Ending Personal Ownership of Vehicles: A Necessary Step

-- ShayBanerjee - 24 May 2015

Introduction

The federal government must build the infrastructure capable of supporting an economy in which suppliers own road-based vehicles and consumers share them (“rideshare”). Failure to do so will permanently entrench the existing regime of personal vehicle ownership and the dependence on oil that accompanies it.

A Problem

Oil accounts for more than 95 percent of energy used in the U.S. transportation sector. That is a problem. Personal vehicle ownership ensures that it never gets solved.

By imposing insurmountable hurdles to the construction of a national electric charging network, personal ownership prevents the total replacement of gas-powered vehicles with electric vehicles. First, since personal owners are not adept at planning long-term refueling strategy, accounting for their unpredictable needs requires that refueling operations exist at thousands of strategic locations across the country. This works for oil, which can be carried to refueling stations in trucks, but serious electricity generation – the kind needed to power 250 million vehicles – requires expensive transmission lines that the private sector will not build. Second, personal owners demand that refueling is convenient and fast. This prevents electric vehicle penetration because liquid petroleum can be loaded faster than a battery can charge.

Because no other technological development will reduce oil use, only electric vehicles can end America’s oil dependence. The fuel economy of domestically purchased automobiles will improve, but not as rapidly as America’s transportation needs will increase. Meanwhile, renewed efforts to develop a commercially viable synthetic fuel alternative are arriving too little, too late.

So long as cars are dependent on oil, economic growth is capped. Oil production has peaked, and the diminishing returns upstream are savaging the American economy. The retail price of gasoline has more than tripled in the last two decades, and the cost of transporting consumer goods, raw materials, and labor are rising with it. Since wage and productivity increases are lagging, the secular trend is dragging down livelihoods and profit margins. Because the so-called “Shale Revolution” was a commercial failure and the resulting crash will further exacerbate long-term cost pressures, the problem is only going to get worse.

The drag placed on the American economy by personal vehicle ownership is not limited to entrenching oil dependence. First, personal owners are more likely to ride alone and tend to require parking in densely populated communities. These qualities increase congestion and traffic, reducing productivity, air quality, and the value of property located near major roads. Second, personal owners demand vehicles customized to support their individualized needs. This characteristic increases production costs by preventing standardization of processes and machinery. Third, preventing electric vehicle penetration deprives consumers of the accompanying energy efficiency gains. While internal combustion converts only 20% of stored energy into work, electric engines convert 80%.

No benefit of personal vehicle ownership justifies its preservation. First, while personal owners may gain some utility through vehicular customization, that gain does not outweigh the benefit of getting consumers home faster by reducing traffic. Second, while personal ownership saves consumers the costs of a driver, the long-term costs of customized production, customized maintenance, and oil dependence are larger. Furthermore, the labor costs of rideshare will be eliminated with the inevitable emergence of autonomous capabilities.

Instead of transitioning to a more robust economy, governments at every level are propping up the economic drag of personal vehicle ownership. Major cities require new parking with every office building. State and local governments prohibit the pre-arrangement of rides through electronic devices. The federal government spends $7.3 billion on tax subsidies for incurred parking expenses. The weight of government policy must be shifted in the opposite direction, and the federal government must lead the change.

A Solution

The emergence of autonomous vehicles on American roads is inevitable. Optimistic projections anticipate complete vehicular autonomy by 2026. As the disruption occurs, the federal government must construct or heavily subsidize massive rideshare facilities capable of supporting fully autonomous, fully electric vehicles.

If autonomous vehicles were predominantly controlled by rideshare suppliers, the obstacles facing electric vehicle penetration would be eliminated. First, combining autonomous vehicles with rideshare eliminates the need to construct tens of thousands of charging locations across the country. Rideshare services could integrate refueling processes into their high level planning and logistics, thereby allowing for refueling locations that are larger, less frequently distributed, and located closer to centers of power generation. Second, autonomous vehicles allow rideshare to be fully operationalized. Extended trips could be completed through tightly coordinated vehicle “handoffs” mid-trip, thereby reducing the speed and convenience advantages of gasoline. With these obstacles eliminated, electric vehicles will leverage their higher energy efficiency to drive out gas powered vehicles.

Since electric vehicles rely on grid-based power generation, their total penetration of the transportation sector would virtually eliminate America’s dependence on petroleum and make a substantial dent in overall fossil fuel dependence. Oil is responsible for only 1% of grid-based power generation, and that number is falling. Alternative energy sources comprise 32% of grid-based power generation, and that number is rising.

In addition to ending America’s dependence on oil, rideshare unlocks incidental benefits that could not otherwise be achieved. First, because rideshare centralizes logistics and planning, suppliers could coordinate autonomous driving programming that optimally reduces traffic. Second, firms operating rideshare facilities could leverage scale to drive down electricity production costs for their vehicles.

Despite the economic gains to be had, path dependency prevents the private sector from constructing the facilities on its own. Personal ownership is profitable for automakers because they sell more cars and can pass off increased production and maintenance costs to consumers. Consumers will not end personal ownership on their own because unlocking the associated benefits requires collective action. Furthermore, the current infrastructure of cities and suburbs supports their choice to use personal vehicles. This infrastructure must be realigned around facilities that fully support modern technology. The upfront capital, land purchases, coordination, and legal risk associated with a project of this magnitude render it a non-starter with private firms. When no one else will do what is necessary, the government must act.

Is there the slightest reason to believe that voters want this done? Some relationship to political reality should be demonstrated.