This is how Big Oil will die

It’s 2025, and 800,000 tons of used high strength steel is coming up for auction.

The steel made up the Keystone XL pipeline, finally completed in 2019, two years after the project launched with great fanfare after approval by the Trump administration.  The pipeline was built at a cost of about $7 billion, bringing oil from the Canadian tar sands to the US, with a pit stop in the town of Baker, Montana, to pick up US crude from the Bakken formation.  At its peak, it carried over 500,000 barrels a day for processing at refineries in Texas and Louisiana.

But in 2025, no one wants the oil.

The Keystone XL will go down as the world’s last great fossil fuels infrastructure project.  TransCanada, the pipeline’s operator, charged about $10 per barrel for the transportation services, which means the pipeline extension earned about $5 million per day, or $1.8 billion per year.  But after shutting down less than four years into its expected 40 year operational life, it never paid back its costs.

The Keystone XL closed thanks to a confluence of technologies that came together faster than anyone in the oil and gas industry had ever seen.  It’s hard to blame them – the transformation of the transportation sector over the last several years has been the biggest, fastest change in the history of human civilization, causing the bankruptcy of blue chip companies like Exxon Mobil and General Motors, and directly impacting over $10 trillion in economic output.

And blame for it can be traced to a beguilingly simple, yet fatal problem:  the internal combustion engine has too many moving parts.

Cummins diesel engine

The Cummins Diesel Engine, US Patent No. 2,408,298, filed April 1943, awarded Sept 24, 1946

Let’s bring this back to today:  Big Oil is perhaps the most feared and respected industry in history.  Oil is warming the planet – cars and trucks contribute about 15% of global fossil fuels emissions – yet this fact barely dents its use.  Oil fuels the most politically volatile regions in the world, yet we’ve decided to send military aid to unstable and untrustworthy dictators, because their oil is critical to our own security.  For the last century, oil has dominated our economics and our politics.  Oil is power.

Yet I argue here that technology is about to undo a century of political and economic dominance by oil. Big Oil will be cut down in the next decade by a combination of smartphone apps, long-life batteries, and simpler gearing.  And as is always the case with new technology, the undoing will occur far faster than anyone thought possible.

To understand why Big Oil is in far weaker a position than anyone realizes, let’s take a closer look at the lynchpin of oil’s grip on our lives: the internal combustion engine, and the modern vehicle drivetrain.

BMW 8 speed

BMW 8 speed automatic transmission, showing lots of fine German engineered gearing.  From Euro Car News.

Cars are complicated.

Behind the hum of a running engine lies a carefully balanced dance between sheathed steel pistons, intermeshed gears, and spinning rods – a choreography that lasts for millions of revolutions.  But millions is not enough, and as we all have experienced, these parts eventually wear, and fail.  Oil caps leak.  Belts fray.  Transmissions seize.

To get a sense of what problems may occur, here is a list of the most common vehicle repairs from 2015:

  1. Replacing an oxygen sensor – $249
  2. Replacing a catalytic converter – $1,153
  3. Replacing ignition coil(s) and spark plug(s) – $390
  4. Tightening or replacing a fuel cap – $15
  5. Thermostat replacement – $210
  6. Replacing ignition coil(s) – $236
  7. Mass air flow sensor replacement – $382
  8. Replacing spark plug wire(s) and spark plug(s) – $331
  9. Replacing evaporative emissions (EVAP) purge control valve – $168
  10. Replacing evaporative emissions (EVAP) purging solenoid – $184

And this list raises an interesting observation: None of these failures exist in an electric vehicle.

The point has been most often driven home by Tony Seba, a Stanford professor and guru of “disruption”, who revels in pointing out that an internal combustion engine drivetrain contains about 2,000 parts, while an electric vehicle drivetrain contains about 20.  All other things being equal, a system with fewer moving parts will be more reliable than a system with more moving parts.

And that rule of thumb appears to hold for cars.  In 2006, the National Highway Transportation Safety Administration estimated that the average vehicle, built solely on internal combustion engines, lasted 150,000 miles.

Current estimates for the lifetime today’s electric vehicles are over 500,000 miles.

The ramifications of this are huge, and bear repeating.  Ten years ago, when I bought my Prius, it was common for friends to ask how long the battery would last – a battery replacement at 100,000 miles would easily negate the value of improved fuel efficiency.  But today there are anecdotal stories of Prius’s logging over 600,000 miles on a single battery.

The story for Teslas is unfolding similarly.  Tesloop, a Tesla-centric ride-hailing company has already driven its first Model S for more 200,000 miles, and seen only an 6% loss in battery life. A battery lifetime of 1,000,000 miles may even be in reach.

This increased lifetime translates directly to a lower cost of ownership: extending an EVs life by 3-4 X means an EVs capital cost, per mile, is 1/3 or 1/4 that of a gasoline-powered vehicle.  Better still, the cost of switching from gasoline to electricity delivers another savings of about 1/3 to 1/4 per mile.  And electric vehicles do not need oil changes, air filters, or timing belt replacements; the 200,000 mile Tesloop never even had its brakes replaced.  The most significant repair cost on an electric vehicle is from worn tires.

For emphasis: The total cost of owning an electric vehicle is, over its entire life, roughly 1/4 to 1/3  the cost of a gasoline-powered vehicle.

Of course, with a 500,000 mile life a car will last 40-50 years.  And it seems absurd to expect a single person to own just one car in her life.

But of course a person won’t own just one car.  The most likely scenario is that, thanks to software, a person won’t own any.


Here is the problem with electric vehicle economics:  A dollar today, invested into the stock market at a 7% average annual rate of return, will be worth $15 in 40 years.  Another way of saying this is the value, today, of that 40th year of vehicle use is approximately 1/15th that of the first.

The consumer simply has little incentive to care whether or not a vehicle lasts 40 years.  By that point the car will have outmoded technology, inefficient operation, and probably a layer of rust.  No one wants their car to outlive their marriage.

But that investment logic looks very different if you are driving a vehicle for a living.

A New York City cab driver puts in, on average, 180 miles per shift (well within the range of a modern EV battery), or perhaps 50,000 miles per work year.  At that usage rate, the same vehicle will last roughly 10 years.  The economics, and the social acceptance, get better.

And if the vehicle was owned by a cab company, and shared by drivers, the miles per year can perhaps double again.  Now the capital is depreciated in 5 years, not 10.  This is, from a company’s perspective, a perfectly normal investment horizon.

A fleet can profit from an electric vehicle in a way that an individual owner cannot.

Here is a quick, top-down analysis on what it’s worth to switch to EVs:  The IRS allows charges of 53.5¢ per mile in 2017, a number clearly derived for gasoline vehicles.  At 1/4 the price, a fleet electric vehicle should cost only 13¢ per mile, a savings of 40¢ per mile.

40¢ per mile is not chump change – if you are a NYC cab driver putting 50,000 miles a year onto a vehicle, that’s $20,000 in savings each year.  But a taxi ride in NYC today costs $2/mile; that same ride, priced at $1.60 per mile, will still cost significantly more than the 53.5¢ for driving the vehicle you already own.  The most significant cost of driving is still the driver.

But that, too, is about to change.  Self-driving taxis are being tested this year in Pittsburgh, Phoenix, and Boston, as well as Singapore, Dubai, and Wuzhen, China.

And here is what is disruptive for Big Oil:  Self-driving vehicles get to combine the capital savings from the improved lifetime of EVs, with the savings from eliminating the driver.

The costs of electric self-driving cars will be so low, it will be cheaper to hail a ride than to drive the car you already own.


Today we view automobiles not merely as transportation, but as potent symbols of money, sex, and power.  Yet cars are also fundamentally a technology.  And history has told us that technologies can be disrupted in the blink of an eye.

Take as an example my own 1999 job interview with the Eastman Kodak company.  It did not go well.

At the end of 1998, my father had gotten me a digital camera as a present to celebrate completion of my PhD.  The camera took VGA resolution pictures – about 0.3 megapixels – and saved them to floppy disks.  By comparison, a conventional film camera had a nominal resolution of about 6 megapixels.  When printed, my photos looked more like impressionist art than reality.

However, that awful, awful camera was really easy to use.  I never had to go to the store to buy film.  I never had to get pictures printed.  I never had to sort through a shoebox full of crappy photos.  Looking at pictures became fun.


Wife, with mildly uncooperative cat, January 1999.  Photo is at the camera’s original resolution.

I asked my interviewer what Kodak thought of the rise of digital; she replied it was not a concern, that film would be around for decades.  I looked at her like she was nuts.  But she wasn’t nuts, she was just deep in the Kodak culture, a world where film had always been dominant, and always would be.

This graph plots the total units sold of film cameras (grey) versus digital (blue, bars cut off).  In 1998, when I got my camera, the market share of digital wasn’t even measured.  It was a rounding error.

By 2005, the market share of film cameras were a rounding error.

Analog Cameras

A plot of the rise of digital cameras (blue) and the fall of analog (grey).  Original from Mayflower via mirrorlessrumors, slightly modified for use here.

In seven years, the camera industry had flipped.  The film cameras went from residing on our desks, to a sale on Craigslist, to a landfill.  Kodak, a company who reached a peak market value of $30 billion in 1997, declared bankruptcy in 2012.  An insurmountable giant was gone.

That was fast.  But industries can turn even faster:  In 2007, Nokia had 50% of the mobile phone market, and its market cap reached $150 billion.  But that was also the year Apple introduced the first smartphone.  By the summer of 2012, Nokia’s market share had dipped below 5%, and its market cap fell to just $6 billion.

In less than five years, another company went from dominance to afterthought.

Nokia market share

A quarter-by-quarter summary of Nokia’s market share in cell phones.  From Statista.

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[1]): Self-driving EVs will be approved worldwide starting around 2021, and adoption will occur in less than a decade.

How screwed is Big Oil?


Perhaps the metaphors with film camera or cell phones are stretched.  Perhaps the better way to analyze oil is to consider the fate of another fossil fuel: coal.

The coal market is experiencing a shock today similar to what oil will experience in the 2020s. Below is a plot of total coal production and consumption in the US, from 2001 to today.  As inexpensive natural gas has pushed coal out of the market, coal consumption has dropped roughly 25%, similar to the 30% drop that RethinkX anticipates for oil.  And it happened in just a decade.

Coal production

Coal consumption has dropped 25% from its peak. From the Kleinman Center for Energy Policy.

The result is not pretty.  The major coal companies, who all borrowed to finance capital improvements while times were good, were caught unaware.  As coal prices crashed, their loan payments became a larger and larger part of their balance sheets; while the coal companies could continue to pay for operations, they could not pay their creditors.

The four largest coal producers lost 99.9% of their market value over the last 6 years.  Today, over half of coal is being mined by companies in some form of bankruptcy.

Coal market cap

The four largest coal companies had a combined market value of approximately zero in 2016.  This image is one element of a larger graphic on the collapse of coal from Visual Capitalist.

When self-driving cars are released, consumption of oil will similarly collapse.

Oil drilling will cease, as existing fields become sufficient to meet demand.  Refiners, whose huge capital investments are dedicated to producing gasoline for automobiles, will write off their loans, and many will go under entirely.  Even some pipeline operators, historically the most profitable portion of the oil business, will be challenged as high cost supply such as the Canadian tar sands stop producing.

A decade from now, many investors in oil may be wiped out.  Oil will still be in widespread use, even under this scenario – applications such as road tarring are not as amenable to disruption by software. But much of today’s oil drilling, transport, and refining infrastructure will be redundant, or ill-fit to handle the heavier oils needed for powering ships, heating buildings, or making asphalt.  And like today’s coal companies, oil companies like TransCanada may have no money left to clean up the mess they’ve left.


Of course, it would be better for the environment, investors, and society if oil companies curtailed their investing today, in preparation for the long winter ahead.  Belief in global warming or the risks of oil spills is no longer needed to oppose oil projects – oil infrastructure like the Keystone XL will become a stranded asset before it can ever return its investment.

Unless we have the wisdom not to build it.

The battle over oil has historically been a personal battle – a skirmish between tribes over politics and morality, over how we define ourselves and our future.  But the battle over self-driving cars will be fought on a different front.  It will be about reliability, efficiency, and cost.  And for the first time, Big Oil will be on the weaker side.

Within just a few years, Big Oil will stagger and start to fall.  For anyone who feels uneasy about this, I want to emphasize that this prediction isn’t driven by environmental righteousness or some left-leaning fantasy.  It’s nothing personal.  It’s just business.


1 Thinking about how fast a technology will flip is worth another post on its own. Suffice it to say that the key issues are (1) how big is the improvement?, and (2) is there a channel to market already established? The improvement in this case is a drop in cost of >2X – that’s pretty large. And the channel to market – smartphones – is already deployed. As of a year ago, 15% of Americans had hailed a ride using an app, so there is a small barrier to entry as people learn this new behavior, but certainly no larger than the barrier to smartphone adoption was in 2007. So as I said, I broadly believe that the roll-out will occur in about a decade. But any more detail would require an entirely new post.

58 thoughts on “This is how Big Oil will die

    1. Thanks! I worked with someone who was on the executive team that reported the coming collapse to Kodak’s CEO. He kicked them out of the room. It’s hard to hear that message when it means the end of all you know.

      1. You can decide to deny it or decide to bounce back and reinvent the business before it sinks

  1. Nice analysis. But can we compare cameras and cars in an apples to apples manner?
    Digital cameras did not maker their operators redundant. So people could still enjoy the experience of operating cameras, But for self driving cars to succeed their operators will have to be made redundant. People who enjoyed the experience of driving may still want to drive.

    1. I agree, people will still want to drive for fun. But gas sales will look a lot like vinyl records sales – a niche business that serves enthusiasts. I own a Subaru Forrester and go camping with it several times every summer; but if that was my only driving for pleasure, I personally would rather sell it, reclaim my garage, and rent a car for special occasions. I bet I am not that unusual in this regard.

      I’ve thought a lot about the best metaphor for the transition, and weirdly digital cameras fit best. In film cameras, you are using a consumable and have to go back to the store to ‘fill up’. And when the film stores start to disappear, it becomes a harder hobby to maintain. No metaphor is perfect, but that was as close as I could get.

      1. I feel the same with my VW TDI I enjoy for vacations. But quite frankly I use it 70% of the time for commuting and 30% really for enjoyment. I would consider a shared car for work and rent something for fun when I want to explore.

        You can extend the digital camera case, to the digital watch case. In early 70s the Swiss watches dominated the market and presented a pet project to an international fair: digitial watch. Swiss claimed noboby would really buy a watch without gears nor complex mechanisms. So they presented their invention without patenting it. Then Texas instrument and Seiko who were attendeding, found it was a great idea to propose it to custommers. Result Swiss watch industry lost its share part and the sophisticated product is now bought by elite. Simpler and cheaper watches dominate the market now.

        Tesla was founded 100 years after GM and Ford. It’s unbelievable Tesla passed them in the electrical car business. Maybe lack of vision, volontary sight obstruction mixed with political obstruction, kept these centenial companies away from EV cars. Of course they tried, but without corporate convictions.

        We laughed at first digital camera’s resolution and we laugh at electrical car autonomy. I hope old fashion car industry will stop laughing and realize ”EV car in the mirror are closer than they appear”

    2. How about analog, manually-operated, pay-inside gas pumps versus pay-at-the-pump, digital gas pumps? Although there remains some legacy equipment in low-volume settings, sales of new pumps flipped very quickly, driven by labor cost savings.

      1. David, that’s absolutely right. More broadly, there are precious few examples of both an old and new technology sharing the market for any length of time. Much more common is for the old to go; after all, if the new was not growing in cost/performance faster, it never would have caught the old in the first place. While defenders of oil are focused hard on today’s data, these historical examples offer a much more ominous picture of the future.

  2. An interesting analysis. As to the analogy – we have an even close one, albeit in a more distant past. Just 100 years ago, people rode horses to get from A to B. Today, people still ride horses, but only for fun. And its a bloody expensive hobby. I think same fate expects the internal combustion cars.

    Although I think the main driver for change is, ironically, the elimination of the driver, the electric engine will just speed up the decline of oil and car sales.

  3. Nice views, but I think you forget how people love their cars as being… theirs. For many, they’re their second homes, where they can do whatever they like, leave their stuff and trash if they so wish etc. Kind regards, Joris (Belgium)

    1. Joris, I appreciate your prediction, and thanks for reading. I guess my rejoinder is that photographers loved film too – I know photographers who were still using film in 2005, but it quickly became less and less of their business. Culture is difficult to measure: We will find out the answer together soon.

  4. Interesting analysis, sound arguments. Like you, I have focused a lot on the internal combustion engine, back in the past working as an analyst for the Venezuelan oil industry.

    The only thing about your analysis is that it seems to focus only in the USA. So, how can we apply it to the whole planet? Not all countries are at the same level in regards to the set of variables needed for that disruption to happen. Not that it won’t happen, but the rhythm of incorporation will be very diverse. We could even group countries based on that rhythm. That would be a thorough and interesting analysis.

    Greetings from Venezuela, a country where most people think we are sitting on a treasure made of oil and do not imagine that it could actually remain there forever because of a huge disruption like you describe.

  5. No doubt the switch – when it happens – between ICE AND EV will catch many by surprise. However, replacing a $100 camera with another is not the same as replacing a $35,000 automobile. If we assume your math is correct and ICE vehicles become worthless, oil prices drop to the marginal costs of the most efficient producers (perhaps $10 / barrel), and mechanics have nothing to do (and thus drop their salary demands), we have a fleet of 350 million vehicles in the U.S. which can be acquired at a very low cost, will last 15 years +, will be fuelled by very cheap gas, and serviced by cheap mechanics desperate for work. For this reason alone, ICE vehicles will be with us for a very long time.

    The other concerns surround self -driving vehicles. Even assuming the technology is tremendous, how many lawsuits will be threatened or succeed based on the coding of the system? In a silly example, assume a bus full of kids is forced to chose between going off a cliff or running down a group of nuns? Even if you can prove the system is better than having people drive – in the aggregate – , lawyers will have a field day arguing the specific cases when injury occurs.

    Also, no doubt there will be problems in the programming. Can you guess what the reaction will be the day after passengers are killed because they are driven into a truck carrying mirrors, or their car follows old road markings into a wall? Their will be errors, and the day after they occur people will be running to their old cars. Additionally, what about hackers? Does anyone believe the system will be 100% free from terrorist attacks? Even the threat of an attack would cause chaos.

    1. George,

      I agree: Many people will keep their ICE cars. But if they are used mostly for weekend getaways, they won’t contribute much economically. Oil continues to exist, but nowhere near it’s current volume, and not with its current political and economic clout.

      As far as the corner cases go, including hackers: There are thousands of engineers already working these issues, and while it’s impossible to solve them all, it is possible to make them very rare. And I believe they can be made rare enough that we don’t think about them as we make our purchase decisions. After all, the current electrical grid is vulnerable to hacking: How much complaining do we actually hear?

      Risks will continue to exist, but if they are lowered by self-driving, the insurance costs can fall just like other costs do. We don’t have to be perfect, just better than we were before.

      I think your concerns are spot on. But I remain skeptical they will slow things down.

    2. George certainly knows more about this subject of vehicles and how they affect petroleum usage than what Seth Miller presents in his poorly researched article on oil and vehicles.

      Year Cars Produced
      2014 87,037,611
      2013 65,140,268
      *Numbers do not include commercial vehicles
      Rank Country 2013 2012 2011
      1 China 16,664,502 15,523,658 14,485,326
      2 Japan 7,859,320 8,554,219 7,158,525
      3 Germany 5,438,155 5,388,456 5,871,918
      5 U.S.A. 4,540,985 4,105,853 2,966,133
      4 South Korea 4,160,596 4,167,089 4,221,617
      6 India 3,212,988 3,285,496 3,053,871

    3. Yeah, just like everyone went racing back to horses and buggies once those damn “horseless carriages” started killing people!

  6. While I appreciate your analogy it ignores the fact that digital adoption did not require anywhere near as much of an infrastructure transformation as will be required for EVs to become mainstream. You replied to an earlier comment with “…when the film stores start to disappear, [using film] becomes a harder hobby to maintain.” Do you believe gas stations will disappear more rapidly than charging stations will appear? Shouldn’t the latter transformation precede the first?

    1. Linda, that’s the right question to ask. My assumption is that we won’t need anything like the existing gas infrastructure, because autonomous vehicles will be fleet-owned. In that sense, it makes no sense to deploy as a first step charging stations that serve individuals. Logistically, this has more in common with deploying cellular base stations than with gasoline stations – you want to optimize to make sure that all served areas have effective coverage for autonomous vehicles.

      How fast can a cell network be rolled out? My recollection was that when 4G upgrades were done, a town was covered in about 18 months. The capital required here will be higher – the superchargers cost roughly what a base station might, but of course you have to buy cars as well. But the revenue will be higher too. It seems tractable.

  7. I am coming in a little late on this as read the article only recently. And this article followed the other trilogy on Solar Power.

    Read together, am absolutely convinced of Seth’s prognosis.

    In india, the CEO of M&M, a leading vehicle manufacturer said that he fears competition from Uber and other cab sharing services. They will dampen the demand for personal vehicles, even if owning one has certain status sysmbol in India. With our roads crammed with ever increasing number of vehicles and parking space at huge premium, shared Servcies are a natural choice. Add to that the revolution in storage battery technology – that will power your e-vehicles – stage is set for decline in petroleum demand. On power generation side, India is investing big time in solar power. With power supply and transmission quality improving, the demand for diesel fired backup generators is coming down. And Indian Railways have implemented plan to start installing solar panels on train couches that will generate sufficient power to light up the cabins and run basic air conditioning – all hatbis today supported through diesel fired generators in a large number of premium trains in India.

    If a low income country like india is investing in alternate energy fornusage in varied areas, decline in demand for petroleum is not so far fetched.

    1. Charan, it’s fantastic to see your comments. It was India’s commitment to solar that got me started down this path. That was not supposed to happen, at least based on everything I had heard about how solar energy was a first world luxury. When India announced that it would meet its Paris commitments early, that’s became a sign for me that maybe the conventional wisdom was not just a little wrong, but a lot.

      There perhaps is more hope for humanity than we realize.

  8. Seth Miller, the “Scientist, inventor, entrepreneur”, who is “Mostly just trying to understand the world.” sure needs to get out more and look at the world in a different manner to really see the big picture of how things actually are.

    “The Keystone XL closed thanks to a confluence of technologies that came together faster than anyone in the oil and gas industry had ever seen. It’s hard to blame them — the transformation of the transportation sector over the last several years has been the biggest, fastest change in the history of human civilization, causing the bankruptcy of blue chip companies like Exxon Mobil and General Motors, and directly impacting over $10 trillion in economic output.”

    Seth Miller should know that transportation is a small part of what petroleum is used for.
    Here is another aspect of petroleum that needs to be considered when trying to figure out why the price of gas and diesel is what it is. I’m reasonably sure that none of you far left type anthropogenic global warming/ climate change people know just what all Exxon-Mobil does for your everyday life that you have no idea about, and never will because of your closed minded approach to this issue.

    “A partial list of products made from Petroleum (144 of 6000 items)
    One 42-gallon barrel of oil creates 19.4 gallons of gasoline. The rest (over half) is used to make things like:
    Americans consume petroleum products at a rate of three-and-a-half gallons of oil and more than 
    250 cubic feet of natural gas per day each! But, as shown here petroleum is not just used for fuel.”

    It appears that Seth Miller doesn’t consider all of those aircraft flying around the globe to be part of the transportation system and just what it is that keeps them aloft.
    2015 U.S.-Based Airline Traffic Data
    Date: Thursday, March 24, 2016
    The U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS) reported today that U.S. airlines and foreign airlines serving the United States carried an all-time high of 895.5 million system wide (domestic and international) scheduled service passengers in 2015, 5.0 percent more than the previous record high of 853.1 million reached in 2014. The system wide increase was the result of a 5.0 percent rise from 2014 in the number of passengers on domestic flights (696.2 million in 2015) and 4.7 percent growth from 2014 in passengers on U.S. and foreign airlines’ flights to and from the U.S. (199.4 million in 2015) (Tables 1, 1A, 5).
    Passengers on All Scheduled U.S.-Based Flights, Domestic and International, 2003-2015

    SHAPE OF THE MARKET Over the next 20 years, Boeing is forecasting a need for over 39,600 airplanes valued at more than $5.9 trillion. Aviation is becoming more diverse, with approximately 38 percent of all new airplanes being delivered to airlines based in the Asia region. An additional 40 percent will be delivered to airlines in Europe and North America, with the remaining 22 percent to be delivered to the Middle East, Latin America, the Commonwealth of Independent States, and Africa. Single-aisle airplanes command the largest share of new deliveries, with airlines needing over 28,100. These new airplanes will continue to stimulate growth for low-cost carriers and will provide required replacements for older, less-efficient airplanes. In addition, 9,100 new wide body airplanes will be delivered, which will allow airlines to serve new markets more efficiently than in the past.

    One can wonder at the mentality of anyone who would advocate that the Airline/Aircraft business be eliminated to supposedly keep the earth’s temperature from increasing. Some people like hard facts and apply logic while some, it seems, only use useless ideological platforms to show their total ignorance about the climate and what makes the world worth living in.
    Mark Twain was obviously talking about Seth Miller’s kind of “science” when he stated this: “There is something fascinating about science. One gets such wholesale returns of conjecture out of such trifling investment of facts.” Mark Twain

  9. Those who know nothing about the pipelines or solar energy, seem to have issues with the oil industry. Do they also dislike Apple?
    “Apple’s gains helped it overtake Exxon Mobil Corp. as the company with the biggest market value. The Cupertino, California, electronics maker said late Tuesday that it sold 37 million iPhones in its fiscal first quarter, the first period after the death of CEO and co-founder Steve Jobs. That was coupled with a big jump in iPad sales to 15.4 million, and a more modest increase in Mac sales.
    Apple’s net income leapt 118 percent from the same quarter a year earlier. Revenue soared 73 percent. Both results blew the doors off Wall Street’s expectations.”

    I can get by without an iPad easier than without the products that the petroleum industry produces.
    The question is, when will Seth Miller be more open minded than the source that he relies on, Skeptical Science, and allow other views to see the light of day on his site? Here are some FACTS about the “big oil” that has made Seth Miller’s life worth living as compared to, say 50 years, ago.

    The oil industry employs 1.9 million people and benefits the retirement accounts of many millions more. The price of crude oil makes up 70% of the pump price and that price is set on the world spot market. Refining and retailing add 17% & taxes add 13% to the pump price. The oil companies are making money. Why shouldn’t they have the right to do so? Some other industries do much better, for example; 7th; Internet Information Providers: 23.8%, 8th; Application Software: 22.7%, 12th;Cigarettes:19.8%, 19th; Beverages – Brewers: 16.5%, 27th; Beverages – Wineries and Distillers: 14.9%, 29th; Beverages – Soft Drinks: 14.3%, 24th; Drug Manufacturers – Major: 15.4%, 26th Railroads: 15%, 90th; Oil and Gas Equipment and Services:7.9%, 114th; Major Integrated Oil and Gas: 6.2%.
    Incidentally at present: Wal-Mart Stores Profit Margin is 3.03%, In Jan of 2011 it had been up to 5.3%
    In the remote chance that ReduceGHGs might want to see these figures for themselves, here is the link that they were taken from:
    Oil Industry Profit Margin Ranks Fairly Low: There Are Bigger Fish

    1. John,
      The argument is not that we will stop using oil. It is that the oil companies, with large debt overhangs and commodity margins, will suffer a fatal blow when oil use falls due to the rise of autonomous EVs. We can still use oil for planes; it is Exxon, along with its political clout, which may not survive the transition.

  10. “The argument is not that we will stop using oil. It is that the oil companies, with large debt overhangs and commodity margins, will suffer a fatal blow when oil use falls due to the rise of autonomous EVs.”
    Seth Miller is dreaming if he thinks that anytime soon this number of cars will be autonomous EVs.

    How many cars are produced in the world every year? In 2012, for the first time in history, over 60 million cars passenger cars will be produced in a single year (or 165,000 new cars produced every day).Dec 1, 2012

    Total Cars Produced In The World
    2015 68,560,00
    2000 41,215,653

    In 2013 this is the number of cars produced in China and in the US.
    1 China 16,664,502
    5 U.S.A. 4,540,985

    1. John Swallow wants us to swallow oil business can be different from companies who denied the change and collapsed. John Swallow like to discredit people with bunch of statistics and forecasts representing its interests. One thing John Swallow can’t do is preventing the change and keeping people from switching consumption habits. Kodak underestimated the impact of digital cameras, Swiss watchmaking underestimated the impact of digital watches, Paper and mail industries underestimated the impact of internet. Same fo music industry. People consume digital without impacting their comfort, with a gain in overall carbon footprint because less consumables involved. Who will be against that ? Maybe John Swallow if it’s his real name.

  11. This is great. But there is much better: a significant cure for congestion. The average American car is over three-quarters empty and same for buses. Hauling all that empty space and weight is unnecessary. Bicycles and electric bikes have no empty seats, and take up 10 or more times less room on the road and parked.

    An electric assist ebike eliminates almost all the reasons people won’t ride: distance, hills wind, age, infirmity, injury and not wanting to arrive sweaty. Faster ebikes can keep up with traffic and a bicycle rain cape pretty much solves precipitation problems at city speeds. You get as much or as little exercise as you select, and it’s a great way to recover from injuries.

    Since the average American car only has 1.1 people in it I’m going to guess that more than half of local commuting and errands can be done on an e-bike. If half of drivers are instead bicycling you’ve reduced congestion by about 40%.

    Imagine parking lots reduced by a half when half of trips are done by bike. Then when autonomous cars prevail we can eliminate most of the remaining parking. Cities have some 3 – 30 spots for each car! With autonomous vehicles, each only needs one spot when idle and there are much less vehicles.

    Since the average city is 30% paved for vehicles and LA up to 50%, land cost will go down and more neighborhood stores will spring up. Cyclists and pedestrians will be in much less danger and European style street life will flourish in America.

    A car, even an electric or autonomous one, is vast overkill for most of our local solo transportation needs. The bike has been the most efficient mode of transportation in either the man-made or natural world ever since roads were smoothed. The ebike makes us all far stronger than Greg lemond.

    Another reason to go for lighter vehicles: road damage is roughly proportional to the fourth power of vehicle weight. So a typical local city bus the Orion 40 foot model is 32,000 lb, about 10 times what a smaller car weighs but doing 10,000 times the damage! And a car does roughly 10,000 times the damage of a bike. Every person you can get off a bus and onto a bike is doing something like 10 million times less damage that way, if the bus carries an average of 10 passengers. That saves a lot of oil in the form of asphalt or the enormous energy needed to make concrete. A bike path is basically forever except for intruding tree roots or flood damage.

    Since my ebike is instead of a car I got a cargo version. It will carry three big people but I’ve only taken a passenger, and separately, 150 lbs of compost. But even though it’s 60 lbs to accommodate that I can ride it at an average speed of 20 miles an hour up the highest paved road in Boulder County climbing 5600 ft in 28 miles, in 1 1/2 hours. A regular bike takes about 4 1/2 hours.
    It cost about $3,000, the same as one 5 times less powerful I bought 5 years ago but which was stolen.

    Ebikes should be subsidized much more than electric cars because the energy savings of an ebike over an e-car is much greater than that of an e-car over a car. But in most places they are not subsidized at all.

    1. I sat amen to everything you have written. I’ll add that one aspect of autonomous fleet vehicles that people don’t consider yet is that they can be sized based on the trip. There will be no need to get a ride in a five-person vehicle unless you are carpooling. And if the car carries one or two alone, it can be made much lighter and more energy efficient. A-EVs will, long term, end the curse of unused capacity, which will benefit us all.

      1. Sure, but it’s fun to ride your own bike especially when there will be no more drivers on phones or texting. And no waiting for a ride to come. Riding your own ebike is recreation and conditioning and injury recovery as well as transportation.

    1. Plastics will still be from oil. I want to emphasize a subtle point: it is Big Oil – the political and economic power – that will die, and that will happen with a 30% (or smaller) drop in oil consumption as cars convert to electricity. The petrochemicals part of the oil business represents 20% of oil use, and it will thrive as oil ceases to be used as fuel. Which is as it should be; we can burn fuel only once, but properly managed, plastics continue to provide value well after their initial use.

      1. I agree,

        Good plastic last long ! As per exemple my 9 years old son still play with my Fisher Price toys made 40 years agos. The plastic vehicule for action figures was molded in Aurora NY in early 70s and still looks good.

        New plastics are emerging and stay away from petroleum based polymers. Of course machine to produce such material will end up dripping in oil but the goal here is saving oil for long lasting goods and keep renewables for consumables.

  12. bravo seth , truly enjoyed this post and the thought put into it (and the comments section) , based on reading the comments and looking around for contradictory opinions, i found your analogies to be quite compelling, it may be plausible to argue with the “scale” of the change….or even the timeline, but when you combine the arguments re: huge cost to maintain ICE’s vs. EV, PLUS the fuel costs, PLUS the inefficiencies of ICE ownership, I say you hit the nail on the head, or rather the nail in the coffin (of big oil)

  13. Forgive me if this has already been touched on but …

    The article doesn’t mention one important factor – whether internal combustion or electric vehicles, it still takes x amount of energy to move people and goods, If everyone switched to EVs overnight, their vehicles would still need electricity for their batteries, which is generated by the electric companies, which are powered by fuels that come from big oil – primarily.

    How devastating EVs will be to oil companies seems to hinge on how energy efficient EVs are. In other words, unless EVs require substantially less energy to move x weight over x distance, then roughly the same amount of fuel will be required to provide the energy to do so. Currently, big oil is in the best position to provide that fuel – unless nuclear power dramatically improves safety and public opinion and/or alternative energy sources such as wind and solar make significant improvements in distribution.

    1. I tried to keep the article focused, but you are right to express concern about what fuel will be used to generate the electricity. I strongly believe it will be wind and solar, simply because they are cheaper than fossil fuels already in sunny locations, and their prices are falling at dramatic rates. Natural gas is improving too, but not at a rate fast enough to keep up.

      The majority of new generation going onto the grid is renewable. All of this electricity will, by definition, be stored in batteries, and the cars can come back home to recharge during peak production hours. All told, I think that A-EVs will be powered by clean energy based on price alone.

    2. Big power plants are more efficient and better maintained than your car, so there is some advantage. But as my post above relates, electric bikes are all that’s needed for probably half of in City trips. Electric bikes use something like 30 to 50 times less electricity than an electric car. But more important they take up some 10 times less space, thus reducing congestion and cutting the need for parking lots which are enormously wasteful of space. This will lower the price of urban land and make actual destinations closer together without huge parking lots and wider than needed roads. has single-handedly lowered the price of powerful electric bikes by half.

  14. Right now, solar is the cheapest electricity going on the grid, so the presumption is that it will dominate for EV charging in the future.

    The down side to cheap solar is usually that it must be paired with expensive batteries to balance the load, but of course the cars themselves are those batteries. There will have to be some fixed batteries at charging stations to prepare vehicles for the morning commute, but overall a dedicated supply of solar with a small local battery pack is likely to be cheaper than a grid tie.

  15. Generational priorities also some into play. As a baby boomer, my love affair with the 396 Chevelle might be unending, but talk to a 16-year-old today and cars and driving do not have that kind of grip.
    If you’re a serious commute away from your job, you’re imprisoning yourself in a glass and steel box for weeks out of every year. It may be comfortable, but it’s also extremely aggravating.
    The economics of the conversion must also address the very real cost of wars to maintain petroleum supplies, which the nation must bear under the status quo.

  16. I think your timeframe is optimistic because it assumes this trillion dollar industry will simply sit back and let it happen. Isn’t it more likely we have a “job protection act” lobbied for (bought by) the oil industry that bans self driving cars? Who would have the money and power to out bid them? I’m not saying they could stop it from happening, but they could sure drag it out and slow the transformation down for many years.

    What “we the people” want has little influence in non-key issues, and its unlikely the typical voter is going vote based an issue they don’t understand or even know about. Obviously as it becomes standard in other places that common people political force would over ride the lobbying at some point, but that could kill a decade or more I would think. In most cases in our government what we want matters very little compared to what the money wants. At least starting out, the oil industry is the money.

    1. Steven, I understand your point, but it relies on the narrow assumption that the industry could stop this across the globe, in every country. China in particular is running headlong towards EVs, and they lack the vested interest in maintaining the oil industry that the US does. I could say the same about Germany, France, Singapore, India, Brazil…

      The diversity of these alternative markets means that, even if the US were to go full-on petro-fascist (which, sadly, is not entirely out of the question), the technology will still be developed, and at almost the same rate. And I haven’t given up on the US yet. It would be a huge and public embarrassment for US executives to host their foreign peers but not have the latest amenities. There is more money and lobbying power than just the oil industry; the vested interests, in this case, can be on the side of the people as well. It’s not on purpose, mind you, but I’ll take it when I can get it!

  17. I love our all-electric Chevy Bolt, which we charge with solar power. I do hope that EV adoption will be as rapid as you project and can understand the fleet advantages for those in urban/suburban areas. I wonder, though, about rural folks who will most likely need to continue to own their own vehicles due to lack of fleet vehicles in their area.

  18. Love all your articles, would love to see a follow up about these things! These last two years have been extremely interesting in this space.

    1. Greg, thank you for the kind words! That is a great suggestion, and something I’d like to follow up on in the next couple months. It is worth a return trip, I agree.

  19. Stumbled upon this article in ‘Medium’ and found it quite interesting. As a follow up, would you say you still expect the 2021 timeline to be possible for automation and full self driving? From what little I know self driving isn’t there yet, with crashes happening on Teslas every now and then. Could you suggest any references that indicate the current state and future timeline to achieving full self driving (like driverless cabs) vehicles? I ask because as a mechanical engineer myself, this is a topic that has long piqued my interest but I’ve not yet been able to place a finger firmly on it. Your response would be much appreciated.

  20. Rick, glad you liked it! I have been asking myself the same question lately. We have all seen the articles about how self-driving is overhyped, but we have all seen money continue to pour into it. So what is the model that allows us to understand the launch timing?

    I had to take a break from writing for health reasons, but I am about to start publishing again, and the 2nd article I write will be on AI, and the third is planned to tackle this question explicitly. What I can say for certain at this point is that we should never expect self-driving to launch everywhere at once – it is much easier to drive between hotels on the Vegas strip than it is to navigate Chicago freeways in February, for example – and that we need to build a metric for how hard these cases are relative to each other to get a sense of how fast the tech will spread. And in addition to that, we need to explicitly understand how difficult self-driving is computationally, which I think I can do, but I need to check my work before I publish anything. So, stay tuned.

  21. Seth, Thanks for the great and well written article.

    The writing is on the wall. In the next 5-20 years, we WILL be going thru a major transformation on how we get around and in the use of hydrocarbon fuels. Your scenarios may vary in time but all of us easily see the imense repercussion of the upcoming change. The petroleum and auto industry will have to adapt or die as many other industries that are being impacted by automation and other technological changes. This will be a very tough change given the enormous importance of these two industries in our current economic model.

    Get ready.

  22. Seth, Great article.

    When you are up to it, an update will be appreciated. Perhaps even some thoughts on the economic effects, such as reducing tax revenues in major oil producing states and potential to generate a major economic dislocation. As retired oil company employee, I hope at least my medical benefits will survive!

Leave a Reply