|Fig. 1: Fig. 1: Average Lithium-Ion Battery Price 2010-2016.  (Source: Quinn Brodey).|
Everyday, 96 million barrels of oil are consumed globally, 60 million of which are used for transportation.  This vast consumption has had and will continue to have serious impacts on the environment. Transportation accounts for 27% of greenhouse gas emissions consisting of carbon dioxide amongst other pollutants that trap solar radiation near the earths surface and act as a leading cause of global warming.  Social pressure to move away from fossil fuels and towards cleaner energy sources has led to a rise in the production and popularity of electric vehicles. Tesla is the most popular producer of electric vehicles today, with over 400,000 preorders of their new moderately priced Model 3.  The rising demand for electric vehicles is starting to threaten global oil demand, but how legitimate is this claim?
Electric vehicles are traditionally more expensive than their internal combustion engine counterparts. A majority of the higher cost of electric vehicles is due to their battery packs. However, battery pack prices have fallen roughly 80% in the last 6 years from ~$1000/kWh to ~$227/kWh, and prices are projected to fall below ~$200/kWh by 2020 and potentially below ~$100/kWh by 2030, which would allow electric vehicles to be competitively priced against comparable internal combustion engine options (see Fig. 1). 
Although electric vehicles are gaining popularity, they still only account for a small portion of the vehicles on the road today globally. Currently, electric vehicles only account for 0.2% of all passenger light-duty vehicles in circulation.  However, by 2030, electric car sales could account for 70% of global car sales and nearly 50% of all cars on the road.  Many established automakers like GM, Volvo, Volkswagen, Ford, and Honda have all pledged to sell more and more electric cars Volvo even went as far as to announce that within a few years they will be producing exclusively electric cars.
Despite the rapid improvements in battery pack technology and the fast-growing popularity, electric vehicles still have a long way to go before they can truly challenge internal combustion engine vehicles as king of the road. One of the main drivers of electric vehicle sales growth have been government subsidies. Currently, China has a subsidy policy that is capped at 60% of the vehicle price.  China's policy ends in 2020, but because electric vehicle sales are largely dependent on the continued support of government subsidies, there are a few new policies being considered.  Improvements in fuel efficiency of internal combustion engine vehicles and technology advances will help oil prices stay low, which will make it more difficult for consumers to switch to electric vehicles.
Electric vehicle sales forecasts and the constant media coverage of Tesla, falling battery costs and the future of electric vehicles would lead one to believe that global oil demand is under an imminent threat and that it is just a matter of time before the oil industry becomes obsolete. However, putting the projections in perspective and factoring in the challenges that lay ahead for electric vehicles, the threat appears less legitimate. Yes, electric vehicles sales and production are increasing at a high rate, but compared to the global vehicle supply, even the most aggressive projections have electric vehicles making up only 25% of worldwide vehicles by 2050.  That is enough time for internal combustion engines to become more efficient, for oil producers to become more efficient, and for oil prices to stay low. All of these factors lead to the conclusion the oil industry is not going anywhere for quite some time.
© Quinn Brodey. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
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