Low Gas Prices Threaten Green Car Revolution
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.