With oil prices threatening to hit new records, it is hoped that lower demand will help bring the market back into balance
... [+]With oil prices threatening to hit new records , it is hoped that lower demand will help bring the market back into balance. While it is likely to help, it won’t be on a level by itself that would offset the possible loss of 3-4 mb/d of Russian oil, depending on how sanctions play out.
Suggestions by environmental groups that the oil crisis should see more emphasis on battery electric vehicles in California are apparently in response to California Governor Gavin Newsom’s announcement that the state had sold it’s one millionth BEV and “This milestone is a testament to the success of California’s nation-leading policies and investments to support our bold ZEV goals while driving down costs for all.” .
Theoretically, oil demand is easy to predict, given price and economic activity. Reality is a bit more different, especially for short-term demand changes. For one thing, the oil price should be back to ‘normal’ by summer, one way or another. Spending a lot for an electric vehicle—or other more efficient but expensive capital equipment—is not something most do, partly because there are numerous ways to cut consumption with minimal expenditure or effort.
Most Americans own two cars, often one that is smaller and used for commuting and short trips. Driving your Ford Fusion instead of your Ford Explorer improves your gasoline mileage from 18 mpg to 23 mpg in urban driving, or 21%. Except those mileage estimates tend to be overstated, and no one is going to switch all their driving to the second car, but it shows how the average person can cut their oil consumption by 5% in the short term.
But as with climate change, the point is to avoid focusing on a potential ‘silver bullet’ or Manhattan Project. A wide variety of changes in supply and demand should rebalance the market later this year, for instance, a nuclear agreement with Iran and easing of sanctions on Venezuelan oil, plus higher investment in the U.S. shale patch, and the current price levels are clearly unsustainable.
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