There is a theory advanced by economist Robert Gordon of Northwestern University, that the technological advance that has powered economic growth for the last century was largely an aberration.
The theory is predicated on the view that inventions like electricity, the telephone, the car, refrigeration, and the airplane were one-time shocks that boosted growth but are not repeatable. More recent inventions like the internet and the cell phone have an increasingly smaller boost to economic progress. If this theory is correct, it will likely spell significant challenges for growth in future standards of living. Related: This Oil Major Seeks To Drive Solar Innovation At Qatar 2022
The argument against this theory is based on the view that new technologies like robotics still can make a major difference in the future. And no single innovation captures this hope for the future better than the self-driving vehicle. Self-driving vehicles hold the promise of revolutionizing transportation (and with it, oil markets) in a way that no innovation has done in decades. And here is good news for optimists on both oil prices and technology’s impact on future economic growth – self driving vehicles may be closer than most people realize.
Even as Tesla and other car makers race to incorporate progressively more advanced forms of software that automate parts of the driving process into cars, the real benefits of autonomous vehicles are larger – tractor trailer sized to be precise. Truck drivers move vast amounts of cargo across the U.S. and Europe and are critical to modern manufacturing. Yet that method of transport is costly and requires a fleet of trucks and drivers to be successful. Self-driving vehicles can change that. Related: Is This The Biggest Red Herring In Oil Markets?
What makes autonomous tech more useful for tractor trailers is a concept called platooning. Convoying involves having lines of tractor trailers driving directly behind one another. Driving this way helps cut fuel costs and emissions, and just as importantly makes it easier for each truck to operate autonomously since other than the lead vehicle, they are simply following one another. Platooning results in less passing, quicker breaking, and fuel savings of roughly 10 percent, making it an attractive proposition with shippers and trucking companies.
Platooning also enables truck drivers to sit back and let software do the hard work. Most trucks made in the last decade already have sensors that alert drivers when they wander out of their lane or get too close to another vehicle. Those sensor costs are more than offset by hefty savings on expensive commercial trucking insurance premiums. Thus it is only a short leap to truly autonomous driving. Related: Saxo Bank: Upside For Crude Diminishes As Traders Shift Focus
The EU is taking the lead in this area of autonomous vehicles from a legal perspective with lawmakers already debating about rules like the required minimum distance between vehicles. Based on that and the existing technology in many trucks already, manufacturers are suggesting that platooning could take off in a big way starting around 2020 – less than four years from now. With 1.5 million trucks on the road across the EU, that could mean big changes for consumer drivers and businesses.
To that end, while platooning saves fuel, it could actually add to demand for oil by reducing the cost of shipping. This in turn would lead to greater demand for shipping-intensive goods, especially if it leads to more widely dispersed supply chains. German manufacturers already rely heavily on parts sourced from across the continent, especially low-cost Eastern Europe. As shipping costs fall with widespread adoption of platooning, the business trend of a geographically diverse set of suppliers could increase even more. That won’t change the economics on demand for oil by itself of course, but it could play a role in a broader oil price rebound in the years to come.
By Michael McDonald of Oilprice.com
More Top Reads From Oilprice.com:
- Biofuel Breakthrough: Production Jumps 64%
- Why Gazprom’s ‘Monopoly’ in Europe is Far from Over
- U.S. Crude Imports Surge After Long Period Of Decline