-This is the second video analyzing the macroeconomic challenges of electric cars on a national scale. It focuses on the effects linked to the energy supply. The aim is to understand what are energy security and the energy bill and the challenges of electric vehicles regarding the energy supply for various categories of countries. 95% of the final energy consumption of transportation comes from oil. But the production of oil is highly concentrated. Only 50 countries or so produce oil. Among them, producing over 500 million tons of oil a year, the three main oil producers, Saudi Arabia, Russia and the United States, provide 38% of the world production. The 9 next main producers, Iraq, Canada, Iran, China, the United Arab Emirates, Kuwait, Brazil, Venezuela and Mexico, produce between 100 and 220 million tons of oil each and provide 36% of the world production. The other producing countries provide the remaining 25%. If we focus on geographical areas, the Middle East comes first, with 34% of the world production. Then comes North America with 20%. South America, Asia and Africa each produce 9% of the world production. The European Union produces under 2% of the world oil production. If we focus on oil consumption, however, Asia comes first, with 35% of world consumption. North America is still in second place at 24%. The European Union comes third, at 14% before the Middle East, 10%, South America, 7%, and Africa, 4%. Oil, which is not exactly consumed where it is being produced, is traded on international markets which reveal equilibrium prices between oil supply and oil demand. But oil production depends on the state of existing reserves and on the evolution of reserve detection and extraction technologies. It also depends on the economic and political situations and decisions of the producing countries. Lastly, it depends on the geopolitical negotiations and power struggles between the member countries of organizations such as the OPEC, the Organization of Petroleum Exporting Countries. Oil consumption, however, mostly depends on the economic situation and the energy and environmental industrial decisions of the countries. At the crossroads of a mixed supply and demand, and under various influences, oil prices, as reflected by the markets, vary widely, often suddenly, both upwards and downwards. These fluctuations are more linked to geopolitical and macroeconomic issues than the evolution of the production cost of the resources. On the long term, we can remember the two successive oil shocks. In 1973, it was caused by economic growth and inflation in the US and geopolitical tensions in the Middle East. In 1979, it was also caused by tensions in the Middle East. The 2008 oil price crisis, which started between 2003 and 2005 with a growing oil demand from emerging countries, was less temporary than what was referred to as oil shocks in the past. The 2008 oil price crisis will be remembered, as oil prices reached a record of 145 dollars per barrel in New York in July 2008. This was followed by a rapid decrease to 30 dollars in December 2008, after the start of the economic and financial crisis. Then, they fluctuated widely between 2010 and 2014. Oil prices have remained apparently durably under 60 dollars per barrel since January 2015. To illustrate the now characteristic volatility of oil prices, we can see that since January 2017, with an average of 77 dollars over 10 years, oil prices were under 60 dollars per barrel for 30% of the time and over 90 dollars per barrel for 38% of the time. In a sector which still relies on oil for 95% of its final energy consumption, electric vehicles are a possible medium to diversify the transportation energy mix. Transportation energy mix diversification may have two upsides for the economies of countries which commit to it. First, it may provide the countries with more energy security by making them less dependent on a non-renewable energy such as oil, locally produced or imported. And it reduces the exposition to supply risks, especially with imported oil and its derivatives. Transportation energy mix diversification may also enable a country to have better control over its energy bill by potentially reducing the oil bill, and/or by being less exposed to the volatility of imported oil and derivative prices. The argument regarding a decreased dependence to oil as a non-renewable resource is valid for both producing and non-producing countries. To make it simple, we consider the risks, for the future of a country and of the planet, of depending on one energy source available in limited quantities for an entire sector of activity, here transportation. The risk is all the higher as the consumption of this resource is irreversible. A ton of oil which is consumed today can no longer be consumed tomorrow, including if it could be more useful or indispensable tomorrow for any economic sector. So there is an opportunity cost to the massive and growing consumption of oil in transportation. This opportunity cost is hard to quantify as we are not yet aware of the future potential uses for oil. The argument of a decreased exposition to risks from importing oil seems to resonate with a growing number of countries. The unequal distribution of world oil reserves and production puts the countries at risk for partial or complete breaks in supply in case of strong geopolitical tensions or even of conflicts. This is true for all countries which import high amounts of oil, including those with their own production which makes them less dependent on imported oil. As a consequence of the two oil shocks of the 1970s, this is especially true in developing countries given the persistent instability in the Middle East. It is also more and more true in emerging countries, even producing countries, as their oil demand is growing steadily and faster than their production. The 2010s were a turning point for the oil independence of the US after it started exploiting shale oil. The US oil production has been covering since 2010 a growing share of its consumption. In 2015, US-produced oil represented 66% of its national consumption, or the exact independence rate that the US had before the first oil shock in the early 1970s. In Brazil, the national oil production grew alongside the consumption. Brazil has been independent since the 2000s for 90% of its national oil consumption. In China, the steady growth of oil production is unable to match the explosive increase in demand due to its economic takeoff. Two thirds of the country's consumption relies on imported oil. France is an example of a non-producing country: 99% of its national consumption relies on imported oil. China and France are two countries which have high stakes in diversifying their transportation energy mix. Imported oil dependence, mostly due to the transportation sector, has a geopolitical cost for these countries since their position in dialogues and negotiations over many international issues is tainted by the need to maintain their supply security. This cost is hard to quantify as it involves complicated arbitration processes, which are more or less explicit or honorable. It includes trade concessions to producing countries on a variety of products, and the cost of foreign operations to secure supplies. However, the partial substitution of oil products by electricity in transportation energy consumption also raises the issue of electric independence which also varies depending on the country. Electric networks are balanced in real time between supply and demand so the issue of energy independence in integrated networks, on a European scale for instance, is complex. France produces enough electricity to cover more than its annual consumption. Its exporting balance for electricity is positive. And yet, France imports part of its electricity, especially during peak hours. And France's relative independence in terms of electric production comes from its nuclear stations which provide three quarters of the net electricity production. These stations require ore, uranium, most of which is imported. So this brings to the light again the issue of energy independence on the medium and long term. The control of energy bills is linked to energy independence. The energy bill is the difference between the price of energy imports and that of energy exports. So it depends both on the volume of energy exchanges and on the price of energy. The concept of energy bill can be applied to any energy source or we can consider the sum of all sources. For oil net importers, electric vehicles are the chance to reduce their oil bill by reducing the volume of imported oil products. But electric vehicles are also a chance to make themselves less sensitive to oil price volatility, which creates uncertainty on many derivative markets, whose cost is hard to quantify but probably significant. Analyzing the evolution of France's oil bill shows strong fluctuations in recent years which come more from the oil price volatility than from the imported volumes fluctuations. France's oil bill is traditionally over 80% of its total energy bill. In 2015, it was over 32 billion euros in a total energy bill of 40 billion euros. Although lower than in 2014, the 2015 oil bill was still about 1.5% of the national wealth as measured by the GDP. If we consider that transportation represents 75% of the French oil product consumption, and we apply the ratio to our oil bill to a first approximation, the result is that the oil bill linked to transportation was 34 billion euros in 2014 and 24 billion euros in 2015. If electric vehicles allowed us to reduce the oil product consumption of transportation by 10%, it would lead to saving 2 to 4 billion euros on our oil bill, depending on the year, based on the oil bills of the last 10 years. One more thing, the partial substitution of oil products by electricity in transportation raises the issue of the electricity bill and of the stability of its prices which must be studied for each country. To conclude, electric vehicles can be tied to major macroeconomic challenges with regards to energy, especially for oil importers. It can help to improve the energy supply security by reducing imported oil dependence. There are real upsides, especially to the geopolitical balance of power, which are hard to quantify. Electric vehicles can also help reduce the oil bill thanks to concrete short-term economic gains and benefit from the upsides for the economy of being less exposed to oil price volatility.
