Shift away from gasoline based order to an electric one signals beginning of the end of oil era

By: | Published: January 2, 2017 6:16 AM

The focus on shifting away from a personalised, gasoline-based transport order to a shared, electric one signals the beginning of the end of the oil era

Politicians have always played fast and loose with the truth. As such, the “facticide” that marked the campaign for Brexit and Trump’s march to the White House should not have come as a complete surprise. Politicians have always played fast and loose with the truth. As such, the “facticide” that marked the campaign for Brexit and Trump’s march to the White House should not have come as a complete surprise.

The year 2016 was a dramatic year. I am not sure about others, but the developments over the past year have made me reflect on four issues. The relevance of the current system and process of democratic politics in what is now referred to as the “post-truth” or “post-fact” world; the beginning of the end of the oil era; the compatibility of our inflexible system of bureaucratic governance with the pressures of a complex, connected and continually changing world; and the fragility of corporate reputations.

Politicians have always played fast and loose with the truth. As such, the “facticide” that marked the campaign for Brexit and Trump’s march to the White House should not have come as a complete surprise. But it did. This was in part because of the gall with which the falsehoods were uttered and in part because they received global attention through internet and the social media. In fact, so much so that the Oxford Dictionary declared the adjective “post-truth” as its word of the year for 2016. I am no political scientist but the thought that did cross my mind, as the politically unthinkable got pushed into the mainstream, was whether the existing electoral structures and systems for manifesting public opinion were in fact democratic. Whether, to be precise, the American system of primaries and electoral college voting for the president; the UK and Indian system of “first past the post” for elections to Parliament or the German system of proportional representation—grounded as each are on the bedrock of nationalism and political sovereignty—were in sync with the imperatives of a connected economic and social order. I found it ironic that these systems had built in checks and balances to prevent the rise of precisely the demagogues and demagoguery that surfaced in 2016. To my mind, two questions need to be asked. One, whether these electoral processes push the voter into a Faustian corner wherein, while it offers them the periodic opportunity to challenge the establishment, it limits their choices by straitjacketing this challenge into conduits managed and controlled by the establishment? Two, in consequence, is now not the time for a root and branch review to contemporise the existing panoply of liberal democratic processes ?

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Just over a 100 years ago, in 1911, Winston Churchill, as first Lord of the UK Admiralty, heralded the oil age by ordering the UK Navy to use oil and not coal as bunker fuel for their ships. Coal continued to be an important energy source, but thenceforth oil’s share in the energy basket rose inexorably. Today, oil is the dominant fuel for transport, and prima facie, there is no Churchillian reason for assuming this situation will change in the near- to mid-term. There is no commercially viable substitute for oil as a transportation fuel and the economics of electric vehicles is not competitive. But Moore’s law and “Uberisation” might change all this and in short order. Moore’s law posits that computing power will double every 18-24 months . And “Uberisation” is altering the current owner-operator model of mobility. Combined, these two forces could redefine the shape of the transportation sector. Amory Lovins, director of the Rocky Mountain Institute, uses an evocative acronym to depict the emergent change. The sector, he says, will evolve from PIGS to SEAL. That is, the current model based on Personalised, Internal combustion, Gasoline-based and Steel encased vehicles will shift to one based on Shared, Electric, Autonomous (i.e., driverless ), and Light weight vehicles. Until 2016, all conversation about a commercially competitive and scalable alternative to gasoline and the internal combustion engine came with caveats of constraints of costs, limitations of battery storage (and hence driving range) and recharging infrastructure. Last year, the conversations began to acquire a ring of commercial conviction. An increasing number of people, and not just entrepreneurs like Elon Musk ( Tesla ) or automotive companies like Mercedes, General Motors and Toyota but also governments bet on Moore’s law and predicted that these caveats would sooner rather than later be removed by the advancement of technology. Given that transport accounts for 60% of oil demand, a world of SEALs would effectively seal this commodity’s future. I wonder whether, in hindsight, 2016 will be remembered as the inflection year when oil entered its period of decline.

The jury is still out on the precise economic ramifications of demonetisation, but I am sure that even the PM will accept it has been poorly implemented. One can adduce many extenuating explanations, of which the strongest argument would be that the civil servants responsible for implementation were not given sufficient notice. But these explanations leave unanswered a fundamental question . Is our steel encased, rigid and hierarchical bureaucracy, staffed as it is, in the main, by “gifted amateurs”, knowledgeable enough to help their political masters navigate the shoals of a complex, competitive, connected and technocratic world? Do they have the security of institutional safeguards to offer objective advice? To be specific, did those consulted by the PM about demonetisation have a detailed understanding about our banking and digital infrastructure? And if so, did they feel secure enough to share this information with the PM , warts and all? I do not have an answer to these questions but I will say that the manner in which this decision has been implemented highlights the importance of institutionalising the lateral entry of experts into the upper echelons of our economic and technical ministries a la the US system.

The Tata Group has for decades sat on the perch of corporate governance. It is not a position they inherited. They earned it slowly but convincingly. Today, the Group is embroiled in a conflict that has severely eroded their market capitalisation and, more important, their reputation. Two issues are deserving of reflection. One, the importance of individuals—they can both make or mar institutions . And two, the fragility of reputations. For whilst it always arrives on foot, it can leave in a Ferrari.

The author is chairman and senior fellow, Brookings India. Views are personal

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