I’m an optimist by nature. It’s why I believe that the Jedi will return in Episode IX, why each spring I believe my Cleveland Indians will win the World Series, and why I want my current vehicle to be the last gasoline powered car I own. So when I read an article on Vox about the negative effects of electric vehicles on the worldwide economy, I was intrigued. In the piece, which is well worth a read for nerds who like details, David Roberts’s post claims that, as electric vehicles start to take a larger and larger portion of the market, their presence could cause a worldwide economic crash. But how exactly could this happen?
Worldwide oil demand is around 94.5 billion barrels a day. And though they account only for 1% of new car sales, demand for electric vehicles (EVs) is growing. As EVs become more available to the average consumer, they will begin to replace gasoline powered cars at a rate that will increase over the next 10 years. This will cause demand for oil to decrease and could mean big problems for a nearly $4 billion dollars per day industry.
So what are some consequences of a crash in the oil market? Many countries rely heavily on oil to power their economy. Kuwait, Libya, and Saudi Arabia all have over 45% of their economy based on oil. If demand for oil drops to $15 or $20 a barrel, their economies might not be able to pay for some of the elaborate building projects they’ve undertaken and their economies could crash, making the region even more unstable. Oil prices that low would cause problems outside the Middle East as well. Nigeria, Venezuela, and Kazakhstan are all developing countries whose citizens have had their standard of living steadily increase over the last 10 years due to their oil industries. A crash in oil prices could send their economies spiraling out of control.
Does this mean we are destined to repeat another Great Depression as we switch from an oil based economy? There’s no need to stock your doomsday bunker quite yet. Remember, changes and innovations tend to ignite economies, not put them out. And while you can now put your order in for a Tesla Model 3 for about $35,000, most EVs are not within the price range of the average car buyer and probably won’t be for another few years, giving time for governments and their citizens alike to make changes.
It’s also important to keep in mind the consequences of not changing from oil based economy. Global anthropogenic climate change has the potential for not only devastating effects on the environment, but the economy as well. So I remain, as always, optimistic about the prospect of our economy changing to one that is cleaner and more environmentally friendly, and am confident that the rest of the world can follow suit.