July 26, 2018
Despite temporary rises and falls combined with a recent arrangement by OPEC to decrease production restrictions, it appears that oil prices are rising. At least, that’s what the Bernstein Institute, an investment research organization, is saying. Last week, the research company predicted that oil may be up to $150 a barrel by the year 2020.
If barrels reach those levels, they’ll overtake the $147 a barrel that the country dealt with in 2008. This will double the gas prices that people are paying today. A few days ago, oil closed at around $70 a barrel.
When gas prices rose in 2007, consumers started buying electric cars, putting the Prius on the map. High gas prices also inspired Nissan’s CEO, Carlos Ghosn, to green light the Leaf. With current options like the Tesla, BMW and Fiat, consumers may be more likely than ever to turn to electric cars for affordable transportation.
According to the Bernstein Research company, current oil supplies have limited capacity. Refineries are experiencing outages, which is affecting production in the world’s major oil fields. In Asia, the demand for oil is growing with millions of people purchasing their first automobiles. While Chinese citizens have a high incentive to drive electric cars, these vehicles still only account for around 3 percent of the country’s car market. This is still much higher than the electric car percentage in North America.
The report said, “The Saudis’ roughly 1.5 million barrels per day of spare capacity along with U.S. shale growth cannot meet demand growth, offset natural declines and fill in the gap for unexpected outages.”
Making the supply shortages even more dire is the new fuel rule for ships that is set to take effect in 2020, which bans using bunker oil in them. The International Maritime Organization established the regulation stating that ships still using petroleum will be required to use more conventional fuel of the lower-sulfur variety. This will put ships in competition with other types of freight haulers like trucks further increasing the demand for oil. The report states that marine fuel accounts for around 5 percent of petroleum demand.
Electric vehicles are also becoming more appealing due to their being cheaper to buy. This is happening because of dropping battery costs as well as from increased scale in manufacturing. Many cities are supporting the move to greener, cheaper electric power by stocking their transport lines with electric buses.
If Bernstein’s prediction comes true, it could be a huge sales boost for electric cars, resulting in dramatic growth for these vehicles from 2020 to 2040. In fact, Bloomberg New Energy Finance reports that the sales of electric vehicles will grow to around 11 million by the year 2025.