Posted by on May 18, 2017 11:29 pm
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Categories: Bakken Formation Business Commodity markets Cryptography detroit Economy Energy Information Administration Fluid dynamics gene therapy Geology of the United States Krugman life changing technologies Market Share Middle East Norway Oil sands Oil shale Peak oil Petroleum Petroleum geology Petroleum industry Price of oil public key Shale oil Stanford University United Kingdom

“We are on the cusp of one of the fastest, deepest, most consequential disruptions of transportation in history. By 2030, within 10 years of regulatory approval of autonomous vehicles (AVs), 95% of U.S. passenger miles traveled will be served by on-demand autonomous electric vehicles owned by eets, not individuals, in a new business model we call “transport- as-a-service” (TaaS).

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.”

Let me say for the record that I’m often skeptical of published reports by academia. Too often academics live in a world where the number of letters behind their name is inversely correlated with real world experience, leading to all sorts of silly and often dangerous theories. Just look at Krugman… I rest my case.

Fortunately Tony Seba, the author, comes from the real world, having spent a couple decades successfully building, running, and managing businesses. As far as I can tell, he’s got a lot of practical knowledge and understands the real world:

  • The impact of the collapse of oil prices throughout the oil industry value chain will be felt as soon as 2021.
  • In the U.S., an estimated 65% of shale oil and tight oil — which under a “business as usual” scenario could make up over 70% of the U.S. supply in 2030 — would no longer be commercially viable.
  • Approximately 70% of the potential 2030 production of Bakken shale oil would be stranded under a 70 million barrels per day demand assumption.
  • Infrastructure such as the Keystone XL and Dakota Access pipelines would be stranded, as well.
  • Other areas facing volume collapse include offshore sites in the United Kingdom, Norway and Nigeria; Venezuelan heavy-crude elds; and the Canadian tar sands.
  • Conventional energy and transportation industries will suffer substantial job loss. Policies will be needed to mitigate these adverse effects.

I can already hear the dismissive crowd. This Tony is loony?

But Before We Dismiss the Idea…

Consider…

“What can be more palpably absurd than the prospect held out of locomotives traveling twice as fast as stagecoaches?” – The Quarterly Review, March, 1825

Or…

“There’s no chance that the iPhone is going to get any significant market share.” – Steve Ballmer, USA Today, April 30, 2007

Below is a detailed chart of the growth of iPhone market share ever since:

The fact is history is replete with examples of stodgy old men in chunky jumpers scoffing at new technology and being taken seriously by the establishment, only to find themselves years later being laughed at as “the old fart who got it so wrong”. The consequences, other than their progeny having to change their names and move to Venezuela, have been profound.

This list of man made life changing technologies which were never “seen” is not a short one.

The internal combustion engine, the printing press, penicillin, wave theory, surgery, public key cryptography, gene therapy, crypto currencies, parabolic geometry, biochemistry, computational fluid dynamics, physics, graphene, satellites, the string bikini. Life changing stuff.

Clearly it happens. Is Tony onto something?

Proof

There are two main factors the report points to though:

1. The economics of transport-as-a-service (TaaS), and that it offers a vastly lower-cost transport alternative — four to ten times cheaper per mile than buying a new car and two to four times cheaper than operating an existing vehicle in 2021.

Sure, we can point to Peach and her husband Storm, raising their 2.4 snowflakes in an off-the-grid house made of hemp and recycled toilet rolls, being desirous of air they don’t chew before swallowing it. They’re simply modern age hippies.

Plus, on the other end of the spectrum we can argue that there is no way that Billy-Bob will take Betty-Sue out in anything other than something that when accelerating is the closest thing to a mobile orgasm you’ll find. Neither of these people matter when subjected to the gravity of economics.

More than a move towards electric vehicles the main economic driver suggested in the report is that of transport-as-a-services (TAAS).

Essentially, this is Uber and any transportation-on-demand service. If we look at how readily and rapidly internet users have adopted to using the cloud then we can see the same process potentially unfold.

In 2012, ride sharing was when you asked your buddy for a lift to work because he was going that way and you were too hungover to drive yourself. It wasn’t an industry. Today, it’s a billion dollar industry which has gone global.

As I was reading through the report I recalled a conversation I’d recently had with my sister in law who no longer owns a car and instead regularly uses something called GoGet. Here is a screen grab which shows what they’re doing.

They simply station a number of vehicles around the city and you search for the closest one to you in order to book it for your day out or whatever you need. Indeed, why own the damn thing if you don’t need to?

This brings me to the second factor:

2. The rise of use of electric vehicles

The report also argues that insurance of autonomous vehicles will be lower as they are proved safer. This is already happening, causing the spread between human driven and autonomous vehicles insurance premiums to widen.

Ramifications?

Jesus, where do I start?

Geopolitical: What happens to the Middle East, Venezuela, Russia, Norway?

Industry: What happens if demand collapses for personal cars? The entire value chain, auto loans, auto servicing, dealerships, vehicle insurance… Poof! We’re not talking small numbers here.

What do you think?

Tony Seba Poll
Cast your vote here and also see what others think the future holds

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