Most companies are moving towards sustainable business. They are reducing environmental impacts while saving costs. Electric Vehicle technology is developing at a very fast pace. The advantages of Electric vehicles are enormous. The rise of Electric vehicles will definitely have an impact on oil markets.
Effects n Electric Mobility on Oil Market
Oil demand from OECD countries shows that over 50% of the oil demand in 2017 was from Road transport. The other sectors shared the remaining 50% (Garside, 2018). Electric vehicles getting popular by day. Reduced use or zero use of petroleum in Electric cars, this market share is likely to diminish. Electric vehicles are likely to replace the demand of 2 million barrels per day by 2023. BNEF takes a mythological approach and considered three scenarios in his forecasting. This included 60% annual growth, 45% annual growth, and 30% in predicting the big crash.
This will disrupt the upstream, midstream, and downstream oil businesses.
Other impacts include disruption of the supply chain as we know it. People will lose jobs from the sector and we are likely to see trade disputes will arise (Dimsdale, 2019). Major disruptions will.
Oil Companies Response
Yet, oil companies have crushed these reports and are predicting only 2% adoption. They associate the slow uptake of an electric car to the cost of owning the cars. There is a need for government incentives on cost. Manufacturers need to take less margins on cars. Customers willing to pay more and the cost of batteries. Three of these factors so far in place and the battery prices have gone done. Most of the mainstream car manufacturers are now in support of Electric vehicles.
Oil Displacement
According to Bloomberg animated Video According to Bloomberg NEF. The impact of passenger EVs and buses could displace as much as 6.4 MMbpd while efficiency will replace .5 MM. the displacement will be sooner than earlier envisioned. This is also supported by the move towards a cleaner planet. support by governments and international conservation movements, and the United Nations. There is also a move towards remote work as more people choose to work from home. The policy environments in different countries. China have tightened CO2 regulations. This is to meet their National Defined Contributions climate change commitments. There have been penalties on fuel guzzlers. This has led to people to have either electric cars or hybrid systems.
The transition
Electric cars are still expensive, but the cost of running and discharging them is low. (Sigurðsson, 2010) It looks into the general economic impacts of the EV to Iceland as a country. , the tax the government collects from the sale of oil will reduce over a period of time. The infrastructure required for the cars is less than it is for the oil-based. International oil companies who appreciate are getting into the EV supply chains.
Trade and economic policies to boost EV
Economic blocks
Economic blocks like EU and Brics need to look into trade-related barriers. These may be contributing to the high cost of EV. They could make some changes to enhance transition and prospects for enhanced growth. These could include both tariff and non-tariff related policies. Driving sustainable goals and environmental protection will promote transport sector decarburization. CO2 emission regulations are necessary. Where they exist, implementation is key. Road transport accounts for 23% of global should emissions. It is also a major source of about to particulate matter. Health Effects were a leading cause of death with 4 million deaths worldwide in 2015 (ICTDC, 2018). Is known to be a big contributor to the emission
Incentives and penalties
Transport is one of the major sectors that influence any economy. Implementation and of Tightening CO2 emission regulations. Having Penalties on emissions will encourage more manufacturers to shift to EV vehicles. Give incentives to producers of low carbon or zero carbon cars. One of the major handles in production is EV battery packs. Encourage production through incentives. That may include implementation of tax breaks will ensure elimination of the hindrance. Subsidies should to member countries to produce essential components like batteries.
A Framework for deployment and technology to the consumer. This ensures the uptake of the product. Policies that encourage member states to have domestic targets. This include phasing out combustion vehicles. Discounts and buy rebates in member countries to solve the problem of costs. Trade tariffs that influence cost of finished products. They determine their prices in the market Policy support of battery technology is of strategic importance. There is a need to support research and innovation in the regions.
Displacement from oil-based to electric-based energy for transport. This will shift the reliance of oil which is a foreign energy. It is likely to change to domestic energy with only a one-time investment of the charging system.
Impacts on the multinational automotive industry
Innovation
From history companies that have not adopted innovations have perished. Kodak was a company in the film industry and did not take up changes in technology. This calls for producers to adapt to the new technologies. There yet countries that will be slow in catching up. They may not have a conducive policy and operating environment for electric cars. These companies may have to run parallel production lines so about suit their needs. This will include changes in their production systems that will cost. Education to all the staff including marketing staff and rethinking their entire chain.
The decrease in demands for the car and their business models may not be conducive. The car companies will have to change their strategies. Integration of both conventional and electric systems to run together. as they move towards less carbon emissions and fuel consumption. It ensures a parallel change until such a time when the entire market is able to absorb the new technology. The integration of the fuel and electric systems is a good option for these companies.
Horizontal investments
This is where companies have replicated operations in different countries. There will be a need for changes in every one of their branches that make similar products. Some countries that have not adopted the electric vehicle technology. Some have no legal and institutional framework for adoption. They may have to keep the old operations or more so push for policy changes in the host countries.
More efforts for productions will shift to countries with more market. Enabling environment will be an important factor eg. China which is leading in absorption of EV. The technical capacity of the population will also impact on investment decisions.
Vertical investments
The changes affect those companies making transmission systems from fuel-powered to electronic systems. Manufacture of electric system units will be in countries with raw materials. for battery. making components e.g. Cobalt and lithium are available. Companies will have distribution systems in different countries. They will maintain production capacity in a few countries. Those that have supportive infrastructure and policy.
Conglomerate investments
These are businesses with different unrelated businesses’ in different countries. Due to competition and dwindling earnings from the business. Companies may choose to invest more in favor of other businesses. They may not want to incur costs of changing their production systems.
Impact of EV on international Relations
The rates at which the EV sales have grown are between 40 to 50 percent per year (Dimsdale, 2019). The cars will be better for the environment and countries that have had a huge contribution to global carbon emissions reduction which will enable countries to meet their emission targets fast. Energy has shaped geopolitics for years. Just like oil before where the struggle of control has shaped policies, created allies, and foes, the control of mineral resources important for the production of oil. This may shift to countries that have had huge reserves of minerals that are in demand for both battery technology and electric components as demand rises.
An increase in technology transfer programs will be launched to help countries that have not adopted the new electric vehicle technology. Due to the demand for electricity more investment in clean energy. The shift of jobs from oil-based to electric energy based will be seen. Foreign energy imports will increase from country to country to ensure the stability of electricity supply.
Home/office installed charging stations may be encouraged. Some countries may sponsor public charging points.
Conclusion
There are very many changes expected not only in the oil and gas sector but also in reduced environmental impacts. The advantages of electric vehicles will be felt over a long time. New jobs will be created in the new sector hence a shift in labor from other sectors so as to meet the needs of electric vehicles technology.
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