“We are on the cusp of the fastest, deepest, most consequential disruption of transportation in history.”
Within ten years, we may witness a radical technological shake up in the way we drive as people switch from petrol and diesel engines to self-drive electric vehicles.
The cars will be owned by fleets, not individual owners. The days of individual car ownership are coming to an end, as people switch to self-drive electric vehicles which are ten times cheaper to run. They will also be significantly cleaner.
And as people switch in droves to electric, the internal combustion engine could soon be consigned to the history books.
Big Oil and Big Car companies will be in trouble as millions of drivers switch to clean electric vehicles. The tipping point could be only two or three years away.
So says a new report by Stanford University economist, Professor Tony Seba, who labels the coming the new business revolution as “transport-as-a-service” (TaaS).
According to Seba in his report, “Rethinking Transportation”, the “TaaS disruption will have enormous implications across the transportation and oil industries, decimating entire portions of their value chains, causing oil demand and prices to plummet, and destroying trillions of dollars in investor value — but also creating trillions of dollars in new business opportunities, consumer surplus and GDP growth.”
If we switch to self-drive electric vehicles, billions of dollars of oil will become stranded, especially in high cost areas such as Canada’s tar sands.
According to the report: “As more projects are stranded in the Canadian tar sands, the need for pipelines to transport the vanishing oil also evaporates. Projects such as the Keystone XL Pipeline, whose financial viability depends on the assumption of high volumes being transported from Canada to Louisiana and Texas, would therefore become a financially dubious undertaking and possibly a stranded asset.”
The report adds: “Similarly, the refineries in Louisiana and Texas that focus on refining oil sands would see volumes trickle down and become financially unviable.” The Dakota Access pipeline, subject to months of protest, could too become redundant.
The oil majors are in trouble too. ExxonMobil, Shell and BP could see up to fifty per cent of their assets become stranded, as demand for oil plummets. Not only will you have stranded assets in fossil fuels you will have “mass stranding of existing vehicles”.
And the change will be driven by the market and basic economics. Professor Seba believes that the average American family will save more than $5,600 per year in transportation costs, equivalent to a wage raise of 10%.
“This will keep an additional $1 trillion per year in Americans’ pockets by 2030, potentially generating the largest infusion of consumer spending in history,” he argues.
And as the more people switch, electric vehicles will become cheaper and petrol engines more expensive. “Individual vehicle ownership, especially of internal combustion engine (ICE) vehicles, will enter a vicious cycle of increasing costs, decreasing convenience and diminishing quality of service.”
Before anyone dismisses his analysis, the report outlines how: “We have reached this conclusion through exhaustive analysis of data, market, consumer and regulatory dynamics, using well-established cost curves and assuming only existing technology. “
The report is making waves. The British Telegraph newspaper reports the report is “causing spasms of anxiety in the established industries,” with a “twin death spiral” for big oil and the traditional car companies.
There are many interesting factors about this report, but one goes back to Trump. The President may want to bring back coal and deny climate change, but the market is moving in the opposite direction.
As the Telegraph reports: “Market forces are bringing” about change “with a speed and ferocity that governments could never hope to achieve.”
“What the cost curve says is that by 2025 all new vehicles will be electric, all new buses, all new cars, all new tractors, all new vans, anything that moves on wheels will be electric, globally,” Prof Seba told the paper. “Our research and modelling indicate that the $10 trillion annual revenues in the existing vehicle and oil supply chains will shrink dramatically,” Seba added.
Seba also believes we may enter an era of “free transportation” supported by advertising revenue: “There is nothing magical about it. This is driven by the economics.”
And as the electric vehicle revolution picks up speed, especially in countries such as China and India, the international oil watchdog, the International Energy Agency, is having to review its forecasts.
As Oilprice reports: As “China and India are rolling out plans to dramatically accelerate the adoption of electric vehicles, initiatives that have prompted the IEA to take notice and promise a review its long-term oil demand forecast.”
The Agency is having to review the assumptions underpinning its oil demand forecasts for its new report due out later in the year.
Change is coming fast and the old energy guard are struggling to keep up.