A Stanford economist has made some predictions that will send cold shivers up the spines of petrolheads around the world. If his bold prophecies about the North American car market are correct, then 95% of people in the U.S. won’t own a car; no petroleum-fueled vehicles will be on the road; and the global oil industry will be eviscerated.
And all of this will happen before 2030.
These are not the ramblings of of a doomsday prepper or a science-fiction author. These bold claims are being made by Tony Seba, an internationally-renowned economist and futurist from Stanford University. Mr. Seba is the leader of a project called RethinkX; which consists of a panel of international academics studying the market dynamics of the transportation sector. The 77-page RethinkX report predicts that the transportation industry as we know it will disappear within a few short years.
The report contains a lot of maths and goes into great detail about the widespread economic implications of electric vehicle ownership. It’s a long and thorough report that takes quite a bit of time to read, but the basics behind it are actually fairly simple and intuitive. The most important aspect of the report is centred around the concept of transport as a service (TaaS). Basically, TaaS refers to services that provide transport for individuals (e.g. public transit, taxis, Uber/Lyft, etc.)
Seba predicts that the cost of utilizing TaaS will fall to the point where it no longer makes economic sense to own a vehicle. Autonomous vehicles will play a critical role in this cost shift as it will eliminate the costs of hiring drivers, as well as provide people with the ability to be more productive in their commute. This surge in the value of TaaS will result in a collapse in the value of the private automobile, as it will cost more to buy and maintain a vehicle than it would to hire a car for transportation.
The ripple effects don’t stop there. RethinkX also predicts that the marginal costs of producing and running EVs will also fall such that petroleum-powered vehicles become economically unattractive. Once this happens, the demand for petroleum products in the transportation industry will all but disappear.
This sounds like devastating news for petrolheads, but the implications could be even worse for the economies of many regions of the world. For example, the Canadian province of Alberta relies heavily on its oil industry to sustain its economy. A collapse in the oil market would almost certainly devastate the large cities of Edmonton and Calgary (pictured); and could possibly disrupt the national economies of both Canada and the United States. These predictions seem to make common sense. The shock value of the RethinkX report comes from the time scale—it proposes that these changes will take place around 20 years sooner than previously thought.
Of course, these consequences beg the question of how accurate the RethinkX prophecy is. If the advancement of technology is as rapid as Tony Seba predicts, autonomous EVs and collective ride-sharing will theoretically optimal. I’m not quite as convinced, however, that the private automobile is going anywhere just yet.
There are a few reasons why I am skeptical of RethinkX. Owning a car has thus far been an immortal component of the American Dream, and I don’t see people being very willing to give up the emotional attachment to their own cars. People don’t make decisions purely based on economic efficiency. What’s more, there’s a certain amount of peace of mind associated simply with owning your own car. If your car has ever broken down and caused you to make alternative transportation arrangements, you’ll know exactly what I am talking about.
I am also skeptical of the report’s prediction that the industry will rapidly advance and squeeze the internal combustion engine out of the market. The corporations associated with the automotive industry are incredibly powerful, and I doubt very highly that they will go down without a fight. This is also true of the magnates of the oil industry, which include OPEC and the massive transnational corporations that produce and distribute petroleum products. The implications of international relationships with oil-producing nations would also be a massive challenge to overcome.
Finally, as mentioned above in one of my previous Ecarnomics blogs, one cannot ignore the impact of widespread EV usage on the electrical infrastructure. This concern is particularly obvious in developing nations in the global South, but cannot be ignored even in nations with the best power grids. It will probably never be known how such an increase in the demand for electricity will impact the electrical infrastructure; and the electricity market therein.
Despite the radical and potentially unrealistic view of the future that RethinkX gives us, I cannot dismiss the report outright. It could very well be right. The economics make an enticing case for a driverless future, no matter how absurd it seems to us petrolheads. Tony Seba’s report is incredibly important to understand, as it outlines the inevitable car culture of the future. Whether or not that future will arrive in 10 years or 40 years, however, remains to be seen.
An #ecarnomics post.