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Oil to be priced at $15 in the future-III: “Sailing-ship” impact not sustainable
May 31: Even elatively cheap oil is no guarantee for the continuous use of conventional motor vehicles in emerging markets. Indeed, coal is still available and relatively cheap; yet steam boats and steam trains disappeared completely many decades ago.
 8There are those who have expressed concerns about a possible “sailing-ship” effect sustaining the demand for fossil fuels. Just as sailing ships improved and managed to briefly compete in the face of steam power, the fall in oil prices may allow fossil fuels to continue to dominate temporarily. 
 8Lower oil prices might delay the energy transition mainly by depressing alternative fuel transportation penetration. Electric vehicle (EV) sales have indeed declined slightly with the 2014-2016 fall in oil price. 
 8But EV producers have cut their costs even faster. The car industry is about to reach a turning point in terms of cost of EVs relative to average income, similar to that of the Ford Model T a century ago. 
 8With comparable prices of electric and motor vehicles and much lower cost to charge and maintain an electric car compared to a motor vehicle, oil price would have to fall substantially to keep conventionalmotor vehicles economically competitive. 
 8Moreover, cost is not the only factor determining technological adoptions. 
 8For instance, coal was cheaper and more easily available than oil throughout the 1920s-1940s, and yet this did not prevent coal’s swift displacement.Click on Report for more.


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