Electric Cars and Oil Prices

Abstract

This paper studies the joint dynamics of oil prices and interest in electric cars, measured as the volume of Google searches for related phrases. The dominant view in the literature is that the main determinants of oil prices are macroeconomic conditions and supply disruptions. I show evidence that public interest in electric cars is also a significant driver of changes in oil prices. In fact, the analysis suggests that interest in electric cars is at least as important as macroeconomic developments. Changes in interest in electric cars can explain a significant part of the rise and fall of oil prices during 2008.