The Impact of Electric Cars on Oil Producing Countries: Saudi Arabia

This dissertation investigates the impact of the growing adoption of electric vehicles on oil-producing nations, specifically focusing on Saudi Arabia. The study begins by highlighting the historical economic growth of Saudi Arabia, heavily reliant on its vast oil reserves and exports, and the increasing domestic oil consumption. It explores the environmental concerns associated with fossil fuel usage, including rising CO2 emissions and the adverse effects of climate change, emphasizing the need for a transition to renewable energy sources, particularly electric vehicles. The research examines the implications of electric car adoption on Saudi Arabia's oil revenues, economic sustainability, and environmental policies. Through a detailed literature review, the dissertation analyzes the challenges and opportunities presented by the shift towards electric vehicles, considering the impact on car manufacturers, oil companies, and the overall economy. The study poses critical research questions, outlines specific objectives, and offers recommendations for Saudi Arabia to navigate the transition and mitigate potential negative impacts, ensuring a sustainable approach to the evolving energy landscape.

The impact of
electric cars on oil
producing
countries
A case of Saudi Arabia
User

Dissertation 1
Abstract
The paper seeks to contribute additional viewpoints and thoughts to the ongoing debate on one of
the highly discussed topic of the use of electric cars. The electric cars are recognized as one of
the best alternative or substitute method for saving the extreme use of energy. There has been
identified a significant increase in the usage of the fossil fuels and petroleum products in the past
few de cades in almost all the regions of the world. The continuous increase in the use of fossil
fuels in also regarded as one of the key outcome of industrialization which in return had
increased the demand for the various energy resources. The studies explain that the economic
development and success of the countries is much dependent upon the usage of energy. The one
of the major issue that raised theconcern of the government bodies as well as the organisations is
the excess level ofenvironmental degradation due to increaseuse of fossil fuels as well as their
rising negative impact on the environment and the lives of human beings. The continuously
increasing pressure upon the petroleum energy resources had resulted in environmental
sustainability issues and negative impact on water and land. All such issues and concerns pointed
the finger to one of the best possible solution i.e. to increase the use new and innovative products
which are based upon electricity rather than work upon the usage of fossil fuels. This had led to
the growth of electric cars in almost in entire world. The paper is developed to understand the
major impact of the use of the electric cars on the oil producing nation with a key emphasis on
Saudi Arabia. These electric cars have not only raised the question upon the revenues of the oil
producing companies but also their sustainability. With the help of a detailed and strong
literature review there will be discussed up the various impacts of the use of electric cars, the
negative implications for the oil producing nations and also demonstrating the significance of
these electric vehicles in present scenario. The paper will also providerecommendation s so that
there can besaved the nation from negative impacts and can have a b better approach towards the
usage of electricvehicles.

Dissertation 2
Contents
Introduction......................................................................................................................................2
Literature review..............................................................................................................................4
Understanding of the impact through theoretical lenses..............................................................9
Methodology..................................................................................................................................13
Findings and Discussion................................................................................................................16
Conclusion.....................................................................................................................................20
Recommendations..........................................................................................................................23
Reflection.......................................................................................................................................25
Bibliography..................................................................................................................................26

Dissertation 3
Introduction
In past few decades, Saudi Arabia has relished and experienced huge economic growth, which
had resulted in increased per capita income. Saudi Arabia’s huge petroleum reserves and profits
attained from the export of petroleum have led to continuous economic growth and development.
The Saudi Arabia’s oil sector holds of a total of ninety percent of the export earnings, ninety
percent of the revenues and forty seven percent of the country’s GDP (Alkhathlan and Javid,
2015). Additionally, there has been a sudden increase in the national oil consumption in past few
decades in Saudi Arabia from 0.41 mbd i.e. million barrels per day in the year 1970 to 3.07 mbd
in the year 2013 and it is the total oil consumption which stands equivalent to one quarter of the
total oil production of Saudi Arabia GDP (Alkhathlan and Javid, 2015). Similar to this, the total
oil consumption of the OPEC had increased sevenfold in the past 40 years.
In respect to the population size and economy of the country, the consumption of oil is much
higher in comparison with that of the various advance industrialized nations. There is a total
consumption of around three million barrels oil on a daily basis which has resulted in increased
level of the CO2 emissions in the nation. There are increased level of environmental protection
issues in Saudi Arabia which are related to the oil and energy consumption behaviour of the
country and primarily because of the huge oil producing companies that supply oil to the rest of
the world. The consumption as well as the production of oil is rising with a rapid rate which is
threatening the environment with increased level of CO2 emissions and the emission of the
greenhouse gases.
The change in the climatic conditions and the continuously rising environmental issues has posed
a threatening global challenge for the masses and the entire humanity. There has been
experienced an ongoing rise in the temperature across the globe which had led to increased
number of issues comprised of environmental imbalances, spread of disease, scarcity of water
resources, reduction in agricultural production, rising sea levels, ecological imbalances and
frequent heat waves (Wang and Li, 2016). The primary reason which has been identified as the
key reason behind the continuously rising environmental issues and challenges is due to the
burning of the fossil fuels that is primarily take place due to rising use of vehicles that run
through the consumption of these fossil fuels supplied by the oil companies of Saudi Arabia. At

Dissertation 4
the present time, as a result of the increased level of fossil fuel extraction, there has been a
projected increased in the temperature of the Earth by around fuel extraction, the Earth’s
temperature is projected to increase by somewhere between 4°C- 6°C (Tsai and Champagne,
2016).
It would cause catastrophic damage to the lives of the human and the other species, therefore as a
society there was a need to have a collective measure for limiting the rise of the use of fossil
fuels so that the temperature could be below 2°C. And to attain the same, there is a need to have
a worldwide transition i.e. from the burning of the fossil fuels to the use of the renewable sources
of energy in an appropriate manner. The primary solution to the issue and the increasing
challenge of environmental unsustainability is the use of the electric vehicles. The major
emphasis of the study is to explain the development of the electric cars and in specific the
introduction of these electric cars and their impact on the oil producing countries having the key
emphasis on Saudi Arabia (Alkhathlan and Javid, 2015). In present time, people as well as the
companies are threatened by the concept of “green thinking” that forces both the buyers as well
as the producers to have a green i.e. sustainable and healthy approach towards the utilization of
the resources and their living habits. Since past decade, the use of the electric cars have suddenly
rise and the maximum of the global car ,manufacturing companies have started emphasizing on
producing highly effective electric cars so that there can be minimized the sue of oil and also
there can be decreased level of environmental pollution. But there are number of implications for
the oil producing countries of the increased use of the electric cars (Gomez Vilchez, Jochem and
Fichtner, 2013). The study will understand the impact of the electric cars of the oil producing
countries by keeping the major focus on the Saudi Arabia. With the introduction of the electric
cars, the car manufacturers and the oil and refinery organisations experience themselves in an
endangered situation and there are certain pressure posed upon the oil producing countries. Being
one of the major producer and export of oil, it is extremely challenging for Saudi Arabia to
sustain the pressure and threat posed by the continuous and increased use of the electric cars and
thus the paper will present several insights highlighting the major implications of Saudi Arabia in
the present scenario (Aljarboua, 2009).
Research Question

Dissertation 5
The primary research question of the study is to understand the impact of the electric cars on the
oil producing countries by analyzing it through the case study of Saudi Arabia.
Research Objectives
Following are the key research objectives of the study:
 The first research objective is to understand the introduction and importance of the
electric vehicles
 The second research objective is to understand the rationale behind environment
sustainability through the use of electric cars
 The third research objective is to understand the negative implications posed on Saudi
Arabia of the increased use of electric cars
 The last research objective is to understand the key impacts of the electric cars on the oil
producing nation and providing adequate recommendations to overcome the challenges.
Literature review
The key focus and emphasis of this part of the research is to understand that how the
development of the electric cars or the alternatively fuelled cars can impact the gas and oil
producing countries in present as well as from future perspectives including probable
countermeasures. The presence of crude oil is dominant in the lives of people as well as in the
societies across the globe and primarily in the transportation sector (Alshaye, 2015). There has
been a great threat posed by two particular concepts to the oil producing countries i.e. the
electrification of the transportation and the green thinking. The idea of eco-friendly lifestyle,
environmental sustainabilityand green living was come in existence twenty to thirty years back.
But in last few years, there was significant concern imposed on the developmentof the
electriccars so that the growing issues can be managed. People in present time are conscious in
respect with their habits and actions and are taking appropriate measures to reduce the impact of
their activities on their surroundings (Anderson and Anderson, 2010). A period of 15 to 20 years
back, when there was introduction of the development of electric vehicles and the hybrid mass-
production vehicles put the car manufacturers as well as the oil and refinery companies in an

Dissertation 6
endangered position (Badr, et al., 2009).There was a severe pressure on the oil companies to
maintain the demand for oil in the coming future. The environmental related issues are
considerablesignificant to the government as well as to the people which require intense attention
to be treated.
Taking environmental situations into mind, the most valuable and useful invention for today’s
world is electric cars (Baran and Legey, 2013). Electric cars are developed to curb the
environment pollution. These cars are the part of automobile which works with the help of
electrical energy. These cars play a key role in saving environment from hazardous problems as
they do not create any kind of pollution. A fast and strong acceleration is also generated with
help of this energy which facilitates human needs (Cohen and Naor, 2013). In 1960’s and early
1970’s were that years when pollution is increasing very rapidly. With the view of saving
environment, vehicles that run with the help of electricity were taken birth into the world of
automobiles. This was established on the basis of the restrictions posed by organisation of the
petroleum exporting countries (OPEC). By the starting of 1990, industries started producing
electric motor vehicles but were less in quantity (Curtis, 2009). By the year 2003, high degree of
competition in motor industry forced the producers to stop producing electric vehicles. EVs earn
greater success in 21st century than in 20th century because of advanced technology and better car
batteries (United Nations Environment Programme. Biofuels Working Group and United Nations
Environment Programme. International Panel for Sustainable Resource Management, 2009).
Ozone depletion, global warming and greenhouse effect are some major concerns which again
give birth to the electric driven vehicles in the year 2008. As 2007-2008 are the years of
inflation, producers were engaged in producing low cost vehicles to overcome economic crisis
(Becker, Sidhu and Tenderich, 2009).
A change does not occur naturally, it was the result of human activities. This entire imbalance in
environmental conditions in last two decades is occurring because of the exploitation of
resources by humans. In the last few years, it was studied that atmosphere is adversely affected
because of the various gases presented in the environment (Dennis and Urry, 2009). The changes
occurred in climate patterns in past years were all because of these hazardous gases. The study
also discloses that fossil fuels are the main cause behind these harmful gases. To improve
environmental situations across the world, many government of different countries accepted

Dissertation 7
electric vehicles as it prevents the environment from getting polluted (De Almeida and Silva,
2011). These electric vehicles are considered as the most important invention for reducing
pollution from the environment. Electrically driven vehicles are the most convenient products as
it brings many advantages for environment. Some of them comprised of that these vehicles are
eco-friendly in nature which means it does not release any kind of by-product in the
environment. It will help in preventing greenhouse effects which is very beneficial for human
beings as well as for other species. It also reduces the usage of oil and other fossil fuels as these
cars work with the help of electricity and the electric cars works as the great substitution in the
place of those vehicles which harms the environment and generates pollution (Dale, 2015).
Significance of Electric Vehicles
Gasoline, petrol or diesels are the only fuels which are used in almost all the vehicles in the
world. With the growing world, non-OECD countries are demanding more fuel so that they can
develop much faster than other countries. On the other hand, OECD countries demand less fuel
than the non-OECD ones. BRIC-countries can be considered as the latest example who is
demanding more of these fuels for development of their countries.At the same time, producers in
Europe and North-America are engaged in bringing innovation by increasing the mileage-per-
gallon of the vehicles which use gasoline for consumption (Essen and Kampman, 2011). In early
time, there was quite less concern on electric cars until there was increased number of
environmental issues. As electric vehicles contain high development costs, it was less occupied
by countries but because of increasing pollution, now-a-days government is more concerned and
follow eco-friendly ways of transportation (Fantazzini, Höökand Angelantoni, 2011).For number
of years, there have been raised huge development costs by the hybrid and the electric vehicles.
There was a long road towards the development of the electric cars until the time the government
entities were not concerned for the issue of environment sustainability. To adjust with the new
environmental regulations both the cars makers as well as the government have raised their
participation in the introduction of electric cars (Ehsani, Gao and Emadi, 2009).
The direct linkage and correlation between the global warming and the emission of CO2has been
accepted across the world with a solid majority of the various scientific communities. The huge
damage which is caused because of intense global warming and the increased awareness of the
public had develop a challenge for reducing the level of emissions of carbon dioxide which gave

Dissertation 8
rise to the development of the various alternative vehicles to diminish the impact on the
environment (Freyssenet, 2011).There were taken a number of developmental steps and
initiatives before the introduction of a completely suitable electric car in the market. The first or
the primary step was “mild hybrid” where an internal combustion engine (ICE) was supported by
a small electric engine and the batteries were used to be recharged through the means of
regenerating braking energy. But the saving of the emission of carbon dioxide was modest and
the costs were immensely high. The second step was the “full hybrid” that offered a greater
electric engine as well as a battery in comparison with that of “mild hybrid” and thus there was
increased level of savings of carbon dioxide emissions but at more high prices (Finley, 2012).
There were expectations that there will be a decline in the overall costs of the electric cars once
there will be increased sales of the cars. Then .later to the “full hybrid”, there was introduced
“plug-in hybrid”. A “plug-in hybrid” is a vehicles or the electric car which is regarded as
completely equipped with increase battery power and engine which can be charged easily
through a grid (Rezvani, Jansson and Bodin, 2015). One of the features of the electric cars i.e.
the range extender provides increased range by having an integration of the efficient ICE i.e.
internal combustion engine which support in recharging the battery of the electric car (Larson, et
al., 2014). The last step that took place was the development and introduction of the completely
suitable electric car. The electric car is charged through a grid and with the help of battery it
operates (Nykvist and Nilsson, 2015). But still there is a long way to go for complete
electrification of the transport sector. The electric cars are dominatingly seen as the source of
reducing dependency upon the oil, for reduction of emissions of harmful gases and for effective
utilization of the capacity (Friedemann, 2016).
Strategies adopting by oil producing nations to overcome the impact of electric cars
Diversification
It is a fact that the fossil fuels are getting scarce day by day and the exploration of the sufficient
amount of gas as well as oil supplies are getting more difficult and challenging. And as a result,
the countries as well as the companies are admitting that there is an extensive need for
alternatives or there must be supplement business fields. And thus one of the strategies which are
being used by the oil producing countries is diversification of business fields. There has been

Dissertation 9
identified an overall decrease or fall in the production of oil as well as there are increasing
forecast that there will be a more decrease in the coming years (Gilbert and Perl, 2010).
Subsequently, it is essential that there must be a new energy policy so that the demand for oil
could be maintained. The strategy of diversification is used by the oil producing companies and
the industry because of the reason that people are moving and switching to the electric cars and
in that situation, there has been used strategy of diversification. The diversification in the oil
companies is in respect with the green investments as the oil companies are diversifying their
business fields to the green investments. If the companies will have more environment safe
business operations and have green business practices such as biofuel etc. then it will not only
help the oil producing countries to maintain the demand for oil but also in having new business
opportunities (Hacker, et al., 2009).
Prolongation
Prolongation can be better explained as an extended form of something so that there can be
attained the attention of new market or new customer base to have higher level of sustainability
in the market. In the transportation sector also there is huge dependency upon the fossil fuels and
the prolongation strategy will help the oil producing countries to maintain their market
leadership and save from the negative impact of electric cars. It is the fact that the major
proportion of the overall population whether being the individual, commercial, airborne or water
transportation is running upon the use of fossil fuels. Both the gas as well as the oil companies
together with the OEMs i.e. the original equipment manufacturers is working on the maintenance
of the business field. To increase and maintain the leadership of the fossil fuels, the oil demand
and the leadership of the oil producing countries in the transportation sector, the oil companies
should not only stick on development of the new and efficient fuels such as natural gas and
diesel fuels but find more reliable, sufficient and innovative sources of gas and oil which are
crucial for the oil industry (Hamilton, 2011). It is true that the exploration of the new oil field is
extremely challenging as well as difficult from technological perspective, therefore a new oil
source i.e. oil sands has been recognized in large quantity. For the oil sands, Northern Alberta is
home and it recognized as one of the largest oil deposits in the world. It is considered as the
second largest resource which is to be found in Saudi Arabia but there are challenges in respect
with the way the oil is trapped in the sand. There has been contained a large form of the crude oil

Dissertation 10
which required extraordinary attention for getting it out from the land and developing it in a form
where it is used as a fluid for travelling down the pipelines for getting refined into the
hydrocarbon and gasoline products (Helm, 2016). It clearly demonstrates that there is time when
huge attention is paid upon the strategies of developing as well as exploring new crude oil
sources to remain competitive in the energy sector this is might be because of the reason that the
oil producing countries may have that position that the complete electrification of the traffic is
still a very long way down the road and there is still a lot more time when the electrification of
the transport sector will be dealt with high intensity (Hawken, Lovins and Lovins, 2013).
Understanding of the impact through theoretical lenses
Porter Five Forces Model
The entry of electric vehicles and the impact of the electric cars can be better explained with the
well-recognized and renowned Porter five forces. The theory is utilized to gain a better and in-
depth understanding off the impact of the electric cars on oil producing nations and particularly
Saudi Arabia. The business environment is generally possessed the aspects of severe risks as
well as increased competition. The failure or the success of any new product or venture is
primarily depends upon its ability of an organisation and the economy’s structure to deal with
particular situations. As per the porter five forces theory, there are specifically five key
fundamental forces of the business competition (Hofmann, et al., 2016).
Internal Rivalry: The first force is the internal rivalry as there is rivalry between the competitors
in respect with the process of the commodities. There are different forms of rivalry which takes
place such as price competition as there is a demand for cheaper products. The other forms
comprises of extended services, extended warranty periods, introduction of new products,
marketing campaigns and advertising campaigns. There are a number of factors that influences
the intensity of rivalry that comprised of a number of equipped competitors, exit barriers, huge
differences among the products, huge cost of storage and high fixed cost and growth within a
particular economy (Inkpen and Moffett, 2011).
Threat of new entrants: There has been a huge threat to the oil producing companies as every
new entrant or competitor is often equipped with increased level of technology and amount of
capital to effectively penetrate the market by the means of increased cost for the producers,

Dissertation 11
lowering the process and therefore reduced the margin of profit (Kalghatgi, 2015). Yet, this
implies that the new electric cars or the entry of the electric vehicles had to overcome the barriers
to market entry. There are a number of factors that resulted in the barrier to market entry that
comprises of retaliatory measures, policies of Government, cost benefits, access to the market
channels, capital requirements, product differentiation and economies of scale (Homer-Dixon,
2011).
Threat of Substitutes: the threat of substitutes is high and a common challenge in number of
businesses because of two primary reasons. The first reason is that there has been limited the
margin of profit by the substitutes within an economy, therefore, it develops a price cap for the
products. the second reason is that the substitutes are able to decrease the market share of the oil
producing companies due to increased use of the electric cars by the masses across the globe and
thus the demand for the oil and gas are decreased which reduced the profits of the Saudi
Arabians’ oil and gas industry. There is a long process though, as the consumers require a
specific period of time for finding out the adequate substitute and then to switch to that product
or service (Karplus, Kishimoto and Paltsev, 2015).
Bargaining power of the consumer: there has been a huge impact on the companies of the target
group for any particular service or product. These target groups may demand a lowered price
range or improved performances or increased quality and thus player the various market
competitors off against one another (Kiani, 2017). The bargaining power of the consumers are
very high as they have a new and fascinating market which offers innovative products and
services to them. Thus as a result the oil and gas industry of Saudi Arabia had to face a number
of issues in respect with the negotiation of the buyers as a result of the entry of the electric cars
in the market. There are a number of factors which demonstrates the huge bargaining power of
the buyers such as low conversion costs, standardized products, significant amount of the sold
product and increased sales to a particular group (Khan, 2017).
Bargaining power of the suppliers: There is an increased threat of the huge bargaining power of
the suppliers. With the new market trends and changing market power, there can be posed a
threat by the suppliers of increasing the prices and cost as well as to lower the quality. The
bargaining power of the suppliers increase in number of situations such as increased conversion
cost n respect with the buyers, huge influence of the goods supplied on the cost structure of the