A Stanford University economist, Tony Seba, recently made two extraordinary predictions for the next 8 years:
- All vehicles sold world-wide will be electric;
- All vehicles will be self-driving.
He also believes that the long term price of oil will drop to $25 / barrel as a result of this seismic change.
To be clear, Seba is not a random guy making an unfounded prediction. After all, he is an instructor at one of the world’s top universities and holds a MBA from Stanford and a B.S. in Computer Science and Engineering from MIT. We also think his report has a few well thought out points. With an internal combustion engine consisting of 2,000 moving parts, it sounds completely reasonable that an electrical vehicle (EV’s), with only 20 moving parts, would cost less to maintain. Combined with lower costs to “fuel”, EV’s offer the potential for much lower overall costs of operation. Seba argues that we’ll hit a point in the next few years where EV’s are also cheaper to buy. Cheaper acquisition costs + cheaper operating costs + cheaper maintenance = the death of gas combustion engines. At least that’s his argument.
While many might doubt this will happen (or at least so soon), Volvo just announced they will be phasing out solely gas combustion engines as they shift entirely to electric or hybrid cars by 2019. Volvo won’t be the last car manufacturer to make this transition either. Especially when they look at the success and market demand that Tesla has experienced.
We are not supporting Seba’s forecast, but it would be naïve to suggest that a dramatic change in gas demand would not have potentially dire consequences for energy companies and oil producing countries. Correspondingly, this could have a big impact on commercial real estate in Edmonton and Alberta as a province. At this point, we don’t see gas combustion engines ever being fully eradicated, but it’s undeniable that EV’s will continue to grow in popularity.
We also acknowledge that Seba wouldn’t be the first person to sell sensationalism. After all, few people would be interested in hearing from an economist that predicted the future will be largely the same as it is today. Big ideas sell, and Tony likely stands to benefit from all the publicity, including from our very influential commercial real estate blog 😉
We would love to hear your thoughts on this. What’s your long term outlook for oil prices? What will the landscape look like in 8 years, or 20 years?