Technology Disruption of Trillions in Value in Oil Related Industries

Ark Invest has a report on Bad Ideas for investing during the 2020s. Ark Invest manages invest ETFs of about $20 billion. ARK’s Invest believes in Autonomous Technology and Robotics, Next Generation Internet, Genomic Revolution, Fintech Innovation, 3D Printing, Israel Innovative Technology, and the overall Disruptive Innovation.

Self-driving trucks will be cheaper per ton-mile than railroads. Railroad companies will get hit when cargo moves to self-driving trucks.

The old car companies will get hit badly with the shift to electric cars and self-driving cars.

Electric cars alone should reduce the global demand for oil by 10 million barrels per day from over 100 million barrels per day to about 90 million barrels per day by 2030. Self-driving electric robotaxis could make this three times worse for the oil industry. The global demand for oil could drop to about 70 million barrels of oil per day by 2030.

Oil companies will lose badly with the reduced demand for oil.

Traditional car insurance will start losing earlier as drivers under the age of 25 shift to ridesharing and then to robotaxis. The younger drivers paid the highest amounts for insurance.

About 10% of the households in the US have cut the cord to cable TV. Ark Invest expects cord-cutting to accelerate to half of the remaining households over the next 5 years.

The shift to e-commerce will accelerate. The coronavirus pandemic accelerated the adoption of e-commerce in the US from 11.3% of retail sales at the end of 2019 to 16.1% in the second quarter of 2020. ARK estimates that during the next few years drones will deliver packages for as little as 25 cents per trip, accelerating the shift in consumer shopping toward online purchases. Global e-commerce will quadruple from 16% in 2019 to 60% in 2030 as drones [and self-driving vehciles] add to convenience. Retail real estate values will suffer. ARK estimates that US e-commerce will grow from $820 billion in 2019 to $2.7 trillion in 2025, pushing non-e-commerce retail down from $4.6 trillion to $3.9 trillion, a level last seen in the late 90s.

The shift to e-wallets and digital banking will accelerate. Digital-only offerings such as Square’s Cash App, PayPal’s Venmo, Chime, and other digital wallets will win and most traditional banks will have losses from the death of regular bank branches.

SOURCES- Ark Invest
Written By Brian Wang,

41 thoughts on “Technology Disruption of Trillions in Value in Oil Related Industries”

  1. Lubricants, and polymers are "spin-off petroleum goods"? As a mechanical engineer, I can tell you. Your beloved dream of an all electric future is not possible without lubricants, and polymers.
    Try making a PV panel with no polymers, or lubricants. Every machine on the production line is lubricated at almost every place moving parts come together, and almost all the lubricants are petroleum based. Besides taht, the cells are encapsulated in polymers under that glass. What about your beloved wind mills? There's a big crank case full of gear lubricant, made from petroleum whether "synthetic" or not, and fuel oil is still the best way to make the Portland cement in the hundreds of tons of concrete in the foundation.
    Sure, there are lubricants made from plants, and animals. Rape seed oil is one of the best light lubricating oils available, but it is expensive compared to conventional oils, and has to be kept very dry. Spermaceti is used in the very finest greases. I worked for a machine tool manufacturer that used it in their sealed spindle bearings, but I'd rather not kill sperm whales to get it.
    Then there is the fact that when you're using oil seed to make lubricants, fuels, or polymers(soybeans usually), you're taking food out of people's mouths, that was grown using petroleum in dozens of ways. Petroleum feeds you, even if you do buy a battery powered car.

  2. In the short term, lower demand for oil will reduce the cost to the consumer. However, there is a cost to the oil companies. They need a certain amount of revenue and volume to maintain their enormous infrastructure. A few years ago they were worried that the Alaska Pipeline output was drawing down and there wouldn't be enough oil to keep the pipeline operational. There is a minimum amount required.

    There's also keeping oil tankers, refineries, and the gas truck fleet going. That all takes time, money, and people. If demand drops enough, gas stations will simply go away like so many Blockbuster Video stores. They just aren't there. It's not worth it for Exxon to keep delivering gas to your town if you're the last person driving a gasmobile.

    We've not run into these economic models before. Every downturn has the expectation of more demand later. But if everyone is driving a Tesla there's no such expectation.

    They will shut down gas stations, pipelines, and nearly all exploration efforts. The most expensive and dangerous will shut down first, like Arctic deep water drilling. Fracking is very cheap now, so when we see fracking companies going out of business, that's the last gasp.

    Lubricants and other spin-off petroleum goods are byproducts of cheap and plentiful oil. If gasoline shuts down, we would need to go after oil specifically for the byproducts, which is much more expensive. Alternatives will be found.

  3. Mainstream trains are already diesel/electric hybrids. To convert to all-electric trains, they would need to do the following:
    a. Remove the diesel power generation system from the train and replace with batteries.
    b. Install heavy duty charging stations.

    This is not a very difficult process, and if the cost benefits are there, rail companies would switch faster than trucking companies or private people buying cars. Looking forward, Tesla should be thinking about the new electric train upgrade. And if charging takes longer than expected, they could buy more battery cars and have them ready to swap out quickly. Not really that hard.

    As always, if you're really worried about pollution you need to be mindful of where the electricity comes from. If you're burning 800 tons of coal and 200 baby seals to get your electricity, then you're not really making progress. Oil is more energy dense and less polluting than coal.

    I still say we skip a step here and design SMR's small enough to fit on a standard train. That would change everything drastically.

  4. I've actually worked in a factory in San Diego. For a week or so on a couple of occasions. As an engineering consultant, not as a riveter or something.

    Yes, we were physically making things right there. And these were "factories" that you could probably mistake for an office building from the outside.

    It wasn't mass production though. This was ranging from prototype assembly through to pilot runs of no more than a dozen machines per day. Then, once all (err… most? many? the most obvious ones anyway) the bugs were ironed out, full scale production was set up in cheaper locations.

  5. More and more stuff is just being brought to warehouses and then onto peoples homes by companies like Amazon. I expect this trend to continue and even accelerate as little drones start moving stuff. 
    Those warehouses with a rail siding are easily occupied by these companies. They don't have to move big factories and all their heavy machines. 
    I looked at the industrial parks in San Diego. Appears they mostly are just warehouses that receive stuff and then fulfill orders for other companies. It's depressing that not much is actually made here.
    I think we make electric guitars, some furniture, golf clubs, and ultracapacitors. But I suspect most of it is final assembly. I can't see any factory big enough to make stuff from scratch. We do have some big factories, I just don't think they are making anything. I think they used to make aircraft. It may have been Consolidated Aircraft Corporation. They were in that area…way before my time.
    OK, it is now operated by Trandes Corporation, which appears to be a highly inefficient government contractor. They appear to repair stuff in mostly empty buildings. For years it was just broken windows, so something is better than nothing.
    The Solar Turbines factory is still there, but they just do engineering there now.
    I see the same complaints everywhere in San Diego, favoritism, nepotism, poor leadership and poor management. Seems to go along with government contractors.

  6. Actually, I'm also avoiding real estate in urban areas until I see how many parking garages become surplus.

    Doing pretty good investing in things like robotics and AI. When reading tech and science web pages is one of your big kicks, it really opens your eyes on where to put your money (as well as where not to put it).

    I am kind of avoiding actual car companies, though. That can be a very volatile market and, while some winners will win pretty big, others are going to suddenly implode, in many cases with very little warning.

  7. Amazingly anchors at major networks ignore the fact that batteries have to be charged on a regular basis.

    Amazing because?
    People chosen on the basis of looks and speaking ability aren't well known for engineering analysis.
    Next you'll be taking political advice from movie stars.

  8. I came to the same conclusion two years ago and got rid of my oil stocks but kept my natural gas stocks. I was surprised because these tanked too. I see some big opportunities for cutting down on co2 in the area of electric transmission. Amazingly anchors at major networks ignore the fact that batteries have to be charged on a regular basis. The million mile battery does not mean one gets a million mile range but is extremely important because it means a battery can be run down to near zero capacity and charged to 100%. I calculated that a current Testla model 3 or Y battery only gets about 60% of the listed range because of these charging restrictions which will be removed when the improving batteries are put into the newer models. I am holding off purchasing a Y until this occurs.

    In the meantime where do we get our electricity. I live in PA and there are over 50 new gas fired generators built or being built to replace coal generation. Urban areas do not have the land to grow solar or wind power to generate their power needs so how should the electricity be transported. HVAC or HADC lines? HVAC is the current choice but if one takes into account the alternative land use for right of way land to grow co2 absorbing trees then this could go a long way to taking this greenhouse gas out of our atmosphere. Testla's use of ac induction motors in which conversion costs are significant. This is an opportunity to re-study HVDC to save on overall power losses.

  9. Correct, there is nothing more nirvana for a banker than not having branches, so Ark has no clue what they are talking about. It's been a 30-year trend. In the big growth markets banking is done via the phone and/or on-line. And there are plenty of very profitable banks who have no branches whatsoever (Goldman). Bank America has shed 30% of their branches in the past 10 years and tripled their branch-related business (ie retail and SME banking which is about 1/3rd of their global revenues).

  10. The idea that doing without all those expensive branches would drive big banks to bankruptcy is not convincing to me.

    Yes, if like many of the old bricks-and-mortar stores, the banks were left stuck with expensive, useless real estate, then that could drive them into the death spiral of Sears, Borders, etc.

    1) The banks have seen this happen to the others. They can take steps ahead of time.
    2) Asset management is the banks' area of expertise. Expecting them to make the same rookie errors of a bookstore, especially AFTER watching the bookstore implode, is drawing a long bow.

    Now, will some banks fail? Sure, banks fall over all the time. World wide we've seen dozens of banks and bank-like-objects collapse every decade or so. But as a group they are stronger than ever.

  11. Agreed. Replacing one propulsion car on a locomotive would be much cheaper percent-wise than replacing 100% of a semi truck. Elon needs to look into this next.

  12. Sorry, but Ark misses on all points. Mainly because they can't see outside the Bay Area.

    • trucks will be cheaper once they automate (as the driver is about 35% of the cost), but never cheaper/mile than rail for what rail carries (heavy low value bulk). Rail is "only" about 28% of freight in the U.S. (trucking is 40%) but trucks won't/can't carry what rail does. Two different modes.
    • "old" car companies? like Toyota? If they see an opportunity to go BEV they will take it and are. The future energy mix for cars is more than BEV, everyone in the industry knows it.
    • BEVs in a perfect world of full adaptation will lower global oil consumption. So will nuclear and hydrogen. Petrochem is rapidly becoming the main driver of oil demand. Say, for instance, that carbon composites becomes cost comparable to Aluminum and specialty steel. Source feedstock for the zillions of BEVs and "cheap" trucks???
    • E-commerce is growing, sure. Drones will never have the scale/customer to become more than a niche because most consumers live in urban areas where droning isn't a viable delivery option. The UPS trucks will be around for a very long time, maybe driverless, maybe BEV/Hydrogen, and maybe made with composites. Traditional retail is done. Well…..except for the 14 million kirana stores in India, for example….
    • digital banking will end branches, but won't end banking, far from it. The galactic banks are getting even bigger and more profitable shedding fixed assets.
  13. Isn't another problem the interface between the two systems, where it's difficult to move value from to bitcoin and back?
    And especially if the govco and government.banking complex starts trying to suppress it. As we have seen multiple times in the past several years.

  14. OK. THAT explanation makes sense to me now. That's not how I interpreted your earlier comment.

    Meanwhile… the idea of rail connecting all the factories was a lot easier when all the factories were located along rail routes. There has been 3/4 of a century of dispersion where factories, industrial parks, entire industry structures, have developed away from rail as a transport system, and it would take a similar amount of effort to move them all back again.

    And it was things like the truck loading docks at shopping centres I was thinking about, not having a semi pull up to my house with a shipping container. (My neighbours complained to the cops when I tried that.)

  15. Not infinitely elastic – certainly not to the extent that would restore production volumes to current levels assuming we stopped using huge quantities of it for transport.

    E.g. fracking has a bottom limit on profitability around $30/barrel. So any new applications that might be able to exploit huge volumes of $20 oil simply won't ever take off.

    Another factor is that refineries are set up to produce certain ratios of products (with some ability to tweak that, of course). Reducing production of a major product like gasoline may make it unprofitable to produce others – and re-building refineries isn't going to be cheap if the change is permanent.

    E.g. currently lots of people have abandoned mass transit, meaning a lot more car driving, increasing demand for gasoline, without much increasing demand for diesel – and aviation fuel demand is nearly moribund. This is causing production balance problems for refiners – probably made worse by their knowledge that this is probably a temporary change so they don't want to do anything permanent.

  16. This is the difference between an industry participant(you), and the speculations of an engineer from another industry(me). Thanks for your insightful, informative input.

  17. As demand for motor fuels fall, lowering the price of crude oil, polymers get cheaper, and oil for space heating is cheaper. Demand for petroleum is elastic.

  18. Goats (switching locomotives for rail yards) have had some demos as hybrid diesel-electric-battery, as well as fuel cell driven versions, but not many pure electric ones. Slugs are unmanned switching locomotives that had their entire powerplant removed and replaced with concrete, using external power from a manned normal switching locomotive to provide more tractive effort. Replacing the slug concrete blocks with battery banks would work doubletime as a battery carrier and traction booster.

    Sadly, railroads are notorious cheapskates, where most switching locomotives are simply mainline locomotives that no longer are reliable enough to work on the main lines. They rarely buy new, so unless there is a legal mandate (usually in the form of emissions limits that old diesels can't meet), we won't see much conversion.

    There have been some demos of mainline diesel-electric engines being converted to CNG, and towing CNG tank cars as tenders, but they are considered unattractive operationally.

  19. Autos also need somewhere to pull off to the side in longer tunnels. And you probably need some system to relay their cell phone signals or at least call boxes for tow trucks.

    And when comparing cost of rail vs semi, we already have the rail, rail tunnels and such. It is the upkeep that is involved in the cost of operation. And rail is very cheap there. And it could be even cheaper if we replaced all the wood ties with concrete ones as the wood ones wear out. Those concrete ones will last a long time.

    The US has 200k km of rail. And we have another 200k km that we don't use anymore. They fall out of use when a new route is shorter or the destination is out of business (mine, factory or mill closed), or the cost of replacing the ties or a washed out bridge was just too high.
    San Diego used to have a line going east, dipped into Mexico and back. It had a very cool trestle too:

  20. There are a lot of sidings going to factories and warehouses. If rail was half the cost of trucking…as it should be…all the factories would have a siding. They did before the Railroad Retirement Board was formed. There are thousands of empty buildings next to sidings. Buildings that used to be factories and warehouses. Sidings or dedicated lines went to all the mines and mills.
    In most cases a semi is not going to delver something to your home, it will be an ordinary delivery truck with the people required to get whatever off the truck and where it goes.
    Now your typical big box store does not have a siding today, so that last mile will take a semi.
    No, rail is still cheaper even with the "elaborate engineering" because roads are far more costly to maintain than rail, also proper highways are much wider than rail beds. Tunnels for roads must be much larger and shorter because fumes can accumulate in the tunnels. The train is only going through a tunnel maybe one an hour and all those cars behind help pull air through the tunnel (passive ventilation). For long road tunnels you have to have powered vents that go all the way to the surface every mile or two. If all the cars were electric, it would be no big deal, but they aren't, and it will take a long time before that is the case. You also need lights in the tunnels for cars and trucks, that means running wires from the nearest power line which might be many miles away. And you need people to come and change the bulbs.

  21. Internal combustion engines are horribly in efficient. To get the electricity, it would still make sense to electrify the fleet and then burn the petrol in a defunct coal power station. Plus the co2 could be captured at source.

  22. While there may be some cost/subsidy issues involved as well, I think the big advantages of trucks over trains are that scheduling is far more fluid and large shipments can go door to door. The big disadvantage of trucks is the need for far more drivers, which will largely go away over the coming decade.

    As to sourcing the electricity – even if we burned the same fossil fuels in power plants to produce the electricity for electric vehicles, it would still be more efficient and produce less CO2.

    Plus we CAN produce a lot of the electricity from 'piddle-power', by charging when the sun shines or the wind blows. That will become even more viable once vehicles can drive themselves to a charging station with an attendant or a robotic charging system.

  23. Hmm – but 100K transactions still isn't enough to handle even the US (roughly 2 transactions per person per day) let alone the world. Are there further advances coming? More shards?

  24. The report says nothing about why S.D.Trucks would be cheaper than rail, but at a wild guess it might depend on the "first and last mile" problem.

    A truck is loaded and unloaded at the actual factory/warehouse/shop that it is dealing with. A train needs a truck to be loaded at the origin, drive to the train station, transfer the load to the train, and then do the same thing at the other end.

    Though, I think you got one thing backwards:

    And the trucks have to travel lots more switchbacks and such to get over mountains as it is much easier and more often necessary to dig tunnels for trains, because trains require less grade.

    So, trucks are more expensive because trains need more expensive and elaborate engineering to get over bad terrain?
    Wouldn't that be a reason that trains are more expensive?
    If having smoother and more direct routes made the overall system cheaper, then there is nothing stopping you from spending a lot of money on a well engineered road system. They don't do that because it's cheaper to rely on the ability of road transport to deal with corners and grades.
    (Though I admit you have a coordination problem, where the people spending money on the roads are not the same group as who pay for the fuel and time on the trucks. That's a problem that toll roads address.)

  25. To focus on the critical issue:
    1.. It is easier, much easier, to make a self driving train than a self driving car.
    2.. They are still very rare.

    So, given these two issues, I suspect self driving cars are still a long way off.

  26. If there are frequent enough stops, you can have a small battery, and overhead wires only near stations, that will keep you topped up.

  27. "Self-driving trucks will be cheaper per ton-mile than railroads." The reality is that rail is 6-7 times cheaper in the US… just not to the costumer. There are fat pensions and high rail worker wages because of the stupidity/corruption of FDR. He made the Railroad Retirement Board which has greatly damaged the US economy for decades and decades. Believe me, the rail price will come down to match freight trucks if freight trucks get cheaper. They have a huge amount of room to work with, and they are not about to let it go belly up and cook their golden egg laying goose.
    Trunks can never match the cost of trains. There is no getting away from higher air resistance, tire replacements, and traffic. And the trucks have to travel lots more switchbacks and such to get over mountains as it is much easier and more often necessary to dig tunnels for trains, because trains require less grade.
    Though none of this means that rail will not beg for money from the Federal Government.
    And don't confuse freight with passenger rail. Passenger rail does have ridership issues, and that could get much worse. Though with Elon getting greedy and charging $10,000 for fully autonomous driving, there is nothing to worry about just yet (one of his worst moves in my opinion).
    I also strongly suspect that States will start charging autonomous trucks more money for registration.
    Trucks cause over 90% of road damage…without the trucker unions defending, they will likely have to pay more.

  28. most locomotives are diesel electric, with contraption for overhead electric cable. They could even recharge the batter "tender" while on electrified tracks.

  29. Petroleum will still be in demand for lubricants, industrial feedstock, aviation, and marine fuels, hydraulic oils, small engine fuels, asphalt, and a million other uses.
    There will soon be a reduction in shale production as existing well production falls off, and fewer new wells, in worse locations are drilled.
    I have a battery electric chainsaw that is great for small jobs, as long as the battery is not too cold, or too hot, but it does not replace a "real" chainsaw for big cuts. Weight is at a premium in chainsaws, almost like in airplanes.

  30. It will be absurdly easy to have a "tender" car containing batteries near the locomotive, which will be switched out with a charged one. Back in the day there were tender cars that carried fuel oil, and makeup water behind steam locomotives that burned oil.
    I wonder if there aren't already shifter locomotives that are battery powered moving around cars in rail yards, and repair shops. That would likely be the first application.

  31. Locomotives will also electrify and go autonomous, technologically and economically they are more ripe for that, so self driving trucks will never be cheaper than railroads. Moreover, it is not clear at all that we will see trucks with no drivers in 2030, for multiple reasons.
    Narrow focus is always dangerous.

  32. Self-driving trucks eliminating the railroads? Its easier to make a self-driving train than it is a self-driving truck. More significantly, where is the electricity for all of these electric vehicles going to come from? (hint" it isn't coming from piddle-power schemes such and wind and solar).

  33. Read up on the latest developments with the Etherium blockchain.
    They are now shifting algorithms to proof of stake and sharded chain. This will allow 100000 transactions per second at very little energy consumption. It will take a few years but I think, eventually, people will realize math and cryptography is more trustworthy than politicians and shady financial powers.

  34. Regarding e-wallets and digital banking, I’m interested if any companies put politics aside. I know that Paypall considers sex education sites to be synonymous with pornography and won’t service them for feminist reasons and I remember MasterCard pressuring enterprises to deplatform users whose politics they objected to. Are there any companies in this field worth investing in who aren’t trying to “go woke” and practicing social engineering?

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