State of the Nation
Today, there are over 250 million registered vehicles on the road in the U.S. and, although electric vehicles such as the Tesla may be gaining ground, 99.9% of them are still petrol-powered. Along with the U.S., Australia also boasts a high number of motor vehicles per capita. According to 2014 research by NationMaster, the U.S. was ranked third in the world with 797 motor vehicles per 1,000 people, and Australia was seventh with 717.
In the first two decades of the twentieth century, motor cars had reached an advanced stage of development and until recently we have seen little fundamental changes to the engines that were designed in those times. However, recent technological innovations suggest that changes are coming. A massive disruption of transportation is just around the corner and it will have long lasting effects on how we travel and our consumption of nonrenewable fuel sources.
Recent research by RethinkX, an independent think tank that focuses on technology-driven disruption, predicts that the coming revolution will be one that's based on a business model called Transport-as-a-Service (TaaS).
According to RethinkX, all TaaS vehicles will be autonomous vehicles (AV) and based on electric vehicle technology (A-EV). These vehicles will be able to drive themselves without human input and will become ubiquitous due to far lower costs and better service. All the annoyances commonly associated with ownership will disappear: there will be no need to drive, park, maintain or insure vehicles. The disruption created by the rise of TaaS will be no small thing, RethinkX believes it will put an end to the whole idea of car ownership altogether.
RethinkX sees 2021 as the most likely point for when TaaS's disruption of the auto industry will begin. By 2030, the think tank estimates that 95% of U.S. passenger miles will be travelled using TaaS.
As mentioned, TaaS will first and foremost provide lower costs. RethinkX crunched the numbers and found that the average cost of a personally owned petrol-powered internal combustion engine vehicle (ICE) is $USD 9000 a year, compared with TaaS which will cost about $USD 3,400 a year. The $USD 5,600 difference might sound negligible, but it works out the equivalent of giving Americans a 10% wage raise. This will put an extra $1 trillion in consumer pockets, which will in turn increase spending. Furthermore, consumers buying a new car will be faced with an option that will save them four to ten times in yearly costs. RethinkX notes that no other market has experienced such a price difference with being disrupted.
TaaS is a cheaper option for two main reasons. The first one is usage. Although individually owned cars are only used 4% of the time, RethinkX predicts that TaaS vehicles will be used 40% of the time and drive 2.5 times farther. The second reason is due to the TaaS fleet using A-EV rather than ICE vehicles. A-EV vehicles will have significantly lower finance, maintenance and insurance and fuel costs than those associated with traditional ICE or even EV ownership.
But there are some significant cultural, technological and legislative barriers that TaaS will have to overcome before it is widely adopted. Many people have a love of driving, while others, such as those in rural areas or the ultra rich, may not see TaaS as beneficial. Others still may just be Luddites who fear change or new technology. In addition, A-EV's are not quite at the level required to navigate a busy city system, and legislatively there is still a lot of red tape to deal with. Presumably, this will all be solved by 2021, but in truth, it could take longer.
TaaS Effects on Oil - Is the sun setting on the industry?
Assuming that the TaaS revolution does follow the RethinkX timeline, we can also expect a massive disruption of the oil industry.
RethinkX predicts that U.S. vehicle numbers will drop over 80% to around 26 million vehicles by 2030 and that ICE sales will be entirely finished by 2024. Along with this, there will be a corresponding 90% drop in oil demand the think tank says, declining from over 8 million barrels per day in 2020 to under one million barrels per day in 2030.
This may be particularly good for Australia, which despite being a huge energy producer, still heavily relies on the import of oil from other countries.
Australia's lack of liquid fuel security was illustrated by John Blackburn in a report he prepared for the National Roads and Motorists' Association (NRMA) in 2013.
In his report, Blackburn noted that Australia's transport systems are wholly oil dependent and that the country is particularly at risk of any interruptions to its oil supply. In a follow-up report written in 2014, Blackburn pointed out that due to a number of local refineries closing, fuel imports for transportation had grown from around 60% to over 90%.
Blackburn's also made a prediction for 2030 in his report. By that time, he believes that there will be no refineries in Australia and that the nation will be totally reliant on imported fuel. To solve this problem, he suggested that Australia essentially reduce demand and increase fuel reserves. But if the TaaS revolution makes its way to Australia, it might not be such an issue.
An increase in EVs leading to a reduction in oil demand has already been considered by the Jamison Group, which prepared a report entitled Fuelling Future Passenger Vehicle Use in Australia for the NRMA. That report estimated that by 2030, EV use would lead to a 12% reduction in the Australian demand for oil. It's certainly a far cry from the RethinkX estimates, which predict that TaaS uptake will result in a 90% decrease in U.S. oil demand.
In the oft-quoted words of Nobel prize-winning physicist Niels Bohr,"It's hard to make predictions, especially about the future". It is unclear when Australia will begin mass adoption of EVs and whether or not TaaS will take off in Australia or the U.S. What is clear is this: disruption of the oil industry is coming.
It may not be till 2030 or even 2040, but sooner or later the convergence of technology, environmental concerns and economics will change society, as it tends to do. Hopefully, these forces will push us in the right direction.