Dire Consequences: Exploring the Next Oil Shock

At events such as the recent EV Roadmap 4 conference in Portland, panelists quibble about when plug-in electric vehicles (PEVs) will be ready for mass adoption, and how best to roll out the charging infrastructure. But to understand why the PEV movement is here to stay, it only takes two words: energy security.

The idea of reducing dependence on foreign oil has been a political stalking horse for at least the past decade. But its impact is starkly demonstrated in Oil Shockwave, a war game-like simulation that enlists former cabinet members and other top-ranked officials to devise strategies to react to disruptions in the global oil market. Sam Ori of the Electrification Coalition presented an abbreviated version of Oil Shockwave to the attendees of EV Roadmap. The exercise, which explores a reduction in the flow of oil that causes the cost of to spike near $200 a barrel, was created by the group Securing America’s Future Energy and has been played out for the past 5 years at meetings of policymakers and business executives.

In the current scenario, a terrorist attack on a major fuel processing plant in Abqaiq, Saudi Arabia, slows global oil production, and Venezuela and Iran decide to exacerbate the situation for the US and other dependent nations by simultaneously reducing their production. None of the responses devised by the big brains during an energy summit this summer, which included political pressure on Saudi Arabia or releasing some of the Strategic Petroleum Reserve, had a tangible impact on the global price of crude oil. The market power of OPEC, Ori explained, outweighs even the military might of the United States and exposes the country to a further potential economic crisis.

The demonstration did not detail the local impacts of the near doubling of the cost of a tank of gas and reduced availability, but it’s safe to assume that owners of conventional cars would feel the sting much more than those who plug in for power. In places like Hawaii, which has just a six-day supply of oil on hand, a temporary disruption of the oil supply would be devastating since the fossil fuel is used for both power generation and transportation.

The Oil Shockwave demonstration leads to the inevitable conclusion that the only way to prepare the country for this sort of event is to reduce our dependency on oil. Since transportation accounts for the majority of the oil consumption, electrifying the vehicle fleet is an effective means of doing so.

This sobering assessment clarifies why the federal government has dedicated thousands of hours and billions of dollars on developing alternatives. That PEVs today are in some cases cheaper to operate than petroleum powered cars and can provide environmental benefits that are significant but secondary side-effects.

Government leaders from China to Canada have recognized this risk and are using a combination of incentives and mandates to ignite PEV demand. In a free market economy, though, it’s ultimately up to the auto industry to develop vehicles that are worthy of consideration, and for consumers to buy the vehicles. The conference also included a focus group of average consumers who were mostly clueless about PEVs. The lack of understanding made it clear that the industry has made little progress in outlining the benefits to consumers of the convenience and fun of driving a PEV as average consumers – much less in underlining the national security risk of not shifting to electric vehicles.

Article by John Gartner, appearing courtesy the Matter Network.

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One comment on “Dire Consequences: Exploring the Next Oil Shock

Roman Sanchez

Thanks!! This was great for my IB Economy commentary on a real article. 😀

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