The Potential Impact of Electric Vehicles on the Oil Industry

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The Potential Impact of Electric Vehicles on the Oil Industry Question A Crude price differentials refer to the differences which are seen in the prices of the different types of crude oil (Oosterman, 2013, para. 2). Sweet crude, such as West Texas Intermediate (WTI), tends to be favored over sour crude as it has a higher yield, requires less refining to meet sulfur content standards, and has fewer environmental issues (Oosterman, 2013, para. 4). Therefore, the sweet crude tends to have a higher price compared to other types of crude. If a technological breakthrough occurs, making electric vehicles popular and cheap to purchase resulting in 50% of consumers switching to electric vehicles this will have a significant impact on the demand for the gasoline, which would see a decline of 50% (assuming that all consumers use the approximately the same level of fuel). If there is a decline in the demand for the gasoline, this will result in a demand for the oil used to make the gasoline, as shown in figure 1 below. If the supply remains the same but the demand decreases the price will decrease (Nellis and Parker, p119). Figure SEQ Figure * ARABIC 1; Decrease in demand INCLUDEPICTURE "../../../../AppData/Local/Temp/scl3.PNG" * MERGEFORMAT (Adapted from Nellis and Parker, 2006, p27) However, this is the overall position of the oil, as there are some oils that are in a greater demand than others, it is likely that the price equilibrium will move at a different rate, as

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