How Toyota Sees The Future

Part of Toyota’s (TM) annual “Sustainability Report” for 2008 contains an interesting look at how the company foresees the growth of vehicles and energy requirements globally. It says,

“Approximately 800 to 900 million passenger vehicles exist worldwide, increasing by around 100 million vehicles every five years for the past two decades. Toyota projects that “this increase is expected to continue in the future, particularly in developing countries, meaning that ownership will likely exceed 1 billion vehicles in 2010 and reach 1.5 billion vehicles in 2020.”

Although an explicit strategy to reduce the overall greenhouse gas production of its products is noticeably absent from the Toyota’s greenhouse gas reduction goals, Sustainability Report 2008 reflects signs of concern within the company that externalities may bring growth to a halt before that time:

Additionally, with the continuing expansion of the economies of the BRICs countries (Brazil, Russia, India, and China), which have experienced tremendous growth since the 1990’s, global energy consumption is forecast to continue rising. This situation increases both the possibility of supply shortages and resource exhaustion, and the severity of the air pollution issue caused by production activities in factories and the use of vehicles for logistical and human transportation.

What does an extra 100 - 200 million vehicles by 2010 mean?  At an average of 5,000 miles per year (people drive less in most non-U.S. countries) and 35 miles per gallon and 42 gallons per barrel, 100 million new cars on the roads equates to an extra 340 million barrels or nearly 1 mb/d if demand - and that is only for cars.  If we were to assume that 1/3rd of the vehicles were trucks which drive much further and are far less efficient, the increase in demand might be 1.6 mb/d.  Since vehicles account for about 70% of oil use in the U.S. the total extra demand in 2010 could be 2.2 mb/d.

That sort of growth in oil demand has been fairly typical in recent years.  My recent analysis of Megaprojects projections assumed an additional 1.75 mb/d of increased demand  by 2010, so it may have been conservative by about 500 kb/d, particularly since the above arithmetic is based on just 100 million new vehicles even though Toyota estimates anywhere from 100 to 200 million.  But if you look out to 2015, my numbers are even further eclipsed by Toyota, which assumes about 400 million more vehicles or about 8.8 mb/d of added oil demand.  My numbers were only 4.5 mb/d of added demand - which was sufficient to totally break the bank by 2013.

What is even more alarming, I think, is the impact that the current decline in oil prices may have on demand.  If oil prices stay around $100 - or perhaps decline even further - for the next year or so while the world tries to recover from the credit crunch induced economic slowdown, it is entirely possible that the lower prices will cause oil demand in OECD countries to resume its former growth track.  That would add important new pressure to the supply shortfall that the Megaprojects analysis indicates is likely to begin after 2008.

In a sense, the pullback in oil prices could act on world demand just the way that Enhanced Oil Recovery technologies like gas and water pressurization of old fields has been acting on the oil supply.  It tends to make things look better in the present at the expense of a much worse situation in the future.  This is the fate we are witnessing in Cantarell.  It may well become the fate of Ghawar prior to 2015.  And it may also be the fate of global oil demand by front-loading  it with currently “cheap” oil only to the ultimate detriment of demand when oil prices explode in a few years.

The report can be found here.

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