Oil Prices and Electric Cars: Trends and Forecasts for 2020

Despite recent fluctuations, my personal assessment is that oil prices won't return to costing more than 80 per barrel by 2020. However, experts predict that it will peak around this figure. The key drivers influencing the trend include the imminent entry of Iranian oil into the global market and the announced slow increase in production by OPEC. Additionally, there has been a slow but steady rise in the US rotary rig count since the end of last year, which suggests that domestic production may play a more significant role by the end of 2020.

It's also worth noting that Saudi Arabia has begun to move away from its previous practices of restraining production. Moreover, American frackers are experiencing renewed profitability, indicating that when the driving season ends, oil prices may start to decline. If the prices do go up, it could be a positive development for electric cars as higher gasoline prices may prompt more consumers to switch to electric vehicles (EVs).

Short-term Trends

While oil prices might hit 75 briefly in July or August, it’s unlikely that they will sustain this level for long. The experts suggest that if the prices do start to increase, chances are the rise will be short-lived, followed by a decline. This pattern reflects the typical fluctuation we've seen in the market over the past few years.

It is evident that a significant oil spike could be influenced by geopolitical events such as wars, regime changes, or other sudden shifts. However, based on current fundamentals, reduced investment in oil projects and budget cuts for major deep-water projects indicate that any spike in the future is more likely to occur several years down the line. With a potential 4 to 7-year timeframe, we might witness a shortage that pushes the price up.

Long-term Trends

The future of oil demand in the US, particularly with the advent of electric cars and potentially driverless Uber cars, presents a new dynamic. The introduction of driverless cars could significantly reduce the demand for oil. As such, if driverless Uber cars are widespread by 2020, it's highly unlikely that oil prices will reach 80 per barrel. The shift towards electric vehicles and alternative transportation methods could significantly impact oil consumption and prices.

The current excess production and storage of oil will need to be gradually reduced. Currently, the shale drillers are innovating and producing oil more efficiently and at lower costs than ever before. This innovative phase should help stabilize or lower prices in the long run. However, an 80/bbl price in the near future is questionable without specific triggering factors such as significant geopolitical events or unexpected shocks to the oil market.

Conclusion

In conclusion, while the short-term oil market might experience fluctuations, the long-term trend suggests that any rise in oil prices to 80 per barrel is more likely to occur several years beyond 2020. Continued investment in renewable energy and the rapid adoption of electric cars will play crucial roles in shaping the future of oil demand. As such, it's essential to be prepared for both short-term price changes and long-term strategic shifts in the energy landscape.

Keywords: oil prices, electric cars, geopolitical event