After Peak Oil, What?

 | Oct 14, 2012 07:14AM ET

In a post published more than four-and-a-half years ago, I argued that global oil production may have already peaked (or will do so in a couple of years). I then contended that peak oil, together with global warming, will force most countries to reduce both their demand for oil in response to an ever-diminishing supply and their carbon dioxide emissions to avoid climate change. This will only be possible - I said - through a major transformation in the global automotive industry: the transition to electric propulsion.

After General Motors' (GM) announcement in January and June 2007 to launch by 2010 the first mass-produced plugged-in hybrid cars with lithium-ion batteries, I posited that all major car producers in the world were engaged in a furious competition for a share of this promising market. In this connection, lithium, a mineral with countless applications in different industrial sectors, may become a key factor for the emergence of a new techno-economic paradigm. Surprisingly, the main thrust of my original argument appeared almost ten months later in a Merrill Lynch report entitled Fuel Cell Today .

In the last five years or so, Hyundai and Kia have been characterized as two of the most innovative automotive companies in the world. In a number of posts and articles, I have advanced the idea that innovation does indeed pay off. It did so in the case of General Motors when it decided to launch the Volt right in the middle of the most severe financial crisis it had ever faced. Something similar occurred with Hyundai and Kia when they launched the Sonata hybrid and the Optima hybrid with Li-ion batteries. And, of course, Nissan (NSANY.OB) also had its share in the reputation pie when it surprised the world with its all-electric Leaf.

But what really makes a difference between Hyundai (005380.KS) and Kia (000270.KS) and the other two car makers - and indeed Toyota (TM) and Honda (HMC) as well - is that the innovation track is not a static phenomenon but - in fact - a way of living. In Figure 4, we see how the stock market reacted in the last five years or so to that kind of behavior on the part of Hyundai and Kia in relation to their main competitors.

Figure 4

Evolution of Major Stocks in the Automotive Industry