The events of the past weeks have shown just how fragile our current energy systems are to shocks; it takes less than most of us would have imagined disrupting the transfer of hydrocarbons from the Gulf to destinations globally. And we are now feeling the shock as prices at the petrol pump begin to rise. Already, some stations as far off as Europe and the USA are raising prices by over ten percent, as they mirror the increase in the overall cost of a barrel of oil (brent crude hit almost US$120 a barrel earlier last week, up from US$73 a barrel the day before the conflict began).
For one group of people, it’s fair to say that the impact on their driving habits may be minimal, or at least less than their internal combustion engine counterparts. For EV (electric vehicle) drivers, their reliance on petrol is negligible. While most of us still charge our cars through a grid that is powered by oil, gas, or even coal in some countries, the pass-on of charges via our utility providers is much slower than the increase in costs at the petrol pump. And, if you’re charging your home and your car with renewables such as solar, you won’t feel any direct impact in any case (we will still feel inflation through supply chain cost increases). This understanding of costs matters for both consumers and for businesses.
Will this shock to the system provide an added impetus for drivers to move from combustion engines to electric vehicles? There is a precedent for this. The oil crisis of 1973 shocked governments around the world, making them realize that they needed to have alternative energy supplies. The result was the beginning of the push for alternative energy sources, most notably renewables which are now a staple of the energy mix in many countries globally.
We have seen other examples, albeit more regional in their nature. In the USA, EVs have come into their own during extreme weather conditions; trucks such as the electric F-150 Lighting pickup truck, which feature bidirectional charging, have been the difference between the lights staying on and going off during storms which have knocked out power grids. To their credit at the time, Ford began to market the truck’s ability to act as a battery as a key selling point for consumers, saying that it could fully power an average house for three days on a single charge.
For many of the EV brands, affordability of use is a major selling point for their vehicles. EVs are not only cheaper to maintain thanks to fewer moving parts, they’re often much cheaper to run as they use electricity. In the app produced by Tesla, there is an option to compare your spending on electricity with the equivalent in what you would have spent on gasoline prices for the same distance. I would expect savvy brand marketers to begin pushing or amplifying the usage affordability line across their EV lineup.
As prices for EVs lower due to smarter technology deployment for battery designs and lower overall production costs and electric vehicle purchase costs reach parity with their combustion engine counterparts, consumers will gradually move towards EVs. Shocks to the system, like we are seeing now, where petrol prices rise much more quickly than electricity costs, will only serve to accelerate this shift. I for one would be interested to see how EV sales are for the rest of the year. If we see a pickup, we will probably know why.
By: Alex Malouf, Founder & Managing Director, Narrative Shapers