Question

1. What will be the effects of the transition to electric mobility on the oil market (demand, price, supply, …). What will be the economic impacts and consequences in the world’s top oil producers?

Answer 1

Electric mobility is a general term used for the development and use of vehicles driven by the electric power instead of the engines which use old fossil fuels. These vehicles include scooters, cars and even trains. These vehicles can be recharged at power grids and hence it do not burn any fuel and hence do not cause pollution.

Since Electric mobility do not use the old fuels and hence if the world transfers from these fuels to electric mobility, the demand for the oil will decrease sharply in the world market bringing down the price of Oil and hence the oil producing companies and countries will suffer a huge loss. This effect can be seen graphically as -

With the substitution of fossil fuels driven engine vehicles with the electric engine driven vehicles, the demand for Oil comes down from D to D1, and hence at new equilibrium point e1, the new Price is P1 which is below P (the old price) and quantity also decreases from Q to Q1.

The economic impact and consequences of this whole process will be very harmful or dangerous for the top oil producers. This is because the whole economy of top oil producing Nations depends on the oil. So decrease in demand for oil will have following impacts -

• At first the decrease in oil demand will leave them with large quantity of unsold oil.
• This will bring down the total revenue of the oil producers.
• Their will be no profit for the firms and hence they will shut down.
• This will bring large scale unemoyment in the economy.
• The National Income of the economy will come down to a very low level.
• The whole economy will suffer a great loss and hence will enter into a recession.