U.S. oil major Chevron Corp. on Jan. 29 swung to an $11 million fourth-quarter loss and missed Wall Street expectations as low margins on fuel, acquisition costs and foreign currency effects overwhelmed improved drilling results… It reported a full-year loss of $5.54 billion compared with earnings of $2.92 billion in 2019…
— article on NASDAQ.com, January 29, 2020
We touched on two concepts earlier in this editorial series: “Peak Oil” and “Peak Demand”. The idea of “Peak Oil” — essentially, the idea that oil is a limited, non-renewable resource, and that humankind will eventually run out — has been around seemingly forever. From the July 19, 1909 Titusville Herald (Titusville, PA, in what was once the epicenter of US oil production):
Petroleum has been used for less than 50 years, and it is estimated that the supply will last about 25 or 30 years longer. If production is curtailed and waste stopped it may last till the end of the century… This being the case, the reckless exploitation of oil fields and the consumption of oil for fuel should be checked.
The concept of “Peak Demand”, meanwhile, has more recently come to the fore — the idea that humankind will cut back on the demand for oil long before it runs out.
On August 31, Exxon Mobil, once the largest publicly traded company in the world, was dropped from the Dow Jones industrial average after serving as a noble indicator of our nation’s financial health since 1928.
Until last summer, Exxon Mobil was the longest-serving member of the Dow’s 30-company index… except that they were called ‘Standard Oil’ back when they first joined the team. In the 1980s, energy companies comprised about a quarter of the index. With Exxon getting kicked down the stairs, one lone energy company remains, accounting for just 2% of the weighed index: Chevron. Folks who’ve been monitoring the situation, like for example the Washington Post, have pointed out that five major tech companies — Alphabet, Amazon, Apple, Facebook and Microsoft — are each worth more than the top 76 energy companies put together.
Things were getting desperate for American oil companies even 10 years ago, but the COVID pandemic was a dumpster fire. People stayed home, even worked from home. Business managers stopped flying in airplanes to big conventions in Las Vegas. Entertainment went online.
The oil companies could have seen this coming. Since 2015, over 200 oil and gas companies in North America have filed for bankruptcy. Twenty oil and gas companies defaulted on their debts in 2019 — before COVID was even a word — and 18 have already done so this year. Exxon Mobil reportedly faces a deficit of $48 billion this year. Things don’t look good.
Stanford economist Tony Seba has some interesting ideas about the future of transportation in the US. Among Professor Seba’s controversial ideas, we find the prediction that “within 10 years of regulatory approval of autonomous vehicles (AVs), 95% of U.S. passenger miles traveled will be served by on-demand autonomous electric vehicles owned by fleets, not individuals, in a new business model we call ‘transport-as-a-service’ (TaaS)…
That quote comes from a 2017 analysis by James Arbib & Tony Seba entitled, Rethinking Transportation 2020-2030:The Disruption of Transportation and the Collapse of the Internal-Combustion Vehicle and Oil Industries. Here’s another quote from the same document:
“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…”
You can view a summary of his predictions in this PDF.
We briefly discussed the idea of “Peak Oil” yesterday in Part Five — the theoretical point in time when the world has extracted, and used up, half of its recoverable petroleum supplies. But Professor Seba is focused on a different idea — that the customer demand for oil, not its availability, has now become the driving factor for the survival of the oil and gas industry. The professor made a daring prediction four years ago, that “oil demand” would hit its peak of 100 million barrels per day by 2020.
Reportedly, the global demand for oil in 2019 hit 101 barrels per day. The demand in 2020 was 9% lower: 92 million barrels per day.
Will Professor Seba’s prediction about automobile transportation pan out as well? That our cars will drive themselves, and most of us will no longer own a car?
If Professor Seba is on target, the number of passenger vehicles on American roads will drop from 247 million in 2020 to 44 million in 2030.
As “Transport as a Service” (TaaS) develops, using TaaS will be four to 10 times cheaper per mile than buying a new car, and two to four times cheaper than operating an existing paid-off vehicle, by 2021.
The cost of TaaS will be driven down by several factors, says the professor, including utilization rates that are 10 times higher; electric vehicle lifetimes exceeding 500,000 miles; and far lower maintenance, energy, finance and insurance costs. The average American household will save $5,600 per year by giving up its gas-powered car and traveling by autonomous, electric TaaS vehicles.
If Tony Seba is correct, the Texas and Alberta economies just took a metaphorical bullet to the head. Other possible victims? Auto dealerships, global automaker supply chains, insurance companies. Automakers like General Motors and Ford Co. will either become low-margin, high-volume assemblers of A-EVs or transition to becoming themselves TaaS providers. (Did we note that GM has already invested $500 million in ride-sharing company Lyft?)
What would any of this mean to sleepy, little Pagosa Springs?
Bill Hudson began sharing his opinions in the Pagosa Daily Post in 2004 and can’t seem to break the habit. He claims that, in Pagosa Springs, opinions are like pickup trucks: everybody has one.