Toyota Warns the World About the Coming Electric Vehicle Crisis

Toyota is the largest global automobile manufacturer. They didn’t become the biggest without learning a few things about consumer behavior and market conditions. Toyota has a very different opinion about electric vehicles than governments and the auto industry. Toyota thinks the infrastructure will not support fully electric vehicles for decades. Also, consumer adoption will not happen as quickly as the talking heads say. When a leader speaks, the world should listen.

1. Charging infrastructure: A 2017 U.S. government study found that around 8,500 charging stations would be needed to support seven million electric vehicles. A fully electric fleet would require charging stations to support around 290 million electric vehicles. If the relationship is linear, there would need to be 352,000 charging stations to support all 290 million cars on American roads. There are only around 145,000 gas stations. Who pays for it? Does it become the taxpayers or the small business owners paying to convert the gas stations? 

2. Charging takes too long: Technology will improve, but currently, there isn’t a super-fast charge option for electric vehicles. The charging process is just too long for the person at the front of the line, let alone the person who is third or tenth in line. Charging can take 15 minutes or more, but most chargers take hours. Gas pumps can put between 2-4 gallons per minute, making most gas fill-ups less than five minutes. 

3.  Affordability: The average price tag of an electric vehicle is around $66,000. According to U.S. Census data, the average 2021 American household income was $70,784. Less than 15% of American consumers can afford an electric vehicle. With inflation raging, it will be a long time before a more significant percentage of American consumers can afford an electric vehicle. Price compared to a gas/diesel vehicle is the most stated reason people would not buy an electric vehicle, and lack of charging infrastructure is the second. 

4.  Consumer adoption: According to a 2021 Australian study, only 49% of respondents said they would be driving an electric vehicle by 2030. 39% of respondents said they would not consider an electric vehicle for their next purchase. A little bit of math translates into a 12% increase in adoption between today and 2030. Suppose these numbers indicate a predictable and consistent adoption rate. In that case, it could take at least 40 years before the market fully embraces electric vehicles. It may not take 40 years, but two decades is almost a given before the market fully adopts electric vehicles.

The world is gung-ho, full speed ahead on electric cars and alternative energy sources. The environmentalists will pressure politicians for even less oil production. Since governments are involved, the most predictable situation is that something will go wrong. An energy crisis is the most predictable outcome of the move to electricity without sustainable infrastructure. The pendulum will swing the other way when people see the prices and inefficiencies. People will turn back to oil and coal, but since production will have been shut down, the prices will be high, and supply will be tight. Fossil fuel prices will spike quickly.

It is very oil intensive to pull gold from the earth. They use heavy equipment to dig and build concrete supports for the mines. The miners need ridiculous amounts of electricity to light and cool the mines. Transportation is also energy intensive. Oil will be costly. The large land-moving machines probably won’t be able to operate on electricity and will require diesel. There is an 80% price correlation between the price of oil and the price of gold. If it is true there will be an energy crisis because the transition was not seamless, the price of gold will follow oil. Oil will spike. Gold will follow and be one of the biggest winners in such a scenario.

The U.S. has the largest oil reserves but doesn’t drill for environmental reasons. Abandoning energy independence leaves us vulnerable to policies of tyrants, despots, and dictators throughout the middle east. However, China is treating those dictators kinder than we are and spending significantly more on oil than the U.S. The U.S. buys about 500,000 barrels of oil per day from Saudi Arabia. China buys about 2 million barrels. In the 1990s, the U.S. bought roughly 2 million barrels per day.

Bad policy and diplomacy have increasingly made the U.S. isolated and dollar-backed assets less desirable. Saudi Arabia has officially applied to the BRICS and is negotiating to sell China oil in Yuan. If Saudi Arabia abandons the West, that’s the ball game. Call the fat lady and have her start singing. Stick a fork in the Dollar. It’s done. 

The easiest way to predict the future is to figure out what and who gets rewarded for specific actions. Saudi Arabia is rewarded by selling oil. 51% of the Saudi economy is oil, so whoever buys the most oil will have Saudi loyalties. One example, the U.S. government is committed to its entire fleet being electric vehicles by 2030. The U.S. is committed to buying less oil to ramp up electric car production. China is committed to buying more oil to build its economy, production capacities, and infrastructure. 

What is the most predictable action for Saudi Arabia to take? Will Saudi Arabia be loyal to its most significant and fastest-growing customer, China? Or, will it choose a customer, the U.S., that routinely insults it in public and has committed to systemically buying fewer oil products over time? 

As counterintuitive and contrarian as it sounds, the electric vehicle trend will continue to raise oil prices. Due to the high demand and scarcity, high prices are predictable. People will realize that the electric car movement will have problems and significant inconveniences. People will return to coal and oil, but environmentalists will have limited their production. 

Economists almost universally agree that raising oil prices translate into higher gold prices. Currently, the price of gold is near the low for the year but slowly climbing back up. It hit the low for the year last week. If you want to position yourself best from the inevitable governmental missteps, buy gold while it is cheap and wait. If you think gold is a good idea and like buying low and selling high, call the U.S. Gold Bureau as soon as possible.

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