Petrol prices are breaking records across the country, pushing $2 per litre in major cities as many fear the worst is yet to come.
The war in Ukraine has caused oil prices to skyrocket. Russia is one of the biggest suppliers of oil and gas in the world, and its attacks on Ukraine saw the rest of the world shun Russian oil, removing much of it from the daily supply.
According to the International Energy Agency (IEA) oil prices could continue rising unless major oil producers produce more barrels. Prices are currently fluctuating, however the current price of crude is a high US$112.67 per barrel.
So, this begs the question: Will oil prices increase the shift to electric cars?
High and rising prices are likely to accelerate the adoption of hybrid and electric vehicles (EVs). Gasoline-hybrid, full electric and other alternative-powered cars accounted for 11% of all new vehicles produced in 2020.
The consumer shift
Consumers tend to buy cars depending on when the price of the barrel shifts. So, when prices are high and on the move, consumers opt to buy smaller and more fuel-efficient cars.
By contrast, periods of low and falling prices result in people opting for larger, less fuel-efficient vehicles.
In these times modern times though, the explosion in the popularity of companies like Tesla has seen electric vehicles become a more viable alternative to gasoline powered cars and trucks.
In the last four decades, consumers have shown a clear preference for gas-guzzling vehicles, but within the long-term trend, longer periods of high and rising oil prices have shifted the balance.
A high price to pay
While electric vehicles seem like the obvious solution, it may take petrol prices to rise to $3.85 per litre before consumers could recover the extra cost of an EV within five years.
Australians would also need to wait more than a decade to reap the rewards of cost benefits from driving an EV. An average $40,000 difference in purchase price between eclectic and petrol models means an EV purchase would need up to 16 years to provide savings for motorists.
According to the Australasian Convenience and Petroleum Marketers Association (ACAPMA), we are nowhere near the level it would take to offset the higher cost of a new EV.
Even if high oil prices drove us to buying EVs, we likely wouldn’t be able to get our hands on one in Australia.
Australia is lagging behind in the global EV pecking order, according to consultancy Bloomberg New Energy Finance (BNEF).
BNEF analyst Will Edmonds said for many though, the drive away price tag is a bigger influence on whether consumers deemed the car better value.
Edmonds also said Australia provided relatively few incentives to encourage the uptake of EVs compared to other countries, forcing the supply to be indefinitely tight.
Given the Liberal government’s stance on emissions reductions, it’s not surprising that there is a confused and contradicting approach to embracing EVs in Australia.
The emissions reduction minister, Angus Taylor, ruled out policies elsewhere to drive EV uptake last year, such as a ban on new fossil fuel car sales from 2030 as promised in countries including the UK, Germany, India, Thailand and Japan.
Roadblocks
Besides government policies, there are still a number of obstacles holding back the widespread consumption of EVs, such as range and charging times.
A common drawback to EV adoption is range, or more so the fear of running out of electricity, a term which has been deemed ‘range anxiety.’ Today though, it’s not as much a concern as it once was.
Long range EVs like the Tesla Model 3 and Chevrolet Bolt have an estimated range of over 320 , km which is significantly larger than the average driving distance.
The 2020 Deloitte Global Automotive Consumer Study said even though drivers only drove an average of 45km a day, over 60% said they would like their fully electric EV to have a minimum range of 320 to 640km.
So, range anxiety may just be a matter of drivers over-estimating their daily commutes.
Another setback to EV adoption is charging times. Even fast charging stations have significantly longer charging times compared to a fuel pump refill, meaning drivers have to plan their stops beforehand when embarking on longer trips.
Looking to the future
The world has not been blind to the shift towards renewables technology . While EVs remain expensive, a point will eventually be reached that allows car makers to lower prices, at which point demand for EVs could skyrocket.
In some states the demand is already growing. Last year In Victoria, fewer than 1% of the cars on the road were currently electric. It may seem like a small figure, but it’s still double the amount of EV sales compared to 2020.
President of the Australian Electric Vehicle Association Chris Nash said it was vital to create greater incentives to strengthen the blooming market.
Last year, the federal government said it will partner with the private sector to fund 50,000 charging stations in Australian homes in a bid to encourage more people to buy EVs.
While this addresses the issue of running out of charge, the ‘Future Fuels’ strategy did not include subsides, tax incentives, sales targets or fuel emissions standards that would make EVs more affordable.
Many other countries announced tax concessions or subsidies to lower the price, with France offering a generous discount of $18,000 on a new EV for trading in a petrol or diesel car.
The government said improved battery technology will be the key to lowering the cost in Australia.
Electric vehicles are here to stay and they’re only getting more popular. There are still many technological and political humps to overcome, but the industry is still only in its infancy.
Written by Duncan Bailey