Toyota’s big boss reported at last year’s Detroit Motor Show that he sees the Prius becoming its best-selling car by the end of the decade, surpassing the Camry. Toyota is rolling out three new Prius models in 2012, including a station wagon, a smaller commuter vehicle and a plug-in version. (For the record, I drive a 2010 Prius and I love it, though I’m looking forward to a plug-in hybrid soon).

Morgan Stanley recently concluded that electric vehicles “aren’t ready for primetime” and highlighted how traditional technologies are witnessing great improvements: “2011 has witnessed a breathtaking level of technological innovation for the internal combustion engine that is ready or near-ready for market. We have been surprised by how quickly and aggressively the OEMs have moved to incorporate fuel-savings content into the model line-up.”

The Obama White House, along with high gas prices, has been a major spur for these trends. Obama has proposed a historic improvement to fuel efficiency standards with the recently-announced goal of 54.5 mpg for regular vehicles by 2025 — almost a doubling of today’s 27.8 mpg mandate. This program, if successful, will be the single largest conservation program in history.

There are some hefty loopholes in the 2025 mandate, but even so, experts expect that the 2025 mandate will result in an average 42 mpg for new cars. A deal was struck with automakers during multi-year negotiations on this proposed mandate but it’s still far from assured that the proposed regulations will pass as is. Earlier proposed regulations under the Bush administration were riddled with loopholes, so fuel efficiency advocates will have to stay vigilant against late-stage shenanigans in this case. Vehicle manufacturers must achieve these new standards with a mix of improvements in traditional technologies and new technologies like electric vehicles.

California is, as usual, pushing the envelope even further, announcing recently a goal of having almost 100% of all new vehicles be electric vehicles or other types of zero emissions vehicles (fuel cell vehicles, for example) by 2040. California’s main agency with respect to vehicle regulation is the Air Resources Board, described recently (and accurately) by one expert as “a global environmental regulator of the auto industry.” As California goes, so goes the United States, because of our 40 million people and the size of our vehicle market.

A less concrete but perhaps even more encouraging trend, nonetheless, is the increasing prevalence of the recognition that we must electrify transportation to reduce greenhouse gas emissions and improve energy independence. A recent article appeared in the highly respected journal Science on the transformation required to achieve California’s ambitious goal of an 80% reduction in greenhouse gases by 2050. The authors concluded that electrification of transportation would be crucial. Most serious plans looking toward a low-carbon future conclude the same, as I did when I wrote a carbon neutral plan for Santa Barbara County in 2007 — the Community Environmental Council’s A New Energy Direction.

The big unknown

The obvious “x factor” in this discussion is the future price of oil. The last super price spike, from 2005-2008, saw less fuel-efficient car sales plummet. In 2008, US-manufactured car sales, which are less efficient than their European and Japanese counterparts, fell from 16 million in 2007 to 10 million in 2008. That’s a profound difference prompted in large part by oil prices reaching $147 a barrel and gasoline prices exceeding $4 a gallon.

If we experience another super price spike in 2012 or in later years, or multiple super price spikes followed by recessions and plummeting gas prices in a cyclical manner (as seems likely), we can expect EV and other more fuel-efficient car sales to climb far higher than even the most optimistic projections.

Super price spikes in oil are not “good news” in any traditional sense, but the pain that follows may actually lead to a far better future, far sooner, if it does jump start the non-petroleum vehicle market in a serious way.

After I wrote the first draft of this article I learned that GreenTech Media has just produced a report, written by Travis Bradford, entitled “The EV Revolution Has Begun!” Bradford stated in an interview, strongly supporting my points here: “I didn't call it ‘The EV Revolution Has Begun’ for nothing. This change is permanent and profound, though it will take awhile for full realization.”

The end of the Oil Age is, then, underway now and is precipitated both by the increasing scarcity of cheap oil and dramatic improvements in technology. This dialectic will unfold unpredictably in the coming years but odds are that the decline and fall of the Oil Age will arrive far sooner than traditional pundits project.