Bloomberg argues that “supply alone is [not] behind the plunge in crude prices to $50 a barrel.” Instead, demand for motor fuel has slacked off due to lack of growth in driving combined with more fuel-efficient cars and more competitive electric cars.
The electric cars argument is specious, as too few of them have been sold to have much of an impact. The lack of growth in driving has already begun to turn around. Bloomberg itself demolishes the argument that supply isn’t the major factor with its very next story, which reports that Saudi Arabia greatly stepped up oil production in March, partly to meet the country’s “growing domestic requirements” and partly, no doubt, to hurt American or possibly Russian producers.
There is no doubt that cars are becoming more fuel efficient, but that is offset by the huge increase in cars sold in China, where auto sales have exceeded those in the United States since 2009. Besides, gasoline only accounts for about 19 gallons of product from a 42-gallon barrel of oil. Some of the rest goes to Diesel fuel, but most goes into other products for which demand is not likely to decline.
