A financial analyst has predicted that oil prices will drop to $10 a barrel in the next six to eight years.
Longview Economics CEO Chris Watling recently told CNBC he expects a surge in electric vehicle sales to drive an extreme drop in oil prices. He believes that alternative energy vehicles powered by electricity or hydrogen will become much more prevalent in the coming years, and since 70 percent of the world’s oil is used for transportation, this will cause oil prices to plummet in an extreme way.
“We forget don’t we? I mean 120 years ago the world didn’t live on oil. Oil hasn’t always driven the global economy… The point is alternative energy in some forms is gathering speed (and) things are changing,” he said.
While Watling’s predictions do seem a bit dubious, it’s important to keep in mind that the world’s governments are beginning to go after the internal combustion engine, and automakers have responded. The UK and France would both like to phase out the sales of internal combustion vehicles by 2040, while China and India have also expressed interest in implementing similar policies. Many car companies have begun to invest heavily in EVs, with some, such as Jaguar Land Rover, Volvo and Daimler, promising to electrify their entire product portfolios.
There’s no guarantee that EVs will cause the shift in oil prices that Watling is expecting, but it seems inevitable that their introduction as a mass-produced, mainstream product will have a huge effect on oil prices. Prices of oil dropped from $120 to just $50 in 2014 as demand in China evened out and US oil production spiked – evidence that it doesn’t take much of a shift to upset the oil industry.