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“End Of Oil” Narratives Are Misleading

“End Of Oil” Narratives Are Misleading

Oil

The world isn’t reinventing the wheel. But we are changing how it turns, who it carries and where it’s going.

Over the next few decades we’ll be plugging in more cars, hailing and sharing them, and reminiscing about the good ol’ days of the steering wheel.

To be sure, these looming mobility changes are all exciting and impactful. But none of these nascent trends extrapolate easily into a narrative about “the end of oil,” a disruptive displacement of the fuel everyone loves to hate.

Contrary to armchair calculus, more electric vehicle (EV) sales do not equate to the world using less oil anytime soon.

In fact, whichever way you cut the spreadsheets, the numbers are pointing in the opposite direction. By 2030, less than 15 years from now, I expect around 400 million more internal combustion engines will accumulate into the global fleet of passenger cars – even after assuming that EV market penetration is accelerated with the heavy-handed help of governments around the world.

Here is an indication of the scale of vehicle accumulation: So far this year, to the end of September, over 70 million vehicles with internal combustion engines have been sold worldwide. Every new vehicle that’s sold lingers in the fleet.

Simplistic assumptions and analogies abound. A petroleum-powered vehicle is not like a cheap DVD or videocassette that gets pitched out the minute you buy a Netflix subscription. A car already on the road is an expensive asset –most often financed with debt – that’s put to work for as long as possible by a string of owners. What’s under-appreciated is that most oil-burning vehicles will resist going to the scrap yard, due to their stubborn and improving reliability (see my column Old Pistons Die Hard from October 16th.)

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The Elephant Cometh

The elephant’s not even in the room, which is why the 2016 election campaign is such a soap opera. The elephant outside the room is named Discontinuity. That’s perhaps an intimidating word, but it is exactly what the USA is in for. It means that a lot of familiar things come to an end, stop, don’t work the way they are supposed to — beginning, manifestly, with the election process now underway in all its unprecedented bizarreness.

One reason it’s difficult to comprehend discontinuity is because so many operations and institutions of daily life in America have insidiously become rackets, meaning that they are kept going only by dishonest means. If we didn’t lie to ourselves about them, they couldn’t continue.

For instance the automobile racket. Without a solid, solvent middle-class, you can’t sell cars. Americans are used to paying for cars on installment loans. If the middle class is so crippled by prior debt and the disappearance of good-paying jobs that they can’t qualify for car loans, well, the answer is to give them loans anyway, on terms that don’t really pencil out — such as 7-year loans at 0 percent interest for used cars (that will be worth next to nothing long before the loan expires).

This will go on until it can’t, which is what discontinuity is all about. The car companies and the banks (with help from government regulators and political cheerleaders) have created this work-around by treating “sub-prime” car loans the same way they treated sub-prime mortgages: they bundle them into larger packages of bonds called collateralized loan obligations. These, in turn, are sold mainly to big pension fund and insurance companies desperate for “yield” (higher interest) on “safe” investments that ostensibly preserve their principal.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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