An article published by The Guardian last year compared the period in which we moved from fossil-fuelled vehicles to electric ones, with the period in which we moved from horse-drawn vehicles to automobiles. The article mentioned that metropolitans of the West were faced with an escalating problem in the 1890s. It also noted: ‘Horse-drawn vehicles had been in use for thousands of years and it was hard to imagine a life without them.’ &nbsp;However, with the growing number of such vehicles, the drawbacks of using horsepower became more and more evident, especially in heavily populated cities. &nbsp;It was outrageous to overlook the masses of manure in the streets, and the awful odour resulting from that. Furthermore, horses posed a risk to human health by spreading viruses when they fell ill or died. Faster and more efficient interprovincial transportation&nbsp;and the transport of more people and goods increased the demand for horse-drawn vehicles.Paradoxically, horses became both indispensable and unsustainable. Exactly like the fossil-fuelled automobiles today. Automobiles, which resolved a series of problems in the past, have now left us with many environmental problems. &nbsp;Fuel and fossil fuels used for diesel-based vehicles trigger global warming with greenhouse gas emissions, which causes climate change. None of this could have been foreseen at the beginning of the automobile era. However, electric vehicles, charged with renewable energy, seem like the most rational way of resolving the problem. So, are EVs as innocent as we think? Or, are they the horse-drawn or fossil-fuel-based vehicles of the future?<h2 fr-original-style="" style="margin: 0px; color: rgba(0, 0, 0, 0.85); font-weight: 500; padding: 0px; box-sizing: border-box;">EVs: Friends or Foes?&nbsp;</h2>Are electric vehicles more environmentally friendly? Without a doubt, yes; however, it would be realistic to say that there are certain points to question here. Experts are on the same page about the fact that electric vehicles have a smaller carbon footprint, compared with traditional vehicles which have internal combustion engines. But, electric networks in many parts of the world are still powered by fossil fuels such as coal and oil, and EVs rely on that power to be charged. Also, battery production for EVs is a question mark.&nbsp;<ul fr-original-style="" style="margin-top: 0px; margin-bottom: 1em; list-style-position: inside; box-sizing: border-box;"><li dir="ltr" fr-original-style="" style="box-sizing: border-box;">Twice as much water: Research conducted by MIT (Massachusetts Institute of Technology) Energy Initiative puts forward that battery and fuel production for an EV has a greater emission than the production of an automobile. Generally, li-ion batteries are used to start EVs. Extracting the lithium to produce a battery afterwards spends twice as much water compared with the production of traditional automobiles. Another material used in battery production, cobalt, also poses a <a fr-original-style="" href="https://phys.org/news/2021-12-cobalt-human-social-consequences-green.html" rel="noopener noreferrer" style="color: rgb(9, 9, 9); text-decoration: none; background-color: transparent; outline: none; cursor: pointer; transition: color 0.3s ease 0s; touch-action: manipulation; user-select: auto; box-sizing: border-box;" target="_blank">great risk</a> to nature.&nbsp;</li><li dir="ltr" fr-original-style="" style="box-sizing: border-box;">Prediction: The abovementioned overpriced environmental costs can be balanced with EVs’ high energy performance over time. It is predicted that we can fully benefit from electric vehicles when electric sources all become renewable, which can take more than a decade.&nbsp;</li></ul>Still, the proliferation of electric vehicles is one of the most concrete steps taken to reduce carbon emissions. The regulations made by governments to combat climate change, customer demand, and technological developments pave the way for the popularisation of electric vehicles. So, how will the everlasting empire of the oil industry get affected by this situation?<h2 fr-original-style="" style="margin: 0px; color: rgba(0, 0, 0, 0.85); font-weight: 500; padding: 0px; box-sizing: border-box;">A window to the future</h2>The already existing oil companies and fossil-fuelled vehicles have immense dominance in the sector. However, <a fr-original-style="" href="https://www.mckinsey.com/industries/oil-and-gas/our-insights/global-energy-perspective-2022?utm_source=aposto" rel="noopener noreferrer" style="color: rgb(9, 9, 9); text-decoration: none; background-color: transparent; outline: none; cursor: pointer; transition: color 0.3s ease 0s; touch-action: manipulation; user-select: auto; box-sizing: border-box;" target="_blank">McKinsey’s Global Energy Perspective 2022 Report</a>, claims that the share of renewable energies in global electricity production is expected to double in the next 15 years. According to the report, while the composition of global energy will rapidly change, the demand for electric cars will peak in the next 2 to 5 years. London-based research agency <a fr-original-style="" href="https://about.bnef.com/electric-vehicle-outlook/?utm_source=aposto" rel="noopener noreferrer" style="color: rgb(9, 9, 9); text-decoration: none; background-color: transparent; outline: none; cursor: pointer; transition: color 0.3s ease 0s; touch-action: manipulation; user-select: auto; box-sizing: border-box;" target="_blank">BloombergNEF</a>’s recent research also supports McKinsey’s prediction: Electric vehicles replaced nearly 1.5 million barrels of oil in 2021, which makes up almost 3.3% of the whole demand.&nbsp;However, from a broad perspective, the future is not as promising. Another remarkable data McKinsey’s report put forth is the fact that the highest demand for oil will be observed between 2024 and 2027, mainly during a period of transition to electric vehicles. Because the increase in electric vehicle sales has not produced a great effect on the global vehicle fleet yet. There are more than 1 billion vehicles&nbsp;on the roads and today’s brand-new cars contribute to global oil consumption for tens of years by becoming safer and more durable.&nbsp;In addition, there is a vital point we overlook: Until now, the transition to electric vehicles has been on the carpet for only the rich world, and in fact, the richest segments of the richest countries. In developing countries, most of which suffer from heavy traffic and whelming air pollution, there are little to no EVs.&nbsp;Thus, we should keep in mind that changes in the demand for oil will vary across countries and markets. So, what awaits the oil industry in a scenario in which things go as expected and e-mobility, known as electro-mobility, settles in the centre of our lives?<ul fr-original-style="" style="margin-top: 0px; margin-bottom: 1em; list-style-position: inside; box-sizing: border-box;"><li fr-original-style="" style="box-sizing: border-box;">Some refineries will have to face difficult conditions since they will have to gravitate towards far markets.</li><li dir="ltr" fr-original-style="" style="box-sizing: border-box;">Low-end or low-conversion refineries will come across the risk of shutting down.&nbsp;</li><li dir="ltr" fr-original-style="" style="box-sizing: border-box;">Refineries in less impacted regions will only experience a change in the area of petroleum products import.&nbsp;</li></ul>On the other hand, increasing energy costs are thought to entail a risk for the future of electric vehicles. Until very recently, EV ownership was getting more and more appealing with the increase in gas prices. Though, after the increase in electricity prices, the current state has become more equivocal. Besides electricity prices; raw material costs, issues with part supplies, and the decrease in disposable income have a great impact on car-making and car sales. If the trend goes in this direction, there are concerns that investors will step back since they will lack the incentives to build charging stations and electric vehicles will become less attractive.

Aposto Business

While regulations to combat climate change increase the charm of electric vehicles, the 'hidden' reality of EVs continues to be a hot topic.                                                                                              

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