The possible irrelevance of oil

The average price of a barrel of oil has plummeted from over 120 USD / barrel to about 30 USD /barrel in the last three years. There may be a lot of geopolitical reasons why this has happened. There is also an analysis of how long this will persist. Relations between Saudi-Arabia and Iran, the situation in Iraq, OPEC relations and shale-oil boom in the US all play a part in this. But there may be another aspect of this situation which may be more relevant and inevitable than most of us may believe at the moment.


There have been many “industrial disruptions” in the last few decades that most of us never really saw it coming. Products and companies which were household names have disappeared into the oblivion. For example Kodak was a company that was synonymous with photography. The brand was so well know that fifteen years ago when a family got together or there was a good photo opportunity it was popularly referred to as a “Kodak” moment. The company does not even exist now. Not because they were not performing well, but because the product that they were making suddenly became irrelevant. Similarly cassettes and VCRs are gone and children growing up today will only know them as novelties from the past.

An industry disruption, according to an expert in this field from Stanford University in the United States, Tony Seba, is when a new industry or product “disrupts” a previously well-established product or industry. If you look at what happened to Kodak, people did not stop taking pictures, but the way it was being done completely changed. Similarly, music is still popular, but the cassettes and VCRs have been replaced with new and more convenient devices.

A similar disruption is possibly taking place in the automobile industry, at this very moment. Automobiles need petrol or diesel as fuel to function. In fact, more than 50% of crude oil produced gets converted to fuels used by automobiles. But the new generation of cars may not need petrol or diesel at all to function. These may not contain the traditional internal combustion petrol or diesel engine.

A few years ago, nobody had heard of a car company called Tesla Motors. The company was founded by a charismatic US based entrepreneur named Elon Musk, in 2003. The cars made by this company are fundamentally different from cars being produced by other large automobile companies like Toyota, Volkswagen and GM. Tesla cars don’t have a petrol or diesel engine but contain electric motors and batteries. The basic concept is simple. The battery is charged like how one charges a mobile phone or a laptop and the power stored in these batteries is then delivered by electric motors to the wheels. The most amazing thing is that the final product is not an experimental or a concept vehicle anymore, but is a thoroughly acclaimed luxury car which is now being compared to the likes of best traditional cars in the business such as Mercedes Benz S class.

Read more: Nation

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