Forecast of the week: Warren Buffett predicts “all electric cars in 20 years”

At a recent meeting with business students, Warren Buffett has proclaimed that all cars on the road will be electric in 20 years:

Goetgeluk asked what Buffett thought of the peak oil theory — that oil production has peaked and will only decline in the future — and what he believed would replace carbon fuel.

Buffett told him that in 20 years, he believes all the cars on the road will be electric. He’s already invested in a Chinese company working on the technology to make it happen.

Buffett is really famous and really rich, mostly from his defiance of conventional wisdom and some excellent timing, so people are naturally attracted to what he thinks about the future. He hasn’t given us much context to this forecast, but it’s still important to consider. Even though Buffett is an authority of strategic-level business issues, let’s pick apart this forecast. I’ll use a rigorous method of forecast assessment I learned working with the great Joe Coates:

Forecast:

• “All cars on the road everywhere electric in 2029″

Author:

• Warren Buffett, chairman Berkshire Hathaway, Omaha, NE

Type of forecast:

• Expert opinion/conjecture

Assumptions:

• All cars means all continents will have electric motors – Africa, Asia, Latin America included
• Electrical “fuel” will be more competitive than petroleum as fuel for transport
• All new electrical refueling infrastructure implemented in the next 20 years across the globe
• Sufficient increase in electrical power supply across the globe to meet new energy requirements currently fulfilled by liquid fuels

Implications:

• Massive recycling of existing cars and engines
• More liquid fuel available for long-haul trucking (assuming “cars” only means passenger cars and not electric trucks)
• Retooling of all auto factories starting in 2010
• Trillion dollar business opportunities everywhere from rebuilding local electric grids, recycling old batteries
• Increase in demand for coal and wind generated electricity to make up gap in supply of electricity
• Increased demand in solar

Probability:

• Extremely unlikely

Assessment:

This forecast is pretty glib coming from Mr. Buffett. All cars running on electricity in 20 years? Fifteen percent electric cars I could easily see, 50/50 I might buy as an extreme scenario – but 100% electric cars by 2029? It’s nigh on ludicrous. The system effect of a TOTAL shift on all cars everywhere would be practically an act of a minor deity. Perhaps Mr. Buffett is “talking up his book” and this new Chinese company in which he has invested.

Not all forecasts are created equal.