This is a very good way to think about the price of goods. When supply and demand are in relative equilibrium price remains stable and reflects the cost of production plus some margin for manufacturers. When you trim demand even slightly by a few percent - which EVs in their various forms will inevitably do - what happens to price? Where is the new demand for oil to compensate? Jet fuel?
I believe price per unit oil will decline until supply is withdrawn to stabilize at a lower value, which may or may not happen. The total market value for gasoline will shrink.
The price of oil is unrealistic, because it does not reflect the terrible damage to our planet. In other words, the current price can be so low because we are "borrowing" the planet from our children and grandchildren. We get cheap oil because they will not have a planet to live on.
If the price were to include a carbon tax, it would likely be at least ten times higher and we would very quickly get rid of our beloved gas guzzlers.
>If the price were to include a carbon tax, it would likely be at least ten times higher and we would very quickly get rid of our beloved gas guzzlers.
Wouldn't you expect a carbon tax to be similar in price to the cost to get the carbon back out of the air?
CO2 released per barrel of oil (when converted to various fuels and burned) appears to be around 300-450 kg [1][2], but we can round up to 500 kg to be conservative and make the math easier.
The cost to take it back out of the air appears to run between $30-$200/tonne depending on how you do it [3][4][5]. I think it's worth speculating that this cost is likely to drop precipitously as the demand and scale at which we need to do it increases, but we can very conservatively stick with $200/tonne for now.
Crude oil is at about $59/barrel today. $200 * 0.5 tonnes = $100. So with the most conservative estimates, it wouldn't quite triple the cost.
> Wouldn't you expect a carbon tax to be similar in price to the cost to get the carbon back out of the air?
If the goal of the tax is to fund carbon removal and if that removal can be done immediately after emission without any damage being done to the environment, then yes. Otherwise you'd want to factor in the damage done.
If someone injected you with snake venom and argued that they should only be fined the amount it costs you for antivenom without consideration of the damage to your body, you would not accept that.
The thing is, if you wait long enough, CO2 will be removed by the plant life anyway so removing it is "free". However if you reflect the price of the removal process which is as _fast_ as it is emitted to the consumer, someone gonna pay through the nose...
> if you wait long enough, CO2 will be removed by the plant life anyway so removing it is "free"
This is a very dangerous misconception and should not be spread around. It is like saying "I don't have to worry about my emissions, because someone else will clean them up for me". Do you have/support enough plant life to clean up your own emissions?
"Long enough" is unfortunately very long because a large part of the fossile CO2 we emit will remain in the atmosphere until it is sequestered back underground by geological processes. These take thousands of years.
>We get cheap oil because they will not have a planet to live on.
Yes they will. Hyperbole is unnecessary and harmful when the real projected outcomes are already bad enough.
>If the price were to include a carbon tax, it would likely be at least ten times higher and we would very quickly get rid of our beloved gas guzzlers.
10x is highly unlikely. At 450kg of CO2 per barrel and even $50/ton of CO2 offset costs that’s about $25 additional per barrel, which puts it at a lower cost than the 2007 era peaks.
As China uses less and there is softening price due to that, other consumers and industry will pick up the slack.
People will drive more, or buy bigger cars, or it fly more, etc. etc...
The price of Oil I think is going nowhere but up even as we deploy electric vehicles, because there are a lot of new people coming into the new economy and they want cars, they want to fly etc.
I believe price per unit oil will decline until supply is withdrawn to stabilize at a lower value, which may or may not happen. The total market value for gasoline will shrink.