Final Essay

Ever since the preliminary stages of the Industrial Revolution, both consumers and firms have had to choose among various sources of energy. Recently, this debate has gained a new dimension: whether vehicles should run on electricity or non-renewable resources. Such has varied implications for oil and gas companies (such as BP), particularly affecting their sales, public image, future stability and investment opportunities. Firstly, we must establish how electric vehicles and oil and gas companies are related. Electric vehicles are substitute goods for diesel and petrol vehicles: if a consumer chooses to buy one of these, he’s not likely to buy the other. Diesel and petrol are derived from natural gas and oil respectively. In other words,

Statements such as these greatly damage the companies’ public image, as well as make electric vehicles more attractive to consumers. In recent years, the action of such environmental groups has gone further than before, calling out for states to promote the sales of electric vehicles and discourage the purchase of gasoline-fuelled cars. For instance, in 2014, over 60 organizations demanded that the government facilitated the purchase and circulation of electric cars in 11 of the United States of America (Sahan, 2014), and the French and UK governments have announced that oil-fuelled cars will be banned by 2040 (Ward,

In fact, in 2017, electric cars accounted for only 1.9% of all cars sold in the UK (Next Greencar, 2018), and this situation is likely to persist for a while: Graph 1 shows the predicted evolution of the global car fleet outlook between the years 2010 and 2040. We can observe that – although the number of electric vehicles increases rapidly– petrol cars always predominate. As such, it’s in these firms’ best interest to ensure that the upward trend on sales of electric vehicles doesn’t interfere with the consumption of other types of cars, and they manage their funds (including those from outside investors) accordingly. Thus, the number of diesel and gasoline cars won’t be decreasing anytime soon, and neither will demand for fuels.

However, things are not as simple. Investing too large an amount on production of electric vehicles could be interpreted as a sign that BP is not doing well. This could lead to a decrease in the value of BP’s stock shares, leaving the company in serious financial danger. Additionally, in the long run, it could lead to sales of electric vehicles surpassing those of oil-fuelled vehicles faster than if the company had not invested in the first