Oil Price War Could Short-Circuit EV Demand

can be reached at pavel@aol.com
can be reached at pavel@aol.com
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A dispute between Saudi Arabia and Russia is sending oil prices spiraling downward – and that could have a similar impact on EV sales, experts warn.

  • Oil prices have recently fallen, with some experts forecasting petroleum could drop to $20 a barrel.
  • EVs still carry a sizable price premium over gas-powered vehicles, though the gap has been narrowing.
  • Many had expected 2020 to be a big year for plug-in vehicles, with an array of new models coming to market.

Tesla Supercharger stationThe price advantage of electricity may not offset the higher cost of EVs if gas prices continue to drop. (Photo: Getty Images)

Doing the math

What some EV advocates hoped would be a big year for plug-in technology may not go the way they expected, now that petroleum prices are tumbling. Prices at the pump already are below $2 a gallon in many states. Electrified vehicles are particularly sensitive to the cost of energy because they typically carry a price premium, one running thousands of dollars more than comparable gas-powered models. The gap has been narrowing but isn’t expected to close until sometime around mid-decade.

While traditional EV buyers aren’t likely to be swayed by what’s happening, industry planners fear the plunge in gas prices could have a bigger impact on the new wave of buyers automakers hoped to attract with the arrival of products like the Ford Mustang Mach-E, Volkswagen ID.4 and Porsche Taycan.

“Lower gas prices, and the fact that automakers have made (gas-powered) vehicles more fuel-efficient, makes alternative-powered vehicles less desirable” for some potential buyers, said Michelle Krebs, principal analyst with Cox Automotive.

WHY THIS MATTERS

This was expected to be a good year for sales of EVs, what with so many new models coming to market in 2020, but cheap gas could short-circuit interest. And the drop in oil prices might not be the only problem, as the coronavirus pandemic, if not brought under control, could have a broad impact on the U.S. economy, including car sales.


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can be reached at pavel@aol.com
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