If Tony Seba is correct, the Texas and Alberta economies just took a metaphorical bullet to the head
Will the emerging electric vehicle “transportation as a service” business model kill the global oil industry in 10 years? Tony Seba thinks it will. The Stanford economist released a landmark study Thursday about the revolutionary changes soon to be wrought by electrification of the transportation sector.
Seba has been making the rounds of conferences for the past few years honing his argument. Policy nerds have been sharing videos of his talks as proof positive that an EV “technical disruption” – and the re-engineering of some of the 20th century’s greatest industries, like automobiles and oil – are only years away, not decades as the contrarians thought.
Now Seba has generated the math to prove his revolutionary thesis.
I addressed this in a 2016 column, arguing there are two emerging models of EV ownership, but only one could lead to rapid adoption.
If EVs compete head-to-head as a replacement for internal combustion engine cars, then there are far more constraints than accelerators to adoption. And the effect of the constraints – high cost, range anxiety, lack of choice, etc. – is much more intense.
The replacement model argued for a traditionally gradual rise up the diffusion S-curve, perhaps reaching 70 to 80 per cent marketshare in 50 years.
But a business model disruption – like transportation as a service – that dramatically enhances the value of EVs to consumers is another animal altogether.
In Rethinking Transportation 2020-2030: The Disruption of Transportation and the Collapse of the ICE Vehicle and Oil Industries, Seba not only explains why the new business model disruption will triumph, and how its success will be so complete that by 2030 “95 per cent of US passenger miles traveled will be served by on-demand Autonomous Electric Vehicles (A-EVs) owned by companies providing Transport as a Service (TaaS).”
“We are on the cusp of one of the fastest, deepest, most consequential disruptions of transportation in history,” the RethinkX think tank founder says in a press release. “But there is nothing magical about it. This is driven by the economics.”
Economics that include:
- A-EVs engaged in TaaS will make up 60 per cent of U.S vehicle stock.
- As fewer cars travel more miles, the number of passenger vehicles on American roads will drop from 247 million in 2020 to 44 million in 2030.
- Using TaaS will be four to 10 times cheaper per mile than buying a new car, and two to four times cheaper than operating an existing paid-off vehicle, by 2021.
- The cost of TaaS will be driven down by several factors, including utilization rates that are 10 times higher; electric vehicle lifetimes exceeding 500,000 miles; and far lower maintenance, energy, finance and insurance costs.
- The average American household will save $5,600 per year by giving up its gas-powered car and traveling by autonomous, electric TaaS vehicles.
Imagine the impact of these changes on related industries, as Seba did in his study.
If 70 percent fewer passenger cars and trucks are manufactured each year, global automaker supply chains will shrink to a fraction of their current size, throwing millions of out of work, with ripple effects throughout national economies.
Seba believes that car dealers, maintenance, and insurance companies will suffer “almost complete destruction.”
Automakers like General Motors and Ford Co. will either become low-margin, high-volume assemblers of A-EVs or transition to becoming Transportation as a Service providers. No wonder GM invested $500 million in ride-sharing company Lyft.
And what of the mighty oil industry? The impact will be “catastrophic,” says Seba: “Global oil demand will peak at 100 million barrels per day by 2020, dropping to 70 million barrels per day by 2030. This will impact different companies and countries disproportionately — and in many cases, dramatically — depending on their exposure to high-cost oil.”
The remark about high-cost crude oil hits at the heart of the Alberta oil sands, whose output is forecast to rise by at 1 million b/d by 2025 and 1.5 million b/d by 2030.
If Seba is correct, the Alberta economy just suffered a mortal blow. Northern Alberta facilities and infrastructure worth hundreds of billions could be stranded. Calgary and Edmonton will be ghost towns.
I interviewed Seba for almost an hour – it’s like drinking from a firehose. That interview will be the basis of several more columns in the next few days. Frankly, Seba’s work is so important it deserves a thorough discussion.
I also interviewed several economists and analysts about his study. They generally agree with his conclusions, though there are plenty of caveats and objections which suggest the timeline will be more like 20 or 30 years, perhaps longer.
I have my own take on Seba’s study, which I think focuses too much on the “accelerators” to technological change and not enough on the “constraints.” Constraints don’t fit neatly into an economic model because they often tend to be of a type – such as culture – that isn’t easily captured with data.
Quibbles aside, Seba’s work is seminal. It should be taken very seriously by Canadian and American corporate executives, politicians and governments, workers and their unions, and investors.
The reason? Seba has sussed out the single most important driver of rapid technical change: an exponential increase in value. People will pay more if the value they receive is significantly greater than the value created by the old technology, a lesson too often ignored by the boosters and hype cyclers of clean energy technologies.
Can you explain where the electricity will come from? Solar, wind, etc, but stored in some kind of external battery from which internal batteries are charged?
For example: from a Diesel Generator. However, a Diesel Generator is more efficient than an ICE, and the Oil needed for 100 Miles will be cut in half or less, even after factoring in all energy needed from well to wheel, including vehicle production and recycling!
I think you are the right track to look at constraints and their potential effects.
Technological change has many effects. As an Ontarian. Premier McGuinty promised to have us off coal and oil electricity generation by 2007. That did not happen but it did occur eventually, and we will billions poorer because of it, using the best green technology available. An 18% efficient solar panel and a 30% wind turbine when the sun shines and the wind blows is not my concept of a green value nirvana. An we still have gas turbines to back this all.
Smart meters at a cost $2B with time of use policies were to be world leading in energy conservation; ultimately both were a bust.
Now Ontario has some of the most expensive power in North America and too much that wee need to sell the excess at a lost to our neighbours.
I agree technology, the right technology delivers many great things, my real concern is much promised technology comes no where near the marketing promises.
Seba’s theory is an interesting and as with Newton and Einstein it will be interesting to see if his theory bears the rigour of the marketplace and the tribulations of government.
The marketplace will determine many good things and perhaps transportation as a service will be one. Although as you have determined, constraints, as you call them, or obstacles to entry depend on the value delivered against the cost.
It will be an interesting ride.
Take a look at the work of inventor Mike Strizki of Hydrogen House Project where with a integrated system that he has developed over the past 20 years is the direction Japan & Germany are headed.
Even Dutch Shell has already started building Hydrogen stations in Germany. Germany has a goal of 400 hydrogen stations in the next few years. Mike Strizki has built a home that shows what is possible with solar and wind making Hydrogen to power the home & a fuel cell vehicle.
How will the poor afford any of these ?
Aviation fuel, shipping, petrochemicals. Cars are a start but oil is in everything – I believe carbon will break oul but cars are only a part of oil’s terrible scope…
I have listen to his presentations. Aside from the doubters. I believe that the trends are clear. Create value and the market will follow. Grid storage batteries to make renewable power dispatchable as well as ev battery storage will Allow the grid to adapt to this new load. Add the investmens in energy efficiency that will be made because of competitive pressures in the market place. The utilities will be happy to have the additional load that ev’s represent. I say this because evs will balance the generation / load of renewables on the grid. Will there be growing pains , certainly. But really it will come down to standards for the integration of evs into the grid and software to manage the complexity that ev and renewables will create on the grid. As indicated constraints will create delays . But the market pursues value and is hard to stop.
If people get surplus cash many will use it by travel by jet burning JET-A. Maybe gasoline sales will drop and diesel go up for a few years then drop of, but as billions more become middle class in middle and south america, asia and africa they want a car and travel by jets. So oil will still be pumped and used but not refined to the mix of today.
Actually John, changing from (convenient) liquid fuels to battery EVs would would be a NEGATIVE demand on the electricity grid. Refineries take an immense amount of electricity to run. Gasoline has 33.4 kW of energy in each US sized gallon.. EVs usually use about 250-333 Watts per mile on the highway (and recuperate via regeneration when slowing down, and almost nothing when standing still, so no wastage in idling) Electricity costs 12cents a kWh on average in the US, cheaper and cleaner in almost coal-free Canada. So, 33.4 kW / ie equiv one gallon of gas, could drive you between 100-133 miles. For $4.00, less in Canada, about $3.34. Do the math; using gas or diesel is much more expensive. Even if gas/diesel was only $2.00 gallon, you would have to average 50-66 mpg for all use including being stuck in traffic jams going nowhere.
Now, about refining that 33.4 kW equivalent. Refineries take an immense amount of electricity. How much? JUST on electricity cost ALONE, and not including the crude costs and all the costs to find/extract/deliver that crude to a refinery, the differential between using electricity to charge batteries directly, and using it to refine gasoline, is about 5 to 10 % in direct use favour. So, if for example, 50% of refineries were shut down, you would end up with 55% MORE electricity in the grid. In real life use, it would be much ‘more’ than 55%. Most EV charging Is done overnight slowly at home or fleet vehicle work locations. Exactly when demand is low and electricity goes begging for customers. Even though overnight generation is ‘wasted’ it still has to be generated to keep the grid ‘up’ which is expensive to do, and a serious money loser for utilities. Which have to charge high premiums during daytime peak usage times to make up for the overnight financial losses.
This is EXACTLYwhere renewables like daytime (peak use time) solar PV, battery storage for the higher peak for an an hour or two after sunset, and EVs soaking up a lot of the now wasted overnight electricity make for an extremely robust and LOW COST grid with very little ‘peaker plant’ (very expensive) capacity needed, in much smaller amounts and for shorter periods. Wind turbine power usually is lower during the day and higher overnight, so an impressive fit with solar PV, wind turbines, and a small amount of battery storage, as long as EVs are in the picture. Electricity grid system designers are finidind out that given a geographically wider grid with interconnections, surprisingly little ‘base load’ capacity is need, much less than formerly thought in the century old power grid model. All very counter-intuitive to most people but borne out by facts. Also, if your coal, nuclear, not gas, (or hydro) complex breaks, you are out 100% of the power generation from the broken plant. If 1 of 100 wind turbine breaks or has to go offline for maintenace, you still have 99% of power generation. Ditto with solar PV panels. Our local nuke plant 665 megawatts nameplace was offline for nearly FIVE years and over $2 billion in cost for the refurbishment/rebuild after a few decades. For less half that cost, you could build the same nameplate capacity in wind turbines and have it running in a fraction of the time, and you could commission bits and pieces in small increments from 1% upwards if you put your mind to it, not having to wait until it is 100% completed.
Watts and kilowatts are not units of energy, they are units of power. If you don’t understand the difference, you are not qualified to be making the comparisons in your comment, and as they stand they don’t make any sense.
Where to begin debunking this economist and this article? The overwhelming enthusiasm displays the writer’s naivety and relative introduction into this topic, which has been ongoing since the 70’s to which all arguments against the fossil fuel industry have come up consecutive failure after consecutive failure. Human behavior on a global scale debunks everything this article chooses to highlight. Constraints are not only under considered, they’ve been completely ignored. Let’s all come back in 2029 & discuss just how ridiculous this article and the economist was. It will provide us all a good chuckle.
Did you even read the article? Was there self driving technology in the 70’s, which the study is largely based on?
From your comments it sounds like you either didn’t read the article, or didn’t understand what it was implying.
The writer doesn’t agree with the timeline of the economist but the premise, and it seems you didn’t understand that either.
Learn the difference between what the writer conveys as their opinion, and what the writer clearly states as the economists opinion.
Totally agree! People will always like there own cars. Sharing cars, is like sharing houses or his wife.
Electric cars have too much problems. The range, the time to charge the battery, the lifetime of the battery, the battery cost …
Yes its true, electric vehicle lifetimes exceeding 500,000 miles probably. Bot not the batteries!
Not until we solve the battery problem – and that is more than 10 years away. That simple.
Which battery problem?
Whilst agreeing that technology drives change, reality is that the world is so connected to fossil fuels with government budgets fed by duties and taxes generated throughout the value chain of fossil production and marketing, It will need more than consumer savings to drive the change. National economies will go in a downward tailspin with massive budget gaps and negative GDP, who will pay for that, the taxpayer? In addition production of green electricity needs huge investments, so whilst technology and demand add up it can only work if supply an national budget adjustment are aligned. I am afraid that will take longer than 15 years!! Closer to 50, especially given the disparity between wealthy and the not so wealthy nations.
Especially the poorer countries will go all solar because it´s cheaper. Solar plus storage is already cheaper than any other energy-source and prices drop every year.
There may be a big push electric cars but how are we going to power the big trucks, trains, farm equipment and heavy construction equipment? If all of these can be run on power, what will take the place of rubber, plastic and ashfalt for the roads. The electric cars are here but there will be a need for fossil fuels for a long time to come.
It won’t happen. Here’s the reason: the future is already here: in Singapore. Singapore is the country with the least reason to own a car. Everything is close by, public transport is cheap, taxis are cheap, public transport is convenient – and here’s the kicker: it is the world’s most expensive place to buy cars: $100k for a 4 cyl Toyota Camry.
And yet in this country, where it makes the least sense to own a car – everybody wants one? Why? Because a car is freedom for the family and for the middle class. I lived there and I left because I loved cars and couldn’t afford one, even though I never really “needed” one.
The Stanford professor’s study is like a study written by some nerd in their ivory tower, completely detached from reality and treating everyone like the Borg: a faceless number with no personality and chasers of absolute efficiency. In reality, people are selfish, they have desires and they are not logical or rational. Sure, quite a lot of people in the world are bots: they will happily conform and relinquish their independence to the state, but as people age – they realize how important freedom is.
Another example is the prevalence of firearm ownership: why do people own firearms for self-defense? Don’t they know that police are there to save them? Of course not – that’s complete nonsense to people with a bit of common sense. When danger is seconds away, the police are at least 10 minutes away, unless you have a cop in your living room, cops are completely useless when you’re in real danger. But even though the left wing socialists have been wanting desperately in their hearts for all the world to give up their guns, this hasn’t happened. Even though they preached that “nobody needs guns” (oh yeah? Then why do cops carry them?), gun ownership is on the rise (and crime is decreasing too).
It’s the same principle with cars: everyone getting rid of cars and taking public transport is a left wing socialist fantasy, where nobody except the government and the elite have independence.
I know a lot of people who can’t wait to get a self driving fossil free vehicle. This includes older seniors and younger millennials. Personally this would increase my freedom.
Mr Seba’s prediction of the demise of oil reminds me of oft quoted remark attributed to Mark Twain that reports of his death were greatly exaggerated. As well as predictions being difficult but especially about the future they often tell you more about the person making them than what is likely to happen.
Mr Seba is living in cloud cuckoo land if he really believes we will not need oil in ten years and all vehicles will be electric. It may well happen – eventually – but it will take decades and oil and gas will be needed for the rest of this century and beyond. I cannot see electric airplanes, ships, and trucks appearing any time soon.
This is Club of Rome fantasy circa 1972.
I will be keeping a copy of this article to read in a few years time. I contend that it is about as realistic as the futurists of the mid 20th century – many (or maybe most) of which predicted we would all be getting around in flying cars well before the year 2000. This turned out to be about as realistic as “The Jetsons” – for much the same reasons as this article will.
We have had flying cars since just after WW2 – we call them helicopters, but 3/4 of a century on, only the very wealthy can afford one and for their primary everyday transport, they drive cars just like the rest of us. There are many reasons for this:
– cars are dangerous enough, but having ordinary people taking to the skies by the 10,000s would be absolute carnage.
– it is simply beyond an ordinary person to safely manage an aircraft,
– when aircraft malfunction, people usually die.
– it is totally infeasible to have the required infrastructure for flying cars.
– the technology requiring cars to levitate while using little or no energy did not and will not eventuate – we can never override the laws of physics.
Here’s just a few reasons why this article, and the whole mindset that goes with it, will be seen revealed as being as ridiculous as flying cars:
– it primarily relies on the fantasy of fully autonomous vehicles (FAVs) on ordinary roads. Much as we will never see levitating cars, I don’t believe we will ever have the technological capability to release FAVs onto ordinary roads. Given the totally unrealistic zeal for FAVs, some will probably be released, but they will be removed quite quickly after they start killing people. At present, they can’t even handle simple things like road works and traffic lights. This is about as fundamental as the problem with levitating cars – replacing human capability to recognise a vast array of situations simply cannot be done with automation.
– the majority of people don’t live in big cities where the envisaged TaaS systems would be feasible.
– only about 40% of oil is used for light vehicle transport. Heavy transport, aviation and industry use most of the rest – so there will still be still a major market for oil, even if the majority of private transport is by EVs.
I predict that we will see a major shift to EVs as the price of batteries comes down. However, they will only be suitable as short hop commuter vehicles due to the charging requirements. Most people in wealthy countries use their cars for much more than commuting and EVs are not suitable for all day commercial use due to the recharging requirements. So there will still be a lot of ICEVs getting around in 2030.
My guess is that we will see about 50% reduction of light vehicle oil consumption by 2030, representing about 20% reduction in overall oil consumption in wealthy countries. That is contingent on a business as usual scenario for oil production – which is whole other topic.