App based cars vs Oil

Modern technology has lot of good with a shadow of bad. I read Impact of start-ups and the importance of their socio-economic contributions and started observe how start-ups influence human behavior.  I hear positive impact stories as part of marketing of these start-ups. Are there no pitfalls? We are more aware of safety mishap for a women in Uber and  government decision to  ban as knee-jerk reaction.

Earlier using public transport in Bangalore, I observe many employees go to office in their cars and these cars have 1 or 2 passengers and the road is filled with one-car passengers. when we calculate the amount of fuel consumed, there seems to be option to conserve  fuel if the employees carpool or use public transport.

Today I observe more cars of app based taxi providers going single(driver to pick a passenger) or double (passenger and driver).  Customers download the taxi provider app to their smartphone, customers can use the app to “e-hail” the vehicles, pay for the trip, and even rate the driver. Driver owns the cars and connect with passenger using app based taxi providers.

App based providers claim “green” credentials by matching people’s common interests and common destinations,  reducing the negative environmental impacts of driving.

Can we safely assume ” App based transport providers enables carpooling and in some year, people need not own a car.” to be real? Will app based transport providers operate similar to taxis or similar toa casual carpool using personal vehicle? Let us examine.

  • You have a driver who needs money. You have a passenger who needs a ride. Do they connect and engage based on common interests? In practical world, the common interests might not be relevant. Instead, drivers transport passengers entirely at the convenience of the passenger. Passengers consider convenience as top priority and quote reasons for not sharing like safety, status, need for privacy etc.
  • When passengers demand for cars, more drivers hang and cruise in metropolitan areas to pick up passengers as soon as the passengers hail them online, leading to more consumption of Oil. The app-based transport provider has significantly lower  entry cost barrier compared to traditional taxi services, causing increase in the number of cars on the road available for hire, leading to more consumption of Oil.
  • There is traffic and air pollution in India. Will we see a significant drop in the automobile emissions? Should the government subsidize the cost of Oil ?  Instead the government should strive to align  app based transport providers with desired society goals to reduce transportation emissions and this can be achieved with a mandatory use of only “clean” vehicles (hybrids or compressed natural gas vehicles).

I do not visualize that app based transport providers working like casual carpool using personal vehicle and view them operating much like taxis.  Ealier, I have observed in corporate that drivers and transport supervisor get in to agreement and  allot 2 vehicles to perform late drop of employees living in same area.

For a growing economy such as ours, demand for fuel and energy also increased. India’s consumption of petroleum products from 1951 to 2014 has increased consistently  every decade. Assume Modi government delivers reforms agenda, we would see ramp up in growth and infrastructural development, leading to a sustained demand for more fuel and energy.

Consumption of Petrol Products

Right now, India imports around 70% of the fuel that it consumes. Import of oils impacts the trade balance of the country and the way the exchange rate pans out and makes India vulnerable to how the international crude prices behave. The longer-term solution is to make India self-sufficient in energy.

Some app-based transport provider offer luxury vehicles for transportation. These vehicles consume more fuel than hybrid cars. Today few people can afford to purchase these luxury vehicles at higher cost and hence conservation of oil. When luxury vehicles are available for quick hire,  more oil gets consumed and creates a hit on the drivers, who appreciate fuel savings and quieter rides. Will app-based transport providers help India become energy self-sufficient?

Is there possibility that price of oil goes down?. What will it look like? When oil becomes cheap, countries are going to get killed.

Oil prices country budgets

The oil price at US$ 83 per barrel is woefully inadequate for all the major oil-exporting countries to balance their budgets. For example, Iran needs a price of at least US$ 135 per barrel to come anywhere close to balancing its annual fiscal budget. Even for Saudi Arabia, it would be nice if the prices to go up by 14% for its budget to balance. Hence, these countries facing a budget shortfall at current prices are working already to take the oil prices higher from here on. Will business that depends on oil prices stand relatively resilient to movement in oil prices?

How safe are the drivers interest in the ecosystem of app based providers? App bases transport provider enables drivers to provide discounts to passenger and increase the demand for cars in large.  Here are articles about drivers being affected. Similar to  fire cracker owners claims in media about family losing livelihood, when the children have been taken off from bondage labor of the fire cracker industry  in Sivakasi.

In addition these drivers have been caught in EMI trap to pay for their car purchase.  Now assume that cost of gas/ petrol increases astronomical again. This would lead to increase in rice and reduce the demand for cars on hire. Reduction in demand increases pressure on drivers to pay EMIs on their car purchase. if the leasing company takes away the car, there is impact on the livelihood of drivers. How many of the drivers would continue as entrepreneurs

In long term, I see potential of app-based transportation services to improve goals to reduce transportation emissions and reduce oil consumption. In short term, I see oversupply of app-based vehicles (driven by easy available loans) on the road, in addition to traditional limos.