Oil prices have been in a continuous downward slide for months now, but last week’s OPEC meeting sent the market into turmoil. The price of oil has rebounded a little this week, but is still sitting at its lowest levels since 2010($67.67 at the time of writing this post)
Conspiracy theories abound as to why this is happening. These theories are often contradictory: the Saudis and Americans are working together to try to strike back at Vladimir Putin and destabilize the Russian government, or is it the Saudis are trying to put the American fracking industry out of business by allowing oil prices to drop below what they perceive to be their breakeven point. As entertaining as some of the theories are, the only consensus appears to be that we are in for a bit of a rocky ride when it comes to oil and gas prices.
What impact will these falling gas prices have on electric car sales?
The electric car market has matured greatly since 2010 ( the last time gas was this cheap in North America). There are many more models available with new offerings on schedule for introduction in 2015. Most of the major car makers now offer an electric model of some sort. You can also buy an EV for as little as $26,000 U.S.(after the U.S. tax credit) versus the six figure price tags that made electric cars an extreme luxury item in the past.
The infrastructure needed to support electric cars has been growing at a fast pace, but still remains a major impediment to the widespread adoption of EVs. Elon Musk has stated that the lack of infrastructure in China, has been a major factor limiting the demand of Tesla electric cars in that country. Lower gas prices will affect the development of infrastructure in some countries such as the U.S., Canada, etc… but probably will not have as much impact on countries like China, where the adoption of electric vehicles could be prove important in their efforts to improve disastrous air quality.
In the short term, the electric car market should weather the storm of lower gas prices just fine, since it has grown and matured over the last four years. Longer term, things could get dicey. It is kind of like the chicken and the egg thing. It still costs $10,000 more (double if looking at sticker price alone) for a KIA Soul EV over the regular gasoline powered model. That is a huge premium for the average consumer to pay if they do not receive something in return to help offset it , like lower operating costs. Also, if charging your car does not get easier and more convenient, the market will be hampered as only the real EV “enthusiast” is willing to be spend extra time and money to have a greener car.
Less demand will mean lower investment in charging infrastructure and less investment in R&D and production by manufacturers. This will mean fewer models to choose from – you see where this is going. It could ultimately result in the EV becoming a luxury item of the environmentally conscious affluent consumer once again.
So you see the EV market has not yet reached the critical mass, tipping point or whatever terminology you want to use, where it will can grow unfettered by the price of gasoline. We could be in for a bit of a “rough ride”.
If we could only stop this obvious global conspiracy by the oil companies to try to kill the electric car industry<wink>!
Tracey is an accountant and entrepreneur with a passion for nature. This passion is what spurred her interest in renewable energy, and the rest is history as they say. Tracey is a principal in Energy Think Group, the publisher of Solar Thermal Magazine and Tek-Think. She is also the principal at Women's Financial Help Desk. She spends her free time in the outdoors with her horses and dogs. She loves to travel.