Threat For Oil-Based Economies as China Plans Outright Ban of Petrol Cars

There are indications that China is setting a deadline for automakers to end sales of petrol-powered cars in the country soon. This is in a bid to curb worsening air pollution.

According to Bloomberg, the move by the Chinese government is in a bid to accelerate the drive into an economy solely dependent on electric cars and benefit indigenous electric car companies such as BYD Co. and BAIC Motor Corp.

China is the world’s largest auto market, with 28.03 million vehicles sold last year (a boost in demand of 13.7 percent when compared with the number of cars sold in 2015). China is the biggest market to make a wholesale declaration for the electric car after the U.K. and France have announced plans to phase out petrol vehicles.

China is the 2nd highest buyer of crude in the world after the US. The Chinese government has also created a number of incentive programs for OEMs, including subsidies.

Analysts are unanimous on the impact of such bans on the pricing and relevance of oil in the nearest decade. Crude oil is already suffering acute global valuation owing to excessive output and the battle for dominance over shale. The question then is how much longer can economies that rely on the crude-oil commodity survive?

The Nigerian Government, for instance, has continuously announced its intentions to diversify the economy from its present oil-dependent look. Yet, its budgets year-on-year have continued to indicate that the policy makers are not ready for this reality.

Critics have suggested that a ban on fossil fuel vehicles is likely impractical because it would stretch an already taxed supply chain, which has some hard limits in terms of the volume of lithium available for lithium-ion battery cells, for instance. But global manufacturers such as Elon Musk’s Tesla,  Nissan Motor, Toyota and General Motors are racing to meet the demand glut in the nearest future.