Low Gas Prices Threaten Green Car Revolution
Published September 23, 2009
The single biggest factor determining the success or failure of high-tech fuel-efficient cars is not battery technology, legislation, tax incentives, new model introductions, or infrastructure. It’s gas prices. The price at the pumps is the elephant in the room when it comes to green cars. The cost of oil is not the only determinant of prices at the pump—for example, there’s refining capacity or lack thereof—but oil does play a major role. When the price of oil jumped to $147 last year, gas prices raced to $4 a gallon.
Unfortunately, the most important factor for customer adoption of hybrid and electric cars is also extremely hard to predict. What are experts saying these days?
Japanese broker Ryoma Furumi said oil prices will stay rangebound at $70-$75 a barrel; analysts at Mirae Asset Securities said prices are likely to consolidate between $65 and $75; and Jim Ritterbusch, president of Ritterbusch & Associates, said crude could be pushed toward the $75 mark.
Verleger, the energy consulting firm, predicts a drop in oil this year—all the way down into the $30s. The firm bases this prediction on crude stockpiles in the US being 14 percent higher than a year ago, and gasoline supplies up by 2.2 percent. Also, OPEC is currently pumping 600,000 barrels a day more than the world needs.
Meanwhile, Christophe de Margerie, chief executive of French oil giant Total, this week said he sees a risk of oil rebounding to $100 a barrel unless there’s greater investment in exploration. He warned of a possible oil shortage between now and 2015 if immediate action is not taken to invest in exploration. "The reserves of oil are there but if you don't invest they don't come on the market," de Margeries said.
In other words, the experts don't have a clue. Short of raising gas taxes or setting a gas price floor—extremely unlikely anytime soon in the US—auto industry planners need to plan for low, medium, and high fuel cost scenarios. At last, major global automakers are moving forward with plans to roll out new greener advanced technology automobiles. But Priuses, Insights, Volts, Leafs, and Karmas are little more than an insurance policy in the event of high gas prices. Auto executives make big promises for rolling out hybrids and plug-in cars in big numbers, but if oil prices remain “rangebound” at current or lower levels, don’t hold your breath for the new age of greener cars.
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Tell me if I'm wrong, but I am pretty sure big oil companies and OPEC are lowering prices specifically because they see upcoming EVs as a threat to their profits. I doubt low prices right now have anything to do with supply and demand. Long term prices will surely go up dramatically unless we make the leap to EVs. We either switch now or later when they have us all by the throat.
Gas prices isn't the only reason people buy hybrids. Low emissions is also a good reason to buy them, but it's definitely not the main reason. People know that gas prices can spike at any moment, so I think we are making the shift toward hybrids regardless of the current prices.
It seems that oil companies have it in their better interest to keep gas prices low since higher gas prices means people would buy hybrids, then onto electric cars. Oil companies are scared of that. Of course, that's probably NOT why gas prices are lower now (it's due to the reasons in the article), but it does seem like something oil companies would do in order for people to buy cars with lower MPG.
Here's something that car companies can do, make cars that have the ability to get great gas mileage AND have great power as well. The switch between the two would be the push of a button, since it's mainly software now. The new Lexus hs 250h does that. That way, people who want to save gas have that ability and the others that need more power for some reason have that ability as well. Problem solved.
OPEC doesn't control prices the way you think they do, rest assured. If they could pump more they would, but they can't. Oh, they can within a certain range - they can increase production, but not by enough to make a big difference. They can reduce production a lot, obviously, but when that does raise the price, a lot of oil in other places that is too expensive to bring to market at the lower price suddenly becomes economical ... which moderates the price rise.
Peak daily production is coming soon, so it's only a matter of time before we're back at $3, $4, $5/gallon.
I don't know about you, but I don't consider $3 gallon to be that low. It's not at the peak, but it's certainly much higher than the median price over the last decade.
This sounds like a non-story about nervous Nellies wringing their hands.
Only the "US" green car revolution is threatened.
In virtually every country outside the U.S, gas prices are much higher because oil is not subsidized, and gasoline taxes are much higher.
So........
Outside the US, the green car revolution will continue, leaving the US far behind.....
Low prices? Tell me where. Here in Anchorage AK they are approaching all time highs.
$3.00 per gallon is about half the cost of gasoline in most other countries....
Of that $3.00, only 18 cents goes to the federal gov't as taxes. No wonder we don't have enough money to repair roads and bridges.
Meanwhile, the US Military spends about $500 billion annually protecting foreign oil shipments and fighting wars to protect foreign oil. This adds $500 billion to the US deficit.
When you put it all together. $3.00 is very low.
......and the result of that low price is a hugh federal deficit, insufficent highway infrastructure, and an addiction to foreign oil.....
Yes, obviously the price of fuel is probably the single biggest factor in adoption of alternative fuel vehicles. We saw this right before Oil peaked at $147/barrel last summer.
Most people anticipate the price of oil rising again as the economy recovers, hence hybrids continue to gain market share.
If the price were to stay low for several years then the hybrid car revolution may be threatened, but I really don't see that happening. The economy is recovering, gas demand will rise causing the price to rise.
Hybrids will continue to gain market share. Also Hybrid technology continues to improve which justifys buying a hybrid even more.
Here's my rating of the importance of gas issues
1. Foriegn Oil Dependency
2. Air Quality
3. Global Warming
4. Price of Gas
All due to one cause - Consumerism gone wild and me first mentality.
Usually a article from this site does a good job of reporting all the issues surrounding a topic.
However, this story over simplifies things and makes a poor point if not counter-intuitive if you really think about it....
Most of the true costs to fuel up at the pump are hidden from consumers by means of other taxes and subsidies for military costs, diplomacy & externalities. So maybe the discussion should be "Should consumers pay the direct costs associated with a gallon of petroleum?"
If gas prices are generally covered up, & a gasoline tax is politically non-feasible due to unintelligent political rhetoric and lobbying interests w/ the waiving of undecided consumers who worry about short-term gasoline prices along w/ voters screaming about any ways in which government reduces the efficiency of production of oil, shouldn't all these reasons give governments around the world greater interest in passing legislation requiring more hybrids & EV's? It is just my opinion but the article is counter-intuitive in that its all about legislation & government moving green vehicles forward so long as the avg. consumers does not see the true costs of petroleum and they think the ICE benefits are greater than the costs compared to early EV buyers. The Car Industry has little interest in progressively pursing green technologies or making them standard w/ issues from reduced maintenance profits, longer retention of EV vehicles by consumers, & smaller profit margins on cash cow V8 Trucks & SUV's combine this w/ the misinformed public over true gasoline prices only leads to government being the only one who can play the biggest role going forward w/ green technologies.
Robby D, you've got it, mate.
Natural gas is the anser it is cheep we have it in America it will create jobs in the USA. Tell the goverment to stop buying oil from over seas and produce our own energy. Natural gas well give us the energy we need untill a new source is developed.
michael j belaj, once the natural gas runs out, what then? Oil and natural gas are non renewable resources. What do we leave for our grandchildren and their grandchildren? This is the true importance of developing renewable energy resources. The use of hybrids, EVs, and other fuel efficient vehicles is so we can stretch out our oil and natural gas resources to get through to future developed renewable energy resources. . We, the people that are alive today, will never live to see the full development of those future renewable energy resources. But if we, as a people, do not show enough vision today, our grandchildren and their grandchildren will live in a new stone age brought on by our actions now. Unfortunately, too many people do not believe that to be true.
Yes, the gas prices are lower now that a year ago. But does anyone think it is going to stay that low for the next five years, let alone ten or fifteen years from now? Preparing for the future is now, not tomorrow.
Robby,
I'm with you on this priority.
If most Americans agreed with us we could solve these problems without goverment intervention or additional gasoline taxes.
Unfortunately, most of America puts "price of gasoline" as number one on their list.
michael j belaj:
Natural gas is fine for now but it will run out. If we do want to run natural gas cars, however, what is the best way to do it? Do we just burn it in an Internal Combustion Engine (ICE) or should we burn it at a power plant and run the car off of electricity?
It turns out that we can go about 3 times as far if we burn the natural gas in a co-generation power plant and run the car off of electricity than if we just burn it in a natural gas hybrid. A conventional ICE (non hybrid) would use about 4 times as much natural gas. This is because battery electric drivetrains and natural gas cogeneration power plants are so much more efficient than small vehicle mounted ICE.
Electric Vehicles can use any fuel or energy source that can create electricity. We don't have to wait for the perfect one to come along.
We need higher gasoline taxes in the USA. We should spend the money on a variety of clean transportation subsidies, from hybrid cars, to transit, to bike lanes, to urban design that makes it easier to walk.
Many European countries have high gas taxes and they're doing fine economically. Plus, their vehicle fleets are much more efficient than ours (surprise surprise).
I say start slowly and ramp up the pressure over time. Expensive gasoline creates the right incentives for the environment and the long-term health of the economy. It's time to stop being so squeamish and do what's necessary to get off of oil.
DJB,
Good luck getting a politician to stand up for this. Too many loud Americans are too greedy to stand by and let this happen. It would be political suicide.
At $24k, I don't think I paid that much of a premium for my prius.
Oil is low now because demand is low right now. I don't know if anyone else noticed, but there is kind of a world wide recession going on right now. And with +9.5% unemployement, anything other than seasonal demand isn't going to pick up.
On the down side, because of all the economic stimulus programs put out by all the western governments this year, when unemployment does start dropping, inflation will start rising and oil (along with other commodities) will skyrocket.
With winter coming, I don't expect oil to drop anytime soon. I'll bet money it hits $85 a barrel before the year's end. In the spring, if unemployement is still over 9%, the price will drop back down. If unemployement is below 9%, the price will keep climbing.
Which makes me wonder when those in charge are going to figure out a way to hike gas prices. Of course they would do that. We do need more fuel efficient vehicles but not $200 per barrel of oil to get the job done. I know there are those who despise oil and gas burning vehicles but it's the world we are in. A little patience is appreciated as the world evolves into green.
I think all those who worry about price and how we can add to the cost to get people to conserve more are missing the point and only thinking of one-side of the issue w/c is common even among academia & environmental groups .
We have to take price out of the equation. Remember if the government was responsible they would charge consumers and producers for protecting oil assets and any envr cost that could occur that inflicts damages to a societies welfare. But here is the problem, we are an economy based off of cheap energy supplies. If we start messing with prices per barrel everyone will be affected by this not just cars but in everything you buy (assuming real wages stay the same or fall). If you do decide to charge more for petro uses you need to develop an alternative to absorb the shock of added real costs of petroleum. In this case we are talking about transportation issues but the point is for an economy as a whole and consumers short-term thinking we must find ways to eliminate the comparisons between oil prices and EV costs. This is not easy to do but we must realize that it will always be in governments interest to help promote cheap energy (mostly political considerations) even w/ envr. factors so prices will always be artificially low and that enables short-term cost vs benefit decisions among consumers. So again price of petro needs not be the issue because there is no winning solution with this....
Of course it would make sense to increase fuel taxes and use the money to address our many problems, but it cant happen politically. lets face it we cant even fix the health insurance mess. problem is that many (most) Americans are pedalling faster than ever before just to stay even financially. real wages, after inflation are at 1970's levels. If spouses didnt work outside the home, tens of millions would be in poverty. When you start talking about increasing their cost of living for some abstract principles, they're going to go to the polls and vote against it. which will just set us back that many more years till things get bad enough that even the right has to take action.
Its going to take a lot longer to switch from oil than some green advocates think. the draconian measures some advocate will only produce massive economic and social turmoil. when Americans get scared they veer to the right , big time.
If it's impossible to raise the price of pollution, we're too stupid to save ourselves. At least some of us can move to Denver. The "mile high city" will be a good place to make a home when the oceans start rising and taking out our coastal cities.
Who needs LA and New York anyway? They don't contribute to our economy. No, what's unrealistic is raising gas taxes.
I disagree with those who think our economy is based on low gas prices.
I do think our "behavior" is based upon low gas prices however.
2008 showed that Americans will adjust their behavior quickly if gas prices go up.
If a long term organized plan to increase gasoline taxes is introduced, American manufacturers as well as American consumers will be able to to make the adjustment over time having less impact on the economy.
In fact, such a plan will be a boost to the economy as it generates incentives for consumers and gives auto manufacturers time to develop fuel efficient cars knowing that the consumers will want to buy them.
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It ought to be perfectly clear to about everybody that once the oil prices started dropping major companies and countries limited their production of oil to force higher prices. This clearly indicates that oil prices are not controlled by demand and supply but by concerted efforts of speculators and producer-speculators to keep the price of oil high in spite of the availablility and the cost of production. EVERY oil company high executive knows that no oil costs more than $10 a barrel to get out of the ground and in many places like IRAQ it can be much cheaper.
Jet fuel can be produced from coal cheaper than it can from oil if oil is $35 a barrel. The cost of energy from coal is TEN TIMES or more lower than the cost of energy from oil now, so the price of coal is a small price of the jet fuel. Very low grade cheap and waste coals can be made into jet fuels, but even at a very high price of $100 a ton, the energy cost of jet fuel from coal would be competative with that of oil at $240 a barrel even if half the coal energy were wasted in the process. But the wasted energy can usually be used partially for power generation. If there were full energy efficiency, one tonne of coal has the same energy as 4.88 barrels of oil. The average price that Peabody got for its coal was $20 a ton in 2007. The waste of natural gas by flaring in this country and especially foreign countries and the costs of transporting and refining may even make the CO2 cost of making jet fuel from oil higher than the CO2 cost of making jet fuel from oil. ..HG..
I meant the CO2 cost of jet fuel from oil may be higher than the cost from coal. ..HG..
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