The IMF takes a look at the future of oil prices in the wake of EVs
Jorge Ferreiro
![Jorge Ferreiro]()
Jorge Ferreiro
Senior hydrogen and derivatives analyst, specializing in the role of hydrogen in the energy transition
Recent technological developments and past technology transitions suggest that the world could be on the verge of a profound shift in transportation technology.
The return of the electric car and its adoption, like that of the motor vehicle in place of horses in early 20th century, could cut oil consumption substantially in the coming decades.
Our analysis suggests that oil as the main fuel for transportation could have a much shorter life span left than commonly assumed.
In the fast adoption scenario, oil prices could converge to the level of coal prices, about $15 per barrel in 2015 prices by the early 2040s. In this possible future, oil could become the new coal.
You may download the Working Paper here
@hans hyde Two observations: An IMF Working Paper describes “research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.” This WP is about the impact of EV adoption on oil demand and price – it is not a statement about EV adoption, which the authors obviously need to model to assess oil demand paths. To do this, “we approach forecasting EVs from several perspectives. FIRST, we use the horse-car transition pattern that happened a century ago to extrapolate EV adoption, and we verify that our extrapolation matches the data on EV adoption between 2011 and 2015. SECOND, we project the number of EVs using a diffusion model widely used in management science to predict the adoption of new technologies. Finally, we discuss the hurdles to adoption of EVs and in particular, the affordability of EVs compared to motor vehicles (MVs). We argue that these hurdles are disappearing: lending credibility to our conjecture that EVs could displace motor vehicles as motor vehicles displaced horses a century ago.” Excuse the pun, but a lot rides on the relevance of horse-car transition pattern! IMHO, this FIRST section is the most problematic. I have no opinion on the SECOND approach, the application of the Bass Diffusion Model to EVs, but will note that there are issues (https://www.researchgate.net/publication/282626541_The_choice_of_Bass_model_coefficients_to_forecast_diffusion_for_innovative_products_An_empirical_investigation_for_new_automotive_technologies). The lessons of the horse-car transition pattern. The transition is discussed at length in Richard Gordon’s The Rise and Fall of American Growth: The US Standard of Living since the Civil War. “Peak horse” – and peak renewable fuel and prime movers in transportation -- occurred circa 1915 in the USA. Feeding an estimated 21 million horses claimed an estimated 25% of available US farmland. The logistical and infrastructural costs of the enterprise were immense, to say noting of manure disposal and health risks. The arrival of motor vehicles, including trucks, was universally embraced, reducing transportation times and greatly enhancing quality of life, in rural America in particular. Gordon gives the example of access to a family doctor, and daily home calls, which greatly increased. The motor vehicle unleashed large productivity gains. A shift to EV offers few if any of the unique productivity gains pulled by the one-time horse-car transition. A poor estimator of EV penetration.