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Oil Market Futures: Will Britain become the slow man of Europe?

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One feature of a carbon neutral global energy system is already certain. It will not contain several billion internal combustion engines. What does this mean for the British economy?

Electric vehicles (EVs) are set to accelerate at a rate more common in consumer technology than vehicle markets. Last week a report from three leading transport industry analysts – Pöyry, the International Council on Clean Transportation (ICCT) and Cambridge Econometrics – showed that EVs are about to permanently alter the trajectory of global oil markets. We know that the impact on the British economy will be significant and rapid, but will it be positive?

The report showed that the impact on the European economy is expected to be positive as cheaper oil frees-up billions for oil importing countries which is then spent in other parts of the economy. Whether this is also true for the British economy will depend on the choices taken by the UK Government this year.

The report’s authors found that the scale of the global shift from petrol and diesel to EVs will significantly alter the oil price by collapsing the demand for the most valuable part of the barrel – petrol and diesel – with no prospect of recovery.

EVs are on a trajectory to make unsubsidised electric vehicles as affordable as their petrol and diesel counterparts in the next six years. This is a huge opportunity for Britain with manufacturers such as Nissan well placed to take a significant share of the market. But there are risks. The UK market for EVs is smaller and growing more slowly than our competitors; our standards are weak; and our charging infrastructure is underdeveloped.

To secure the benefits of the disruption the Government needs to grow the UK market with strong and consistent standards and EV charging and supply-chain infrastructure. Without action this year the UK will become a ‘fast follower’ as California, Germany and Norway accelerate their commitment to EVs.

The Government cannot afford the fast follower option. To benefit from the EV disruption Britain needs to secure a serious share of the market. If we do not then the investment freed up by the lower oil price will go elsewhere and Britain will be left behind.

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