RethinkX: The ICE and Oil Industry Will Collapse by 2030

A new report from the think tank RethinkX has projected that “[w]e are on the cusp of the fastest, deepest, most consequential disruption of transportation in history. By 2030, within 10 years of regulatory approval of Autonomous Vehicles (AVs), 95 percent 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).” The projected speed of Taas adoption is shown in the figure below.

RethinkX says the TaaS disruption will have “enormous implications across the transportation and oil industries, decimating entire portions of their value chains, causing oil demand and prices to plummet, and destroying trillions of dollars in investor value — but also creating trillions of dollars in new business opportunities, consumer surplus and GDP growth.”

Key Study Findings

Key findings in the study include the following:

  • Using TaaS, the average American family will save more than $5,600 per year in transportation costs, equivalent to a wage raise of 10%. This will keep an additional $1 trillion per year in Americans’ pockets by 2030, potentially generating the largest infusion of consumer spending in history.
  • In this intensely competitive environment, businesses will offer services at a price trending toward cost.  As a result, their fleets will quickly transition from human-driven, internal combustion engine vehicles (ICE) to autonomous electric vehicles (A-EV) because of key cost factors, including 10 times higher vehicle-utilization rates, 500,000-mile vehicle lifetimes (potentially improving to 1 million miles by 2030), and far lower maintenance, energy, finance and insurance costs. ICE and A-EV fleet composition in the U.S. is shown in the graphic below.

  • TaaS will offer a 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. Cost saving will also be the key factor in driving consumers to adopt TaaS.
  • Demand for new vehicles will plummet: 70% fewer passenger cars and trucks will be manufactured each year. RethinkX says this could result in total disruption of the car value chain, with car dealers, maintenance and insurance companies suffering almost complete destruction. Car manufacturers will have options to adapt, either as low-margin, high-volume assemblers of A-EVs, or by becoming TaaS providers. Both strategies will be characterized by high levels of competition, with new entrants from other industries. The value in the sector will be mainly in the vehicle operating systems, computing platforms and the TaaS platforms.
  • The TaaS disruption will bring dramatic reductions or elimination of air pollution and GHGs from the transport sector, and improved public health.  The TaaS transport system will reduce energy demand by 80% and tailpipe emissions by over 90%, RethinkX says, and they say that assuming a concurrent disruption of the electricity infrastructure by solar and wind, we may see a largely carbon-free road transportation system by 2030.

Specific Impacts to the Oil Industry

According to the report, oil demand will peak at 100 million barrels per day by 2020, dropping to 70 million barrels per day by 2030, shown in the figure below. 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 and a 30% decrease in just 10 years.  RethinkX says this dynamic 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, according  to the report.

Future Fuels Outlook members can read more on my analysis of why I think this is unrealistic in the May report here.

Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.