How electric cars can save the world

Electric vehicles and the global economy are connected, and the correlation is as follows: the more electric cars we use, the more stable our economy is. Here is why.

The United States imports more than half of the oil it consumes and its economy significantly depends on the oil price fluctuations. The economy-oil interrelationships are akin to a swing. The better the economy feels, the higher the oil price rises; as a result, the future economic growth becomes more expensive and the economy ends up in a recession. The worse the economy feels, the less oil it consumes, pulling the oil price down; the industrial growth becomes cheaper, but once it starts, the former scenario sets in. Oil follows the economy, eating all the surpluses it can eat, because it is a speculative commodity and must behave this way.

That could be manageable, if the oscillations of the swing were just preserving the status quo, preventing from both big progress and big regress. But given the fact that oil is a finite resource which becomes more and more expensive as it approaches closer to its finite point, the economy in fact is slowly retrograding with every motion of the swing. It is not a new idea, but one worth repeating: lowering the demand for oil will help us cut its price, and electric vehicles can be of big help here.

the oil sample

In the United States, transportation is responsible for as much as 72% of the total oil consumption in the country. While natural gas import is secured by mostly long-term contracts, oil supplies are very often medium-term and short-term. Oil companies have a complicated system to hedge their risks during oil price ups and downs, but still their end consumers can feel those oscillations when buying gasoline.

And this is where electric vehicles’ heroic act comes in. In order to reduce oil consumption in transportation we must use an alternative source of energy to run our cars. Compressed natural gas (CNG) and bio-ethanol have numerous disadvantages as motor fuel. Even if we put aside the safety issues with CNG and the moral aspects of growing fuel corn while people in Africa are starving, this kind of fuel is closely connected to the end consumer and thus still has speculative potential. So we probably will not be able to solve the price instability problem by replacing gasoline with corn.

Hybrids and electric cars seem a better choice. Power plants that produce energy for their batteries can be run on natural gas, hydro, sun or wind energy. Besides a diversified feedstock, these plants have a very diverse market and thus able to maintain long-term contracts with their suppliers. The biggest and only barrier to conquering the world with electric vehicles is low battery life and, consequently, short travel range.

Tesla is trying to solve the problem by setting up its charging stations ubiquitously. More than 100 Supercharger stations are already operational in North America, and Tesla plans to spread them across the entire United States before the end of 2015. At the same time, Tesla and many others are working on disruptive battery technologies, which is promising to be a pivotal moment for the car industry at least. Long-lasting powerful batteries will help replace heavy diesel trucks with the equally powerful electric vehicles, triggering a remarkable decrease in using oil for transportation. This boils down to the following: the batteries of the future should not only revolutionize the electric vehicles market, but also tame the oil price and give the swinging global economy a long-desired break.