This is how Big Oil will die
Seth Miller
2.6K191

The article has an interesting premise. That being said, I find the timeline for the “disruption” quite optimistic. Miller postulates that self-driving cars go live in 2021, and by 2030 the entire automotive industry (as well as consumer base) have completely pivoted to self-driving electric.

Since when has a widespread and widely accepted technology been rendered completely obsolete without step-changes in performance? People didn’t buy digital cameras because they were cheaper, they bought them because new digital cameras had comparable resolution than their film counterparts and could store thousands of photos without needing to replace film. Sure, maybe someone bought a digital camera to save on film costs, but I doubt that was most people’s primary driver.

Similarly, Nokia didn’t die because the cellphone market collapsed or the costs/phone became too large. On the contrary, Nokia died because the smartphone market exploded and no one needed something that was “just a phone”. Again, we’re looking at a step-change in product performance. One is a mobile phone, the other is a portable small computer with a phone attached. The market clearly valued performance over cost.

Additionally, Miller uses coal as the analogue. Coal died because regulations on emissions caused a national shift from coal-burning to natural gas-burning plants. This shift took decades. In addition, there are (thanks Google) 7,658 power plants in the US. Comparing a shift of ~7500 units to that of hundreds of millions is a bit of a stretch. In addition, power generation is a business (though heavily regulated) and therefore operates with the sole purpose of being the cheapest cost for the best output. Period. Unlike that electricity business model, most people don’t own or drive cars with pure capital efficiency in mind.

A major stipulation of this article is that people will give up their combustion engines because they’re fiscally prudent and that the self-driving electric car is the logical route to go. Since when are people (as a whole) ever fiscally prudent or logical? If that were the case, no one would ever buy SUV’s and giant trucks. Over the last decade, gasoline prices have remained squarely over $2/gallon (crossing into $3/gallon a few times). Despite these elevated and sustained gas prices, demand for trucks and SUVs have continued to rise (http://evadoption.com/suvs-and-crossovers-key-to-the-next-wave-of-us-electric-vehicle-adoption/). Clearly, the motivation for buying vehicles has not been historically motivated by fuel efficiency and cost savings.

Additionally, American’s are fiercely independent. I really don’t see the bulk of the American population giving up freedom of mobility (i.e. mobility on demand via personal vehicles) to save extra money. Perhaps some will. But the population as a whole? I think not. That being said, a true “disruption” will absolutely occur if highways become self-driving-only and daily commute times are substantially decreased. However, until something of that magnitude occurs, I foresee a much more gradual shift in the Automotive (and therefore Energy) industry.

All that being said, not once did the article mention the fact that the electricity for self-driving vehicles comes from power plants (most of which are now natural gas burning). If electric consumption rises, so too does the consumption of natural gas. Last I checked, natural gas was still one of the primary products of energy industry. Unless the electricity providers also shift to another source of energy, I really don’t anticipate anything close to the death of “Big Oil”.

Another thing to keep in mind is that the 9 year timeline provided will likely not allow for the proper infrastructure to be put in place to “fuel” hundreds of millions of people. As such, even if we wanted to convert to self-driving electric transportation rapidly, infrastructure requirements would still be a major limiting component. Just like housing in oil boom-towns, it will take time for the “gas stations” to meet the demand. And like everything else, if the infrastructure isn’t meeting demand, people will take refuge in the tried-and-true combustion engine.

As a side note, refilling an electric car is not like refilling a gas tank. If one were wanting to drive across country, the fill-up isn’t simply pumping a tank full of gas. It’ll be at least a half an hour of just sitting around waiting. Until charge times get on par (or close) to that of traditional fill ups, the electric car will be met with some level of resistance.

All these previous points still don’t touch on the fact that even if first-world countries unanimously adopt self-driving electric cars, developing second- and third-world countries will almost certainly stick with combustion. You don’t need a functional power grid to have a working combustion engine. Many places without running electricity still have gasoline to run vehicles and machinery. Until we reach a point where the entire world has access to cheap and reliable electricity, much of it will continue to use hydrocarbons.

Like it or not, “Big Oil” is here to stay. Will their market share be damaged by electric cars? Certainly. Will electric cars kill the industry? Not a chance.

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