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Electric vehicles - why we need them

By Mike Pope - posted Tuesday, 3 March 2009

We need electric vehicles because we can no longer afford the cost of fossil fuels, oil dependency, or the pollution produced by vehicles which use fossil fuels.

Cost of fuel

The price of diesel and unleaded petrol has recently been more affordable because demand has fallen significantly due to the global recession. This has seen the price for a barrel of oil fall from $US148 to a low of $US36, though the Tapis price does appear to be stabilising at about US$45-50 a barrel.


As recovery of the economy occurs, demand for vehicle fuels will increase and return to a point where it exceeds supply; probably in 2010. Fuel prices will then begin to increase and are likely to do so sharply, returning to about $1.50 a litre, then continuing to rise further. CSIRO estimates that by 2020, unleaded petrol is likely to cost $8 a litre. Clearly, that is not affordable.

Why should recovery from recession force prices to increase so much? Three of the more important reasons are an increase in the number of vehicles, economic growth, and falling oil production.

Although vehicle sales are falling in many countries, they continue to add to the total number of registered vehicles. The rate of increase may be less but it is increasing. Encouraged by relatively low and slow moving fuel prices, vehicle sales will also grow in emerging economies such as those of China and India. In both countries there has been growth in the number of middle-income earners, hence the demand for cars.

There are cogent reasons for believing that a commensurate increase in oil production will not, indeed can not occur. This is due to the imminence of “peak oil”, reluctance of producers to increase production and development of technology making cheaper alternative fuels usable.

Peak oil is the point where global oil production reaches a maximum and thereafter declines as availability from oilfields decline. That point is either with us now, or will be in two to three years, and it will be accompanied by growing global demand and a growing inability to supply.

Crude oil is a finite commodity and as its availability decreases, its price will increase. With that increase, it will become profitable to extract the relatively small quantities that remain in oil fields hitherto regarded as exhausted. It will also stimulate exploration for new oilfields and no doubt some will be discovered; though it is unlikely to be sufficient to reverse the global decline in oil production.


A significant increase in the price of oil will make it profitable to extract it from oil sands and shales, and possibly from coal. However, production costs are likely to be such that vehicle fuels will be prohibitively expensive and unable to compete with cheaper alternatives - bio-fuels and of course far cheaper, widely available electricity. Growing scarcity will price oil out of the fuel market.

Cost of oil dependence

A common belief is that Australia is self-sufficient in oil, able to meet all its needs from domestic oilfields and can export its surplus. Not true.

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About the Author

Mike Pope trained as an economist (Cambridge and UPNG) worked as a business planner (1966-2006), prepared and maintained business plan for the Olympic Coordinating Authority 1997-2000. He is now semi-retired with an interest in ways of ameliorating and dealing with climate change.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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