Oil Demand’s New Elasticity

The article “oil demand’s new elasticity” by Sarah Miller explores the oil market and how the forces of demand and supply affect price in the sector (Miller, 2017). The author states that a change in oil prices has little or no effect on the demand for the commodity mainly because the transport industry uses much of the product and there are no substitutes for oil (Miller, 2017). The last time oil prices affected the oil demand was in the 1970s when there was an upward price shock that led to the fall in demand from 64 million to 58 million barrels per day. During the crisis, nuclear energy consumption in the production of electricity rose up from 10% to 17% leading to a fall in oil consumption from 18% to 11% (Miller, 2017). The crisis led to an increase in all fuel prices and the upward demand for oil has led to the relative inelasticity in the oil industry. 

Electric vehicles are an alternative way of curbing the ever-increasing demand for oil in the transport industry (Miller, 2017). The adoption of the electric vehicles to replace the conventional vehicles is however costly, but the author projects that if the current trends are anything to go by the purchase of electric cars may be on the rise in few years to come. Electric cars can currently run between 300-400 miles charges, and if crude oil prices were to rise to $70 per barrel leading to an increase in gasoline prices to $3 per gallon, then more people would opt for electric cars in America (Miller, 2017). Other continents like Europe and Asia would follow suit and governments would give subsidies to electric vehicle manufacturers increasing their demand and affordability, therefore, leading to more elasticity of demand in the oil industry (Miller, 2017). The article, therefore, explores the elasticity of the oil industry and examines how it can be changed to reduce the heavy reliance on oil by considering alternative electric vehicles. 

References 

Miller, S. (2017). Oil Demand's New Elasticity