James Lentz from Toyota talks for 2 minutes about their view on Peak Oil (PO):
http://peakoil.com/consumption/toyotas-jim-lentz-predicts-peak-oil-by-2020/
More and more business insiders are coming out with views on PO which differ
from what governments and the MSM are saying.
Lentz says in this short clip that it doesn't really matter if PO is in 2017, 2020
or even 2025. He talks about the increasingly prohibitive price of gasoline, but in my opinion fails to grasp a few things. Whether he actually doesn't understand, or if he is bound by his job at
Toyota not to think or speak about the negative effects of PO on his industry doesn't really
matter. What does matter is this :
- Once PO really hits, that is, once the demand actually outstrips supply at prohibitive price levels (and we are getting very close, it is already happening in the poorer parts of the world), people will lose purchasing power.
Nothing happens wihtout energy, and the price of oil is extremely closely correlated with economic growth. High oil prices = low or "negative growth".
This means (among other things) : less jobs (all the while population keeps growing), less money to spend on non-essential items, increasingly expensive food & energy, less tax revenue for the state and so on.
- The car industry as a whole would have been seriously trimmed down during the recession if it weren't for government intervention all over the world (specially in the US and Europe).
What they essentially did was move future purchases towards the present through tax-deduction and buyback schemes (Some companies were also rescued outright by the state, like GM). Sales will look good for a while as everyone who has been planning to buy a new car in the near future scrambles to take advantage of the free money. The result : plummeting sales once this very short term boosting effect ends. This is a matter of fact, as it has already happened.
- Toyota, like all the big manufacturers, are heavily dependant on the price of oil to make their cars. Higher oil prices = more expensive cars.
- The infrastructure, not only roads and gas stations, but also the vast network of subcontractors that every car manufacturer depends upon, is heavily dependant on the price of oil. Producing on the margin now? You will go broke once oil prices go up 30-40-50% if you can't pass the costs on to the buyer (and eventually to you, the consumer). Of course, paycuts and lay-offs are always options too.
- Companies which don't grow, will contract or disappear. If you have a business model which depends on more and more people buying your product every year, and sales plummet, you will either shrink or disappear. It is doubtful governments would let their automanufacturers die so easily, but they will be on lifesupport until they are either self-sufficient or suck so much money out of the system that it
is obvbious that everyone would be better off without them.
So, in an environment in which people have less money, oil is more expensive, cars are more expensive (at least the true cost, governments can hide the cost through different programs effectively subsidizing cars) and consumers psychology will turn towards saving and making do, Toyota thinks that electric cars and natural gas driven vehicles will be the new big thing.
I think we will see the continuation of the current trend, which is declining sales. More and more people will make do without cars and simply go away from the market. More and more will simply keep their old cars longer and repair them (good news for automechanics, at least in the short term). Car sharing and renting, or taking a taxi when you actually need a car will really start to make sense.
The good news : less pollution, less traffic and more parking spaces:)
NB: I don't necessarily agree with Lentz on the timing of PO. It all depends on how you define "oil", but the most important oil (light sweet crude) seems to have already peaked a few years ago. The real peak is something we will only see in the rearview mirror once a few years have passed. Meanwhile, we will probably continue to experience wild oscillations in oilprices as supply struggles to keep up with demand, speculation grows and economic growth picks up or slows down. It is possible oil will quickly rise to 150USD again, and then crash down to 20USD (as such high prices would devastate economic growth as we saw last time it happened).
It is also possible that it will simply hover around 100USD for the next few years, or even go down without a price spike due to aggregate demand falling over time. A lot of governments around the world are subsidizing the domestic price of gasoline and oil, and thereby increasing demand for it. We are seeing some countries (like Iran), ending or reducing these subsidies now due to the high cost (and obvious unsustainability) of these programs. What is also happening, is that more and more oil is being taken off the market by bilateral agreements
(China and Russia have stepped up these sort of arrangements). This will also have a negative impact on price, as the ones who have to buy oil on the open market will bid for a piece of the increasingly shrinking pie. If the financial system should once again seize up, as some think will happen once the "extend and pretend" phase has run its course, then all bets are off. The US, UK, EU and others are already printing money, and once that cat is out of the bag it's very hard to get it back in.
In short, expect more shit to hit the fan.
