So… Seth Miller doesn’t have to be 100% right… he can be 50% right and still rock your investing world.
Big Oil believes it is different. I am less optimistic for them.
An autonomous vehicle will cost about $0.13 per mile to operate, and even less as battery life improves. By comparison, your 20 miles per gallon automobile costs $0.10 per mile to refuel if gasoline is $2/gallon, and that is before paying for insurance, repairs, or parking. Add those, and the price of operating a vehicle you have already paid off shoots to $0.20 per mile, or more.
And this is what will kill oil: It will cost less to hail an autonomous electric vehicle than to drive the car that you already own.
If you think this reasoning is too coarse, consider the recent analysis from the consulting company RethinkX (run by the aforementioned Tony Seba), which built a much more detailed, sophisticated model to explicitly analyze the future costs of autonomous vehicles. Here is a sampling of what they predict:
Self-driving cars will launch around 2021
A private ride will be priced at 16¢ per mile, falling to 10¢ over time.
A shared ride will be priced at 5¢ per mile, falling to 3¢ over time.
By 2022, oil use will have peaked
By 2023, used car prices will crash as people give up their vehicles. New car sales for individuals will drop to nearly zero.
By 2030, gasoline use for cars will have dropped to near zero, and total crude oil use will have dropped by 30% compared to today.
The driver behind all this is simple: Given a choice, people will select the cheaper option.
Your initial reaction may be to believe that cars are somehow different — they are built into the fabric of our culture. But consider how people have proven more than happy to sell seemingly unyielding parts of their culture for far less money. Think about how long a beloved mom and pop store lasts after Walmart moves into town, or how hard we try to “Buy American” when a cheaper option from China emerges.
And autonomous vehicles will not only be cheaper, but more convenient as well — there is no need to focus on driving, there will be fewer accidents, and no need to circle the lot for parking. And your garage suddenly becomes a sunroom.
For the moment, let’s make the assumption that the RethinkX team has their analysis right (and I broadly agree): Self-driving EVs will be approved worldwide starting around 2021, and adoption will occur in less than a decade.