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.

  • reddanit@alien.topB
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    1 year ago

    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.

    • learningenglishdaily@alien.topB
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      1 year ago

      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).