With all good technologies, there comes a time when buying the alternative no longer makes sense. Think smartphones in the past decade, color TVs in the 1970s, or even gasoline cars in the early 20th century. Predicting the timing of these shifts is difficult, but when it happens, the whole world changes.

It’s looking like the 2020s will be the decade of the electric car.

Battery prices fell 35 percent last year and are on a trajectory to make unsubsidized electric vehicles as affordable as their gasoline counterparts in the next six years, according to a new analysis of the electric-vehicle market by Bloomberg New Energy Finance (BNEF). That will be the start of a real mass-market liftoff for electric cars.

By 2040, long-range electric cars will cost less than $22,000 (in today’s dollars), according to the projections. Thirty-five percent of new cars worldwide will have a plug.

This isn’t something oil markets are planning for, and it’s easy to see why. Plug-in cars make up just one-tenth of 1 percent of the global car market today. They’re a rarity on the streets of most countries and still cost significantly more than similar gasoline burners. OPEC maintains that electric vehicles (EVs) will make up just 1 percent of cars in 2040. Last year ConocoPhillips Chief Executive Officer Ryan Lance told me EVs won’t have a material impact for another 50 years—probably not in his lifetime.

But here’s what we know: In the next few years, Tesla, Chevy, and Nissan plan to start selling long-range electric cars in the $30,000 range. Other carmakers and tech companies are investing billions on dozens of new models. By 2020, some of these will cost less and perform better than their gasoline counterparts. The aim would be to match the success of Tesla’s Model S, which now outsells its competitors in the large luxury class in the U.S. The question then is how much oil demand will these cars displace? And when will the reduced demand be enough to tip the scales and cause the next oil crisis?

David Fuller's view

Asking OPEC spokesmen and leaders of international oil companies about the impact of electric vehicles (EVs) on oil consumption over the next decade or two is similar to asking the manufacturers of buggy whips about the prospects for automobile manufacturers in 1910.  In other words, they could not hope to be objective about a monumentally important new technological development which threatened their industry. 

Actually, I consider the headline above to be somewhat misleading because it implies that prices of crude oil will pull out of their current crisis for producers of this important commodity.  That either will not happen or at least could not happen for long, because oil is another victim of technology.  This is affecting both the supply and demand for crude oil. 

For instance, despite the inevitable depletion of some known and readily accessible oil reserves, horizontal drilling is now extending their production cycles.  More importantly, fracking techniques can now tap vast reserves of oil held in shale formations which are known to be prolific in many countries. 

As for demand, the march of technology is not just increasing fuel efficiency. It is also creating more sources of energy, including rival fuels, some of which are renewable as we see with solar and wind power which are suppling energy for the batteries of EVs.  Additionally, there is no reason why the efficiency and cost effectiveness of EVs should not become steadily more competitive, as we have seen with other new technologies.  Additionally, EVs will be preferred in many regions, not least urban areas, because of the health benefits of cleaner air.