Autonomous Vehicles: What No One Is Talking About [Part II]

Matthew Carr By Matthew Carr, Emerging Trends Strategist, The Oxford Club

Market Trends

Last week, I told you about one of the biggest surprises when it comes to autonomous vehicles…

In a few short years, we’re going to be sharing the roads with these driverless cars… if we’re not in them ourselves.

The first thing investors must realize is that, even though Silicon Valley darlings grab the headlines, the real headway is being made by the Detroit blue bloods.

It’s Ford (NYSE: F) and General Motors (NYSE: GM) and a handful of other familiar and well-established carmakers that are poised to make the most of this revolution.

But that’s far from being the only compelling storyline…

The Energy Impact of Driverless Cars

There is a lot of buzz about the advent of self-driving cars for obvious reasons… But there hasn’t been a whole lot of discussion about how this will impact energy consumption. That’s a pretty shocking omission once you start digging into the numbers…

First, there’s the efficiency factor.

On an individual vehicle basis, studies have shown autonomous vehicles could reduce energy consumption by as much as 20%.

The reason for this is that vehicles would be more tightly packed on the road, traveling at continuous speeds. This leads to less wind resistance. In addition, the controlled style of driving is more efficient.

But then there’s the consumption factor. This is where it starts to get even more interesting…

Autonomous driving will make travel by car easier and more enjoyable. This has a wide range of implications, but I’ll give you just three…

First, a whole host of people who couldn’t drive before, like the disabled or the elderly, will regain their driving freedom. This group is likely using taxis or some sort of car service at the moment. But an autonomous vehicle would allow these groups to travel more freely and more often.

Second, commuting will no longer be a hassle. That means people can live farther out, away from cities. And that increases the number of miles traveled each day.

And finally, shorter jaunts out that would’ve been put off before won’t be. People will make trips in cars more often.

For these reasons and more, autonomous vehicles are expected to increase car travel as much as 60%.

More Time in the Car Means…

According to a Department of Energy report, driverless technology could increase transportation energy consumption as much as 250%.

Think about vacations, like summer driving season coming up… How many more people will start traveling by car in an autonomous vehicle society? Especially on long trips?

We’re already driving more than ever before. For five straight years, the total miles driven by Americans hit new highs. And in 2016, this figure grew 2.8% to 3.22 trillion miles. That’s an average of 13,746 miles per year per person.

Now ask yourself what that means for fuel consumption…

Last year, the U.S. consumed 143.37 billion gallons of gasoline. That’s 9.33 million barrels per day… and the largest amount of gasoline consumed in the U.S. ever, even with a record number of electric vehicles, hybrid vehicles and natural gas vehicles on American roads.

Expectations for this year are that consumption will remain largely flat with 2016 before setting a new record in 2018.

And this is why autonomous vehicles have the potential to be a boon for the energy sector. Even if the vehicles are more fuel-efficient and the cars are driven more efficiently, I don’t see a scenario where the number of miles traveled by Americans decreases.

In almost every situation you can imagine, the opposite is true. That means energy consumption will increase, not decrease.

The only way energy consumption will decrease is if everyone gets rid of their car… But do you think that’s likely?

This is why, as energy and resources investors, we must pay close attention to this emerging trend. The profit potential here from a variety of sides – not just energy consumption – is astronomical. And autonomous vehicles, produced from actual car companies, must be on our radar.

Good investing,

Matthew