According to a new report by Stanford University economist Dr. Tony Seba, within 10 years, radical technological changes will affect the way we get around. We will switch from gasoline and diesel to self-driving electric vehicles. Individual car ownership will become passe as people switch to fleet-owned self-driving electric vehicles 10 times cheaper to run and environmentally more benign.
This switch to transportation as a service will have enormous implications for the transportation and oil industries, as oil demand and prices plummet, and trillions of dollars in investor value become stranded. The switch to self-driving electric vehicles will strand billions of dollars worth of oil reserves, especially in high-cost areas like Canada’s tar sands. With tar sands stranded, pipelines like Keystone XL and Dakota Access could become stranded assets too, along with refineries in Louisiana and Texas that focus on refining oil sands. Oil majors — ExxonMobil, Shell, BP — could see up to half of their assets become stranded and there will be a mass stranding of existing motor vehicles as well.
These changes are driven by basic economics. Americans use their cars only 4 percent of the time. Transportation-as-a-service companies will have their electric vehicles on the road, earning money 40 percent to 80 percent of the time. Electric vehicles run 500,000 miles or more and require far less maintenance and repair than internal combustion engine cars with an average useful life of only 140,000 miles.
By 2030, electric vehicles will account for 95 percent of U.S. road miles traveled, and global oil production will fall from 100 million barrels per day to 70 million barrels. Families and businesses will give up their cars as alternative transportation costs fall. Getting around will be 4-10 times cheaper per mile than driving a new car, and 2-4 times cheaper than driving a paid-off vehicle. The average U.S. household will save $5,600 annually, keeping an additional $1 trillion per year in American wallets, potentially boosting consumer spending.
As fewer cars travel more miles, the number of passenger vehicles on American roads will drop from 247 million to 44 million, impacting the need for road traffic lanes, road maintenance, and how highway construction and maintenance are financed. As more people switch, electric vehicles will become cheaper and internal combustion engine cars more expensive.
The Stanford report is based on analysis of market data, consumer habits, and regulatory dynamics. It assumes only existing technology. “The cost curve says that by 2025 all new vehicles will be electric. … Anything on wheels will be electric, globally,” Seba said in an interview. “The $10 trillion annual revenue of the existing vehicle and oil supply chains will shrink dramatically. We may even enter an era of free transportation supported by advertising revenue.”
China and India already plan to dramatically accelerate the adoption of electric vehicles, causing the International Energy Agency to promise a revised long-term oil-demand forecast later this year.
Change is coming fast. It may even help retard climate change. Will we lead or trail behind?
(Paul Kando is a co-founder of the Midcoast Green Collaborative, which works to promote environmental protection and economic development via energy conservation. For more information, go to midcoastgreencollaborative.org.)