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Rethinking Transportation

Paul Kando

According to a new report by Stanford University economist Tony Seba, within ten years, radical technological changes will affect the way we get around. We will switch from gasoline and diesel to self-drive electric vehicles (EVs). Individual car ownership will become passé as people switch to fleet-owned self-drive electric vehicles ten times cheaper to run and environmentally much more benign.

Uber mapping car, learning to drive
photo credit: computerworld

This switch to “Transportation as a Service” (TaaS) 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-drive EVs 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% of the time. TaaS companies will have their EVs on the road, earning money 40% to 80% of the time. EVs run 500,000 miles or more and require far less maintenance and repair than internal combustion engine (ICE) cars with and average useful life of only 140,000 miles.

By 2030, EVs will account for 95% of US 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 to 10 times cheaper per mile than driving a new car, and twice to 4 times cheaper than driving a paid-off vehicle. The average US 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, EVs will become cheaper and ICEs 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, Dr. 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?