Are Self-Driving Cars a Threat to Shipping?

Automobiles have played key roles in numerous movies over the past 50 years, reflecting our love affair with fast, powerful and stylish cars. Top car movies range from 1968’s Bullitt, featuring Steve McQueen and its famous chase scene, to 1973’s American Graffiti, about coming-of-age California teenagers cruising the strip and embracing rock and roll. Cars also play a prominent role in some great comedies, such as 1977’s Smokey and the Bandit and 1985’s Back to the Future. 

All these movies highlight the central role automobiles played in America’s culture and economy from the 1960s to the 1980s. And every one of the cars in those movies is driven by a human.  

Over those same years the global automobile fleet more than doubled to nearly 450 million vehicles. Today, an estimated one billion cars are roaming the world’s roads and, importantly, burning gasoline and diesel fuel. The demand for fuel has kept the world’s tanker fleet busy, and car-carrier ships, too.  

Now comes the development of battery-powered, self-driving cars that will revolutionize the automobile business with knock-on effects for the petroleum and materials industries that provide the fuel and components necessary for building them (steel, aluminum, rubber, plastics and textiles) and operating them (gasoline, diesel, lube oil). All require energy in their production and operation.  

A leader in developing self-driving or “autonomous vehicles,” as they are often called, is the global information giant, Google. Why is an information company leading the charge?  Because it sees a huge market for information services from mapping the roads these computer-controlled vehicles will travel. Self-driving cars will change the driving experience and thus today’s transportation industry.

The Growth in Fuel Demand

As the global automobile industry expanded over the years and shipped vehicles to every corner of the globe, fuel demand grew commensurately. In the late 1990s, a paper written by economists at NYU showed that, among the countries in the Organization for Economic Cooperation and Development in 1960, slightly over half of the oil consumed was for non-transportation purposes. By 1973, the year of the first oil crisis, that number had grown to two-thirds of total oil consumption.  

The fourfold increase in oil prices triggered by the 1973 crisis was followed six years later by the Iranian crisis, which led to a further doubling of prices. Those two price shocks slammed the growth in non-transportation oil use, which had been riding the wave of oil displacing coal in the industrial and power generation sectors.

Amazingly, however, the use of oil for transportation during this period grew steadily, in line with income growth, despite the 1970s’ price shocks. Following the oil crises, historical growth trends in oil use reversed, such that by the late 1990s transportation accounted for over 50 percent of total OECD oil consumption.  

While the 1973 oil crisis spurred the use of alternative fuels – coal, natural gas and nuclear – for manufacturing and power generation, there was no alternative for powering cars. That was true until recently when electric power and natural gas began carving out niches among the auto fleet, driven by concern over the impact of carbon emissions from gasoline- and diesel-powered vehicles. Globally, gasoline consumption has grown steadily despite climbing oil prices, driven by population growth and rising incomes that every year enabled more people to afford cars. 

In fact, the growth in the number of vehicle miles traveled in the U.S., despite minor dips during recessions, was a straight line up from 1970 until 2007.  Surprisingly, the upward climb stopped a year before the onset of the 2008 financial crisis. A hint of that impending peak arrived in 2005 when vehicle miles traveled per capita stopped rising. The peaks were not associated with recessions or super-high gasoline prices, the usual causes of slowdowns. Demographic and social changes explain the peaks as the Baby Boomer dominance in the workforce yielded to Millennials, who have a markedly different attitude toward cars.  

Unlike the days when young Baby Boomers couldn’t wait to get their driver’s license, cruise the strip, hit the drive-in and celebrate the latest sports car design, today’s Millennials are delaying securing their drivers’ licenses, opting for texting over visiting friends, enjoying shopping and working online, and finding living in urban areas more desirable. Cars are especially costly to own and maintain in urban areas where multiple transportation alternatives exist, helping explain why they are less important to Millennials.

Space Age Vehicles

Today, we are on the cusp of another transformation of the automobile industry.  Autonomous vehicles represent the ideal personal transportation vehicle. Their designs even mirror those Space Age vehicles we watched zipping around in the Jetsons’ cartoons. The new bubble-shaped Google car will have no steering wheel or gas or brake pedals. It will be battery-powered. 

Google envisions people summoning their autonomous vehicle by smart phone, giving it a destination and then sitting back and leaving the navigation to a computer. The computer plots the route and the car enters the traffic flow, and this is where the autonomous vehicle will dramatically alter the future of the transportation industry and eventually erode demand for oil. 

Since 2007, when vehicle miles traveled peaked, U.S. gasoline demand is down about 600,000 barrels a day to 8.7 million barrels a day, or a 6.5 percent drop. That amounts to nearly a percentage point decline every year.  

Gasoline and diesel demand has been and continues to be challenged by the push for better fuel performance from new cars as the government, in conjunction with automakers, established a target for the new car fleet in 2025 to average 54.5 miles per gallon, up from an average of 28.5 miles per gallon today. That represents a 91 percent gain in average fuel-efficiency over the next 11 years. To achieve that goal, auto companies must continue making revolutionary improvements to engines, power trains and, ultimately, fuel choices. The battery-powered autonomous vehicle may play an important role in helping the auto industry reach the 2025 target.  

Self-driving cars are designed to be safer than conventional vehicles. According to insurance industry statistics, 90 percent of auto accidents are caused by human error. That is why so much attention is paid to eliminating drunk-driving, reading and texting while driving, and even restricting cell phone use when behind the wheel. The computer controlling the autonomous vehicle never gets tired or distracted, and it readily adjusts faster than humans to threats. 

A safer car will have a significant impact on the future of the global vehicle fleet. Cars that don’t experience accidents will be designed and built differently than today’s automobile, which is a reason why the Google car is bubble shaped. It is being designed and built to emphasize the comfort of passengers rather than the driver, since everyone in the vehicle will be a passenger.  

Accident-free cars can drive closer together and faster than if driven by humans. Think what that means for road congestion and daily commutes. If you know a vehicle will not experience an accident, it can be constructed from lighter materials – more plastic and aluminum, for example – rather than heavy steel. 

Over the past 20 years, the average car has added 500-600 pounds in response to mandated safety features and increased creature comforts. Added vehicle weight is a negative self-reinforcing feature as heavier cars need bigger engines, brakes, tires and stronger suspension systems that all add more weight. Getting rid of that weight will boost fuel efficiency, and the vehicle diet can become extreme because the car no longer needs to be a tank to protect passengers in the event of a catastrophic accident since there won’t be any.  

Impact on Shipping

What will 20 million new autonomous cars a year mean to fuel consumption, let alone the metals and plastics businesses? One conclusion is that the shift to autonomous vehicles will impact much more than gasoline and diesel use. 

The greatest challenge for these autonomous vehicles, however, is how they are introduced into the global fleet. We cannot transition to a fully autonomous vehicle fleet overnight. It is therefore quite likely that conventional vehicles will cause accidents with autonomous vehicles. Cars, even with sophisticated computers, will never be as nimble as people, who can jump out of the way of a vehicle barreling toward them.  

So will the commercial version of the Google car look like a bubble within a steel cage?  That would impact its fuel economy because even electric cars are assigned a fuel rating measured in miles per gallon. We already know that regulatory testing of this car requires Google to install a steering wheel and brake pedal just in case the driver needs to take control.  Moreover, the government hasn’t resolved issues such as who is responsible in the event a self-driving car is involved in an accident. Does the liability rest with the designated “driver,” the maker of the computer system, the auto manufacturer or all of them?  

Until these issues are resolved and self-driving cars prove themselves on the highway, there will be no radical change to the energy business. The shipping industry can rest easy.