Just a random musing. As EV’s become more popular, means less gas being used, means potentially lower prices since supply of gas should increase? Or do they just cut production and keep prices the same.
Wondering what will happen in the long term.
should. won’t.
It will not decrease that much. Also doesn’t go up that much because the shale oil in the US will ramp up production.
If the price decrease, at some point it will, the Middle East is the place that cost the least to produce oil, so everyone goes out of business except them. Prices will be around 50 to 100 dollars for some time.
The bigger advantage would be politic, Middle East and other oil producers can influence US politics because US consumers buy gasoline, it’s one of the few commodities that people buy directly and are very sensitive to price volatility. If people switch to EV will care less about the price, the same way no one knows the price of the lithium today or yesterday.
As demand drops, supply will also drop as oil wells shut down.
It may even increase due to lack of economics of scale and stations lose income
No.
Oil countries will try to keep the price high so they will be reducing supply before demand.
There are many more forces at play here rather than just “less demand = lower price”. Starting from the very beginning of the process:
- It’s true that with less demand crude oil would become cheaper - simply because all of that demand could be satisfied by relatively easily extractable deposits of oil. But at the same time those very deposits are controlled by petro states with very strong incentives to keep the prices up as well as means to reduce supply to do so.
- Refining oil is not cheap and requires lots of capital expenses. Running old refineries with no regard for future expansion will be a bit cheaper. But this is also an energy intensive process and economies of scale matter in it a lot - thus there is pretty high price floor for that aspect.
- Distribution network actually has the opposite problem. It’s the tremendous scale of oil infrastructure and consumption that enables it to be very cheap per gallon/liter. With dropping demand those costs will start rising.
- Externalities of burning gas are generally not included in its price, especially in the US. Even EU with is much higher gas taxes doesn’t really come close to equalising its costs to the society. So if a government decides it’s prudent to put the burden of externalities on people burning the gas - its price would rise several times over in US and double or more in EU.
All in all - while in the short term there might be some dip in gas prices, I’m firmly convinced it will be very temporary. In the long run the prices will keep rising.
Externalities of burning gas are generally not included in its price, especially in the US. Even EU with is much higher gas taxes doesn’t really come close to equalising its costs to the society. So if a government decides it’s prudent to put the burden of externalities on people burning the gas - its price would rise several times over in US and double or more in EU.
Starting in 2027 road transport and home heating will be carbon taxed in the EU (ETSII).
Quite the opposite, I’m afraid.
As economies of scale for producing and delivering to local stations begin to decline, prices will begin to rise.
Nope. The peak fuel consumption (at least in the US) was in 2019. Gas prices have only gone up since.
Thank Biden & Co for that.
We have less than 1% EV adoption
Still A long way to go before it is at a scale that makes a meaningful dent in things
This really depends on what you mean by “long term”. Like the effects of EVs aren’t being felt now, or next year, pretty much at all. Right now consumption is still stable enough that producers can affect the price more than changing demand does.
In the medium term, significant demand drop will put downward pressure on pricing. The problem is that you can’t drop the price much lower before parts of the supply chain start having issues. There’s a lot less truly cheap oil than there used to be, extracting using oil rigs costs a lot for example. So expect it to fluctuate more, but not really cheaper.
And in the truly long term, several decades, it’ll start getting more expensive not just because of the economies of scale mentioned, but as certain current producers start running out of oil. Many Russian wells are already scraping the bottom. Saudi Arabia’a shallowest wells will run dry. So even with significant consumption, it’ll start costing a lot more just to produce a barrel.
Running out of oil isn’t going to be a thing though. Just higher extraction costs. In general oil doesn’t behave like a regular market though, the supply is just too elastic. Can always leave it in the ground.
Not in the short term. OPEC will restrict supply to keep prices up.
Supply and demand.
Demands going down would mean… cheaper gasoline. Cheaper plastic, cheaper diesel, lots of things.
Gas prices go down? Lol no
Oil companies notoriously don’t obey the laws of supply and demand.
I think eventually we’ll reach a tipping point where they’ll have to, but I don’t think we’re anywhere near that point.
OPEC controls is all, they will cut production substantially…but rig workers will get laid off for sure, there will be unemployment associated with a 50% market penetrance.
But we’re a long way from that…Ike long.