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Sunday 20 Aug 2017 | 01:06 | SYDNEY
Sunday 20 Aug 2017 | 01:06 | SYDNEY

Batteries as 'disruptive technology'

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COMMENTS

6 October 2009 13:05

Several times on this blog I have wrestled with what struck me as a conundrum about the economic relationship between oil and alternative sources of energy:

The cheaper alternative energy gets, the lower will be the demand for fossil fuels, and hence the further oil prices will drop. So eventually, alternative energy will have to compete against a cost of oil near zero, no?

My concern was that this constantly dropping oil price will make it impossible for alternative energy sources to really make an impact. But what I didn't factor in was the possibility for new technology to not just influence the existing market but to transform it totally — 'disruptive technology'.

A Wall St Journal blog post describing a new Deutsche Bank report about the future of oil addresses this very issue. The report describes how oil prices are due to peak because of high demand, and then fall dramatically when electric and hybrid automobiles mature:

But won’t cheaper oil in the future just lead to a revival in oil demand? That’s what’s happened in every other cycle. Au contraire, says the bank: Just as the explosion of digital cameras made the cost of film irrelevant, the growth of electric cars will make the price of oil (and gasoline) all but irrelevant for transportation.

Hybrids are already commonplace but remain expensive, and battery-only vehicles are maturing but are also pricey and still lack the range to win widespread public acceptance. But the direction is pretty clear, meaning that if Deutsche Bank is right, the future of oil is tied up directly with the development of batteries.

(H/t Global Dashboard.)