Chevy is going full tilt into the electric car market with mass production of the Chevy Volt scheduled for 2010.
Actually, it's a hybrid, but it can be recharged by plugging in to a regular wall socket. It's a good start, and it can kick-start the rest of the market into high gear if demand is strong.
It could also impact the energy market in a big way. Consider that the federal government taxes gas to the tune of about 18 cents per gallon. State governments tack on even more. California's gas tax is a whopping 69 cents/gallon. In total about 15% of the price of gas goes to the government (by comparison the greedy oil companies net is about 4%). The big conflict between the government and the advent of electric vehicles is: How do you keep that revenue flowing?
What if electric vehicle technology goes fully electric? You can already buy home wind generators at Sam's Club and other retail outlets. What if you could power your car without even going on the grid?
The folks who stand the most to lose by a change in the status quo are not the oil executives, it's government; here and abroad. Producers will find something else to produce. Government produces nothing. It must find a new way to take.
There are a few ways things could go. First, we could see a resurgence in privately owned and operated roads. Toll roads could become much more common as revenues from pumping gas decline. This option makes too much sense, so is the least likely. Too much of the money flow would come out of the hands of Congress. Since controlling cash flow is where all of their power and influence comes from, they'll never go for it.
The government could dramatically hike taxes on electricity, but that would only encourage more private generation. They could tax generators, but I don't think the public would go for it, and it's too easy to get around.
The most likely scenerio is a dramatic drop in the price of crude well before the mass production roll out. Once politicians realize the threat, they'll suddenly come around to drilling in Anwar, off the coast and elsewhere to deal with our "energy emergency", yes, even the left will find some pragmatic justification for their 180 degree swing. This will just be cover. There really is no short-term supply crunch. We just let too much of the supply fall under the control of OPEC and friends. There is still plenty of untapped oil in the ground. Just as the falling dollar and demand in China and India have been used to explain the run up (as if the dollar fell 80% and/or demand in China quintupled in 18 months) the perception of increased supply will be used to explain the precipitous fall in the price of crude.
I don't know if it will work. There are a number of promising technologies that may well be able to compete with $28/barrel oil. Timing is key. If oil falls fast and far enough, a lot of investment dollars could come out of alternatives. If the players wait too long, they wont be able to get the genie back in the bottle.