We’ve seen disruption before and we’ll see it again. There are moments we can point to in so many industries when it became clear that the game was up.
Take, for instance, the famous shock to music studio execs in the late nineties when they held a rock concert to see what CDs music fans would choose as they exited the show.
The rock concert was a huge success and the execs stood eagerly waiting in the lobby as fans streamed out of the venue. Tables of CDs were laid out with big posters offering FREE CDs. To the shock and horror of the execs the music fans walked straight past the free CDs and left the venue.
The game was up, online music downloads had changed the music industry forever and music shops selling CDs were dead.
As the global oil price hits zero in mid April 2020, it doesn’t seem plausible that electric vehicle (EV) running costs could be cheaper than internal combustion engines.
Free oil, and fossil fuels still can’t complete, impossible. Well, the numbers just don’t lie.
The first number is the petrol price at the pump, currently $1/litre in Australia.
So the input costs in theory are, crude oil is free, oil refining ~ 12c, transport and wholesale cost ~ 15c, fuel excise ~ 43c and oil company margin ~30c. All rounding up to an even dollar.
Electric vehicles by comparison are primarily charged at home so we’ll use a household electricity cost at 26c per kWh. According to KeyNumbers.com the kWhs equating to 1 litre of petrol costs $0.51, plus fuel excise ~ 43c (yet to be added to EVs) which rounds up to a grand total of 94c.
Oil experts and others will argue about the nuances in the price construction above however the comparison illustrates EV running costs are cheaper than fuel at the petrol pump, even when the raw input cost is free.
Crude oil is not always going to be trading at zero price, however the oil markets this week have illustrated that when their product is free, it still can’t compete with electric transport.
It won’t be long before gas guzzling cars will be offered free on car lots around our cities.
The game is up for big oil and it’s time to close the chapter of expensive polluting transport and move on to a cheaper, cleaner, better transport future.