Peak Oil Usage

Investment Analysis Clubs Saul’s Investing Discussions
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Very interesting study of the forecast adoption of Transportation as a Service
and use of electric vehicles for that service. Oil demand to peak in 2020 and
decline rapidly. Many fewer cars needed, less auto service, less insurance, etc, etc.

…In this intensely competitive environment, businesses will offer services at a price trending toward cost. As a result, their eets will quickly transition from human-driven, internal combustion engine (ICE) vehicles to autonomous electric vehicles (A-EV) because of key cost factors, including ten times higher vehicle-utilization rates, 500,000-mile vehicle lifetimes (potentially improving to 1 million miles by 2030), and far lower maintenance, energy, nance and insurance costs.
ê As a result, transport-as-a-service (TaaS) will offer vastly lower-cost transport alternatives — four to ten times cheaper per mile than buying a new car and two to four times cheaper than operating an existing vehicle in 2021…

…Oil demand will peak at 100 million barrels per day by 2020, dropping
to 70 million barrels per day by 2030. That represents a drop of 30 million barrels in real terms and 40 million barrels below the Energy Information Administration’s current “business as usual” case. This will have a catastrophic effect on the oil industry through price collapse
(an equilibrium cost of $25.4 per barrel), disproportionately impacting different companies, countries, oil fields and infrastructure depending on their exposure to high-cost oil.

The impact of the collapse of oil prices throughout the oil industry value chain will be felt as soon as 2021.

In the U.S., an estimated 65% of shale oil and tight oil — which under a “business as usual” scenario could make up over 70% of the U.S. supply in 2030 — would no longer be commercially viable.

Approximately 70% of the potential 2030 production of Bakken shale oil would be stranded under a 70 million barrels per day demand assumption.

Infrastructure such as the Keystone XL and Dakota Access pipelines would be stranded, as well…

You suppose the Saudis’ see this coming as well, floating their trillion $$ IPO to the world.
Get while the gettings good!

JT ~ Zero direct Oil exposure.

Should be good for plastics, airlines…

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And the link…

https://static1.squarespace.com/static/585c3439be65942f022bb…

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Thanks upndn, that’s a fantastically interesting mind-blowing report. Have you read anything else by them?
Saul

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But I see a huge flaw in their reasoning. Upper and upper-middle income people aren’t going to do without personal cars to save $5000 per family! Many, many, many families currently have two, or even three, personal cars, and could obviously save $10,000 or $15,000 a year by just cutting the number of cars currently. It simply doesn’t matter to them compared to the convenience of having their own cars. On the other hand, TaaS could rapidly be adopted by lower income families, and lower and middle income families in a big city, where having a car can be a big hassle.

How did they miss that in their thinking?

Saul

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How did they miss that in their thinking?

Actually I think they have that in their model. Such ownership will tale off at a slower
rate I would imagine. If you’re wealthy you’ll always have your own ICE or EV.


I have an '87 Porsche I drive less than 1,000 miles a year.
And my 1950 Jeepster wouldn't really count being a collector car I rarely drive
especially since it's waiting for me to get off my keister and replace the brake master cylinder.
Have a new Explorer and 2002 Volvo and I live 100 miles from a major metro - Portland, on the Oregon Coast.

JT
No I have not read any of their other studies.
Ran into this one on a SA board, forget which tho.
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I often wonder why so many people seem to think the reasonably well-off would give up their clean safe private cars for what are in effect small buses that run on more flexible routes and times.

I will be keeping a Tesla. Maybe use transport as a service like I would use Uber now. TaaS is really a cheaper Uber without the driver to clean the mess and possible bodily fluids inside the vehicle.

Just like I use motels with private bathrooms instead of saving money with motels using communal bathrooms.
Why? Because I can.

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I keep hearing about the coming TaaS model, where we will all be hiring the service to take us where we need to go, which will result in much lower car use overall.

The thing that always crosses my mind: at 8 a.m. in So California, when I am driving to work, I see a freeway packed with cars. If we all want our Uber car to pick us up at 8 am every day, won’t we need the same number of cars to deliver all these people?
It is not a simple matter of spreading the total miles traveled over a set of cars that are used 100% of the time. You need to be able to handle the peak usage/rush hour traffic. That will take just as many cars as we have currently, right?!?!

Unless the employers decide to stagger the employee start times, or the Uber’s of the world force us to use carpools to get to work (which is not very successful even now), I don’t see how it is possible to greatly reduce the number of cars.

I have not heard a TaaS solution for the rush hour problem.
Has anyone else?

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won’t we need the same number of cars to deliver all these people?

No, we wont. Consider this example. A coworker of mine arrives at the office at 630am, I arrive at 815am, another one of my coworkers teleworks. Currently each of us own a car. In the future, one AEV will provide the needs for all 3 of us. We just went from 3 cars down to 1. I do believe we will have a lot more traffic on the roads as that one AEV drives all of us around, however, we will need far less vehicles.

AJ

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I have not heard a TaaS solution for the rush hour problem

Some ideas are to incentivise people to pool together, meaning taxing individuals who ride alone and making it far costlier. Others like Elon Musk throw out ideas of boring tunnels underground to create far more highways. I’m not sure yet what solution, or multiplicity of solutions, will work out.

-AJ

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It simply doesn’t matter to them compared to the convenience of having their own cars.

The idea of convenience is interesting. I will suggest another perspective on thought. Lets say that an AEV can be at their door within 40 seconds. That’s pretty convenient. What if it arrives and the previous occupant left a bag of spilled Dorritos in the front seat? Push another button and a different AEV arrives in 40 more seconds. You never have to pay insurance for it, never have to clean it, never have to maintain it, never have to shop for it, or haggle on prices, or sell it at a later date. You don’t have to have a garage or driveway for it. If you dont like the style, number of seats, entertainment options, or color you just request a new one. The flexibility of AEVs seems very convenient to me.

-AJ

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There’s a critical mass of electric vehicles at which gas stations will become unprofitable, many will close, and getting gas will be less convenient than electric charging. Gas stations are not exactly high margin businesses and even a modest decrease in customers will make them unsustainable. My guess is that this will come at around the same time that autonomous vehicles become widely accepted as safe and legal (and my money is on TSLA being the one to push both to happen).

The “convenience” of a personal car will rapidly diminish. When you have fleets of cars controlled by AI (AMZN, GOOG, FB with the help of NVDA) to know when and where you need to go, hailing a car will take less than a minute. You won’t have to worry about finding parking or getting gas. You won’t have to worry about what to do when your car needs service. Obviously you won’t have to worry about actually driving so you can go when you’re sleepy and take a nap in the car.

I do own shares in all the companies listed.

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This already exists, sort of. Discount pricing if you’re willing to carpool.

https://www.uber.com/ride/uberpool/

Also if you prefer a nicer car that is an option as well.

https://www.uber.com/ride/uberlux/

I work with a few 20-somethings who use Uber routinely (they have volume pricing plans too) and don’t have a car (in Seattle, not Manhattan). They feel no loss of status from not having a car - their generation doesn’t care.

When I was in my 20s everybody had a car - mostly for convenience but in part for the status - if you didn’t have a car you were a nobody. While not mainstream, this is beginning to take off.

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“You don’t have to have a garage or driveway for it. If you dont like the style, number of seats, entertainment options, or color you just request a new one.”

AJ,

With the scenario you just described, you just increased the number of cars on the road by several. Are you assuming these cars are already on the road that are being requested one after the other? For example, say I don’t like the style. I request another car. The car that just left is on the road and the car that I just re-requested is on the road. What if I don’t like the next one for some other reason you stated… say it’s just dirty. That’s 3 cars now on the road. See where I’m going with this? Instead of someone getting in their own solitary car, there are now three in it’s place. How does that decrease the number on the road? In order to get one that quickly, they already need to be moving and close by unless they are in nearby garages (which is only possible in a large city IMO). The economic viability of this is escaping me I guess. If the cars are already on the road, they are using up gas and/or battery life. That costs money. If they are sitting in a garage, they are not earning money. And if someone who is very picky decides they don’t like the first 5 cars that could get expensive really quick.

I get the autonomous driving for a car I already own… that is extremely useful and viable economically (many people will pay to have that functionality and convenience). However, I’m still trying to wrap my mind around the possibility of the other scenario which is essentially a car rental service a la carte. I’m not sure the Burger King (you get it the way you want it) way you posited is possible. Wouldn’t it be more like the Hertz app where you pick the general style, seating number, etc. and you get what you get? Or like Uber where you request Uber black (which I love BTW) and you know you’ll at least get something good? Sending it back for a defect or uncleanliness is one thing but color? style? I’m not sure I can see that ever happening because of the expense involved… I think it would be more like "this car is available the closest, will that fulfill your needs?” But even in that scenario there have to be hundreds of cars on the road simultaneously… I’m just not sure I can envision how that’s cheap and better…

Any thoughts on that?

MC
Long NVDA

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The analysis missed the big deal.

Time, convience and privacy,

There is no reason for s self driving car to have windows or a steering wheel or a drivers seat.

Club seating, convertable to a couch with a sex robot that provides “hosoitality” while on the road and cleans the machine between customers.

For those not so physically inclined, WI-FI with the screens in place of windows, connecting via sn Apple TV like interface.

Not only do you save time maintaining the car, you save time in the commute and avoid all those messy human entanglements.

Cheers
Qazulight(Never under estimate how far humanity csn be debased.)

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Transportation as a service sounds great when I’m going out to dinner or going to the gym. I could see doing that (although I really should bicycle to the gym most days).

At one point this summer, my wife and I will take a road trip to Michigan. We are bringing our bicycles with us. We’ll be on the road for several weeks, so we’ll have a lot of luggage, partially because we’ll have cycling gear, kayaking gear, hiking gear, and general relaxing gear. I suspect the TaaS software will allow for lots of luggage, as that is a frequent-enough use case. But how many TaaS services are going to give me an option to request a bike rack and, even if the vehicle that arrives has a bike rack, can I be sure it can accommodate my bicycle’s over-sized tubing? How long would I have to wait for another car with a bike rack if the first won’t work, especially if I’m in a remote location on the Upper Peninsula? How badly would that mess up my itinerary? Many bike racks are designed to fit a certain type of vehicle, so carrying my own bike rack with me wouldn’t remove potential “fit” issues.

I can see using my car less – perhaps even much less – but I’m not sure I want to give it up entirely. Not until TaaS gets edge cases (weirdos) like me figured out. I bet it won’t happen in TaaS 1.0.

Thanks and best wishes,
TMFDatabaseBob (long: several companies that might benefit should AI-based, BEV-based TaaS become more prevalent)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

P.S. I might feel safer driving the roads if most of the cars were autonomous, but it would depend on their predictability. Would they behave the way one would expect a safe human driver to behave? Or would they behave with the unpredictability of an AI Go champion, but all the other AI cars in the vicinity would have been told what to expect? Would they recognize a carbon-based interloper among them, and change behavior? Then again, I remember driving a quiet Interstate in Wyoming and passing a guy who was reading a newspaper draped across his steering wheel. From behind, before I realized what he was doing, his driving appeared to be slow – well under the speed limit – but predictable. I made sure to get well ahead of him because I wasn’t sure how sustainable that predictability was.

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MC - Great questions. I threw in several arguments for the convenience of TaaS over and against the convenience of individual ownership of vehicles. I do believe the former will outweigh the later. I believe there will be multiple services which fit the needs and preferences of each customer. If, as a TaaS customer, price is your main concern, then pooling with others in one AEV where vehicle choice is not important is what you will get. If comfort, efficiency, and a private ride is important to you, then it will be more like Uber Black where you can request a specific vehicle. Imagine a Tesla Model 3 waiting to pick you up each morning for your commute to work, for example. That would be your daily driver. Now lets imagine that after a week of work you want to spend Saturday building out a new vegetable garden in your backyard, a nice self driving pick up truck is perfect for you for to pick up all the equipment and supplies you need from Lowes. Date Night on Friday night? Give me a black Tesla Model S. That’s the kind of flexibility and convenience that I’m arguing for. You are right in that I am not arguing for a stream of 10 vehicles lined up at your door in the morning for you select which one you want at that moment. By the way, I do think that vehicle fleet owners will solve the problem of dirty vehicles so that you may never experience it, but if you did, a new vehicle wouldn’t be far behind.

I do also want to point out that I am not arguing against increasing the number of cars on the road, actually quite the opposite. I’m arguing for for far more cars driving on the road at one time…but drastically less total numbers of vehicles and drastically less sitting in your garage, driveway, or parking lot.

Fleet owners will be become incredibly good at anticipating demand and meeting it. They will know my neighborhood far better than I because they will analyze the data. They will know that at 7 AM five people on my street need a ride to work and that at 8 AM another ten people need a ride. Those vehicles will be ready and waiting to pick up their owners.

Let me give another example that I hope helps. My neighbors across the street from me work at night, my neighbor east of me teleworks 5 days per week, and I’m typically in the office 5 days per week. We all own cars that sit in parking lots or in our driveway 96% of the time. One AEV could replace all of our cars. That one vehicle would be on the road for a far higher percentage of time, let’s say 30% of the time instead of 4%, but it wouldn’t be sitting parked near as often.

Hope this helps.

-AJ

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Very good point about calling another one.Though they may be like taxis, scarce in the rain and at rush hour.

“door within 40 seconds” somehow I suspected don’t live in a distant suburb or a rural area.
The answer is of course that when L5 is fully developed it will cut down on private ownership.Just as buses and taxis and Uber do now. How much is a complete unknown.
Is there hard evidence that Uber has reduced car sales? Because in fact L5 cars are taxis and Uber sans driver.

Most of those writing about it live in big cities, media and art centers. What I would do in London or NY City is different from what I would do in Memphis TN . Or in one of the countless smaller towns. Like all other generations Millennials will age , settle down, get serious about life,and their needs and wants will change .
Me I am an old fogy who invests so that I can afford stuff like my own car. And will not be giving it up.

At the rate of decline in purchasing power of the middle class fewer will be able to afford cars, even summoned driver-less ones.

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getting gas will be less convenient than electric charging
With the one exception of long distance highway travel it is already less convenient. Time for me to plug in at home- maybe 10 seconds , less than that to unplug.

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But how many TaaS services are going to give me an option to request a bike rack and, even if the vehicle that arrives has a bike rack, can I be sure it can accommodate my bicycle’s over-sized tubing? How long would I have to wait for another car with a bike rack if the first won’t work, especially if I’m in a remote location on the Upper Peninsula? How badly would that mess up my itinerary?

TMFDatabaseBob - What if you are saving $5,000 per year by not owning a vehicle. Wouldn’t you have enough money then to afford $1000 dollars reserving the perfect AEV for an entire 3 week period? Let’s go even bigger and say it cost $2500 dollars, you’d still be coming out ahead. I do believe “remoteness” is a problem for TaaS. Your vacation scenario would be the same for extremely rural areas, and I think they will be the last frontier for Taas to solve, but I do think your situation isn’t so unique. How many folks in Michigan need a bike rack? Probably a lot more than you’d think.

Here’s another way that your problem may be solved with TaaS. Let’s say that you owned an AEV. You purchased it with all the bells and whistles needed specifically for your cycling needs. However, you also want to benefit from TaaS. In this scenario your vehicle could participate in a vehicle fleet. Not using your vehicle this morning? It can drive it self to the next customer and you get paid for it. Need it for your 3 week trip? You own it so its all yours. This is exactly the scenario that Tesla is envisioning.

Regarding safety, I do think that most people will feel safe in a relatively quick amount of time. Once the number of auto accidents plummet (I believe there are 90 per day in the US), everyone will find the irresponsible thing to do is drive a car yourself. Far safer for an AEV to take over.

-AJ

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a nice self driving pick up truck now that is something I would use. If it doesn’t cost too much for time spent loading and unloading
One big problem I have with rentals is some annoying driving defect that the rental company has not fixed At least with L5 they won’t blame you for tiny scratches and dents the car already had when you rented it. Or accidents.

Thanks for this discussion. It has helped me see more clearly the potential impact on car sales

But “sitting in the garage not being used” would equally apply to jet skies, boats,and motorcycles, all of which have adored my garage at one time or another… Not to mention that second car which I am fond of but don’t really need.
And then there is the main car, often loaded with options of no practical value, moon roofs , fancy wheels, leather upholstery etc. That so called "economic man " is quite rare.

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