Oil Prices Vs. Electric Vehicles

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  • In 2016, fossil fuels accounted for 90% of the U.S.'s total energy supply by source, vs. only 10% for renewables.
  • Electric vehicles account for less than 1% of global market share.
  • EV growth is still very slow.
  • Crude oil prices are at the recovery stage.
  • EV rollouts are not a threat to oil prices yet.

The global market share of electrical vehicles amounts to 0.84%, which has little effect on fossil fuel consumption. A common perception is that electric vehicles will reduce such consumption. Yet without fossil fuels, it is impossible to manufacture an electric car, at least with current technology. Crude oil prices fluctuate (due to supply and demand and other factors), but I expect EV rollouts won't soon be a major threat to crude oil prices.

EVs and Oil Prices

Even though there has been a steady increase in yearly electric car purchases, EVs still account for less than 1% of global market share. So, we shouldn't worry too much about EV rollouts just yet. I expect that oil prices will continue to rebound, and that oil could reach $60/barrel within a couple of years.

Source: EIA

To run factories (and computers and machines and so on), we rely on electricity produced by fossil fuels. As we can see from the chart below, 90% of energy consumption in the U.S. is supported by fossil fuels vs. 10% for renewables. This shows that in order to operate the factories that make electric vehicles, fossil fuels must be relied upon.

Also, tires are usually made out of natural rubber. According to the American Chemical Society, 70% of the rubber used in today's manufacturing processes is synthetic -- i.e., made from petrochemicals. The U.S. government was forced to find an alternative to natural rubber when the natural rubber supply from Southeast Asia was cut off at the beginning of World War II. Regardless of what powers vehicles, the U.S. relies on petrochemicals to manufacture tires for them.

Almost all major car manufacturers are ready to roll out electric vehicles in large volumes very soon, including Ford (F), Toyota (TM), Tata (TTM

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