Among these are the question whether Tesla has become a darling of the public and media and is getting off easy while garnering lots of free publicity. Or, are state and national level auto dealer associations trying to strong-arm poor aspiring Tesla and its ideals intended to better the world? Or is Tesla a half-baked scofflaw with a pretty face and lots of promises that does not understand the precedents it could set to undermine the American economy? Or are the dealer associations the actual thugs, albeit dressed in business suits, protected by laws, money, legislators, and attorneys?

Tesla’s factory owned retail stores are located in high-traffic, upper socioeconomic-level retail areas, and aim to benignly present the award-winning Model S and models to come. They follow Apple stores in concept, and are being established with direction by former Apple marketer George Blankenship who’s now a VP for Tesla.

Tesla store locations from its Web site.

Its associates are friendly, upbeat, helpful, and not commissioned. It will be considered a job well done if after a person wanders into the Tesla store, he or she feels positively disposed toward Tesla and wants to come back.

The hands-on stores feel very liberating, and shun haggling and attempts to close the sale – things many car shoppers detest.

Meanwhile, this contrarian and seemingly egalitarian retail model has been opposed in various ways by state dealer associations including those in Colorado, Massachusetts, Illinois, New York, Oregon, Texas, and North Carolina.

Twenty nine states have some type of statutory prohibition on the books against factory ownership of new vehicle dealerships, according to Texas Auto Dealer Association President, Bill Wolters.

The National Automobile Dealers Association (NADA) told Automotive News that including these 29, a total of 48 U.S. states have at least some form of restrictions on factory owned dealerships. Tesla CEO and co-founder Elon Musk has said he’s aware of 20 states that make it “extremely difficult” for Tesla to operate as it would like.

A Tesla associate talks with a shopper at the new Tesla store in the King of Prussia Plaza shopping mall which just opened Friday, May 17.

George Blankenship has said Tesla rolls with what it has to, while otherwise being staunchly determined.

“We do what we’re capable of doing, and we do whatever they let us do,” said Blankenship to Automotive News. “It’s unique for each location. If we can’t be a dealer in a mall, we won’t do reservations on site. We tell people where to go on our Web site to make a reservation.”

And whether Tesla is getting a pass as a new-age Robin Hood of sorts or not, it does do fairly well in the deliberate campaign to rouse public opinion to its side, and has succeeded in getting its way in some fights to date.

“We certainly have a lot of battles in a lot of places,” said Musk. “So far we’ve been successful in those fights. It’s because right is on our side.”

The car dealer associations meanwhile have often been portrayed as self-serving, hypocritically opposing free trade for which they might otherwise clamor.

Skateboard chassis. Unlike Apple stores, Tesla lets you whip out your camera and snap away.

Musk has pointed out the seeming protectionist stance enforced by varying state-by-state laws is an American phenomenon not seen to such a degree in Europe.

Others have likened the car dealer associations to unionists who’ve gotten too big for their britches, are now getting their come-uppance, and others besides have expressed no love for auto dealers which have been generally accused of unethical practices.

A leaked e-mail from Musk himself about Texas says such attitudes have been stirred up by Tesla.

“If the people of Texas knew how bad this was, they would be up in arms, because they are getting ripped off by the auto dealers as a result (not saying they are all bad – there are a few good ones, but many are extremely heinous),” wrote Musk in an internal e-mail that was “unfortunately” leaked, according to a Tesla media rep. “For everyone in Texas that ever got screwed by an auto dealer, this is your opportunity for payback.”

Of this e-mail, in an interview with Automotive News April 15, Musk explained.

“One uses stronger language internally than one would use externally,” he said. “But I feel like we are being attacked all over the place by dealers, and they’re causing us to spend a ton of money on legal battles, and they’ve slowed down our licensing approvals at DMVs in various states, and they’re just generally being pretty negative and behaving in an anti-competitive way.”

And on and on goes the back-and-forth portrayal of Tesla’s views and those which compete against its vision. Both sides make points held by some as valid and compelling, but it all adds up to a question:

Aside from the letter of the law, who holds the moral and ethical high ground? Is it Tesla or the car dealers associations of America? Or is the truth somewhere in the middle?

Untold Story?

Yesterday we had an in-depth phone interview with Texas Auto Dealers Association (TADA) President Bill Wolters who had been recommended as highly knowledgeable on the big picture by NADA Vice President of Public Affairs, David Hyatt.

TADA President Bill Wolters.

Wolters, who joined TADA in 1982 after 13 years working for Ford Motor Co., said Musk is waging a successful PR campaign. Wolters said he’s mindful of the good, the bad, and the ugly alleged against auto dealers, and associations representing them, but said their motives are not well understood.

“Most people don’t call us and ask for the dealers’ side and I’m grateful that you did,” said Wolters. “And a lot of the interviews that I’ve done over the phone they did not print what I said.”

We told him we would print what he said.

And what is said in Texas does matter a great deal to Elon Musk who has said Tesla is considering Texas for a second manufacturing facility, it views the state as second only to California in potential importance, and it’s a possible a hub also for Musk’s separately managed SpaceX operations.

Unfortunately for Tesla, Texas has very narrowly written franchise laws that Musk “cannot wiggle through,” said Wolters. In April, Musk traveled to Austin to speak before the state’s House committee on business and industry in defense of proposed House Bill 3351/Senate Bill 1659.

These have since died in committee, and Tesla has until Monday, May 27 for a sliver of a hope that some amendment could be approved to give breathing room to Tesla’s two retail locations in Austin and Houston presently hog-tied, Texas style.

The Texas state legislature meets every two years, so if Tesla is not successful, it could be two more years before it gets another chance.

“The governor can call a special session of the legislature at any time but it is unlikely that Tesla’s legislation would be considered in a special session,” said Wolters.

American Economic Safety Net

Wolters said a major concern of auto dealer associations everywhere is keeping hard-won rights and privileges afforded to businesses and communities both large and small.

Tesla’s efforts are generally seen as setting the stage to erode a careful balance upon which many people depend for their transportation needs, economic base, and even their direct livelihoods.

Franchise laws presently stipulate that if a dealership has viable management and can meet the manufacturers’ requirements for dealership standards, the manufacturer must continue to support the dealership, and cannot close it down.

“I tell people that franchised dealers have a greater presence in our state of any significant organization except the public school system,” said Wolters. “You don’t find major retailers or major businesses in these towns of less than 15,000 population and the reason they exist there is a lot of our citizens [with transportation needs] live there.”

Auto dealers have already seen what happens when franchise laws are suspended, Wolters said, citing General Motors’ and Chrysler’s bankruptcies in 2009 when many viable businesses across the country through no fault of their own were shut down to save the manufacturers.

Customers are free to get in and sample the powered, but otherwise not drivable cars’ features.

Texas has 1,240 dealers in 248 cities. Of these 163 operate in towns of less than 15,000 population, and parallel example exist in various states, Wolters said.

In these small towns, there are many grandfathered-in domestic car dealers, but a clue to what would happen if franchise laws were eroded is also seen by the rise of imports, said Wolters.

Not forced to locate franchises in small, less profitable towns, import car manufacturers that have come along in recent decades did not waste their time and money, and in so doing, contribute nothing to small town economies.

Wolters likens this to the effect of big box retailers which only bother to operate in denser areas. They go where the money is, and in effect deprive local communities of direct economic support. Similar ramifications can be seen by the arrival of a Walmart or Walgreens or Best Buy, said Wolters, which can choke off local businesses besides.

Tesla has shown it is going where the money is, and auto dealer associations are concerned, said Wolters, citing the precedent set by the imports.

“They’ve proven where the manufacturers would go to make the most money,” said Wolters suggesting domestic makers are also loyal first to their bottom line but held in check by present franchise laws. “I don’t have a Toyota dealer in West, Texas [pop. 2,800], I don’t have a Honda dealer there; I don’t have a Nissan dealer. I have no import dealers, I have a Chevrolet dealer, and a Ford dealer.”

Having been down this road longer than start-up Tesla, auto dealers across the country echo Wolters’ sentiment, including Bob O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association.

“If a manufacturer sees that Tesla is successful with this kind of business model, who’s to say they don’t break out their own EV product lines and create a separate system that bypasses dealers?” said O’Koniewski to Automotive News. “It’s extremely problematic.”

And a broad dealer network also constitutes a safety net, said Wolters, as it protects consumers with more dealerships to find recourse with their automotive issues even in remote regions.

“To me it’s part of the fabric of this country that car dealers of every size provide transportation but they also provide service and safety to the consumer,” said Wolters.

Hop in and check it out.

His view agrees with the NADA’s Hyatt who said in a statement:

“Buying a car is different from buying other products on the Internet. For example, when you have a problem with your iPad, it affects only you. When you have a problem with your car, it’s a matter of public safety, both for the driver and the driving public. The franchise dealer network promotes public safety and instills confidence in the consumer that there will be a place to go when help is needed.

Wolters also echoed Hyatt who added:

“When a manufacturer goes bankrupt – such as start-ups Fisker and Coda – at least the independent franchised dealership remains, where a dealer is motivated to do everything possible to help the customer. When manufacturers discontinue a brand – such as Pontiac, Mercury, Oldsmobile, Suzuki, Saab and Saturn – auto dealers still remain and they are motivated to do everything they can to help the customer. In other words, manufacturers and brands may come and go but dealers are there for the long term.”

Who’s Really Served By Factory Direct?

Wolters contends fewer outlets do not automatically mean savings to the consumer, as has been implied with factory direct sales.

If franchise laws were successfully eroded, other manufacturers besides Tesla – which themselves continually propose legislation to weaken franchise laws – could re-arrange their distribution to maximize profits for themselves and not only starve or cut off some local dealers, but this could reduce opportunities for consumers as well, Wolters said.

“Now to me fewer dealers drives the price up. Fewer dealers drives the service down. Fewer dealers make people less safe on the highways because I don’t have a dealer in West [Texas] to take recalls,” said Wolters. “The price doesn’t go down when they have fewer outlets. And when they talk about the manufacturer being able to save more selling direct, there’s nothing that says they pass that along to the customer.”

The car business has actually become more consolidated with fewer dealers having to be very savvy to make a living from customers armed with the cost of the car, Wolters said, and who are willing to shop till they get the deal they want.

What’s more, Internet sales were not invented by Tesla, and dealers routinely get many sales via their Web presence.

Model S Signature Performance.

Among retailers, Wolters said car dealers are unique in that dealer invoice can be discovered.

“I can’t go online and find the cost of a flat screen TV, a suit of clothes, a couch,” Wolters said, and the same is true of a Tesla Model S he added, which is sold at a non-negotiable price ostensibly to relieve buyers the stress.

In fact, Wolters said, the public has shown it has a love-hate relationship with car dealers. People say they dislike wrestling over price, but they insist on it anyway, he observed, because they want to save money.

With a vast franchised dealer network, profit margins have thus been driven down as a percentage of sales price in the past two decades, he said.

In the U.S., Wolters said NADA data shows the average price of a new car has climbed from $14,142 in 1988 to $30,910 in 2012.

Fierce competition and consumers armed with information have driven gross profits down to around 4.15 percent, or an average of $1,283 out of the $30,910. And from this, dealers must pay commissions and overhead and might keep about $200 more or less.

Not so incidentally, Wolters observed states benefit from the present franchise system too, as they sit back and take in taxes on par with a dealer’s profits before expenses are collected, and the state shares a cut with no one.

Click on to enlarge.

By his estimation, dealers which represent a half of 1 percent of all operating businesses collect a good 6 percent or more of state taxes.

“So they are the largest uncompensated tax collector in the country,” Wolters said, and the state makes more on a car sale than a dealer.

If you think legislators considering whether they should erode franchise laws do not listen to this line of reasoning you’d be sorely mistaken.

HybridCars.com did attempt to get equal commentary from Tesla, but requests via phone and e-mail to its communications people were not returned.

In this store, one can complete a sale as well as schedule a test drive in the parking lot. Tesla has two cars there on chargers. If needed, an associate can walk a customer through order placement in the store.

Musk has told Automotive News many points from his side of the story, however.

“We’re in a tough spot because I’m not fundamentally opposed to franchising, but I think it’s really difficult for a new company with a new technology to be franchised. It’s not possible to effectively sell a new technology like electric vehicles, for a dealer to do that, without undermining the story behind gasoline cars,” said Musk on April 15 regarding his then-recent testimony at Texas.

“In Texas, it’s the toughest of all because [the dealer association president] about 20 years ago was a really tough dude, and he worded it six ways to Sunday. Like Green Eggs and Ham, you know,: Musk added, “If you’re a manufacturer, you cannot sell it any which way, no matter what. You can’t sell it in a house, can’t sell it in a mouse, can’t sell it in a grouse. It’s like, OK, wow. You can’t sell it.”

The road Tesla is taking is actually costing it millions, by Musk’s estimation. If it chose to, it could take a simpler path involving Tesla-only franchises – stores Tesla could not own but it could select management and have some control – and these could meet state laws.

“It would be cheaper for us to use the franchise system,” said Musk to Automotive News, “except I don’t have confidence that the franchise system would actually sell cars. It would not sell enough volume for us to be successful.”

Musk told Texas legislators Tesla would consider franchising but only after establishing a minimum sales threshold.

“If electric vehicle sales from Tesla exceeded 5 percent of new car sales in the state per year, then I’d say yes to that. We’re a million miles away from that,” Musk said to Automotive News.

The idea that a free market, something Texas normally prides itself on, was also broached.

“In Texas, we’ve got a really difficult battle,” said Musk who also had a discussion with the state’s Governor, Rick Perry, adding “it’s unTexan to have this kind of regulation.”

Immovable Object vs. Irresistible Force

What’s happening with Tesla and auto dealer associations over myriad nuanced details – but the same general issue – is a classic case of culture clash, and agreement to disagree.

Wolters is not buying the notion that Tesla’s consumer-friendly model is really going to be any better.

Actually, he said, there’s “incredible competition” among dealers to maintain consumer satisfaction. This is true if dealers expect to stay in business, and even be treated as well by the manufacturers upon which they depend.

Bad old days of unethical and manipulative car dealer experiences do however linger as memories, and Musk has said they will be overturned with Tesla’s sales and service model.

Monroney label from the white Model S Signature Performance. It says: $106,850.

Wolters conceded ambivalence exists.

“I think there’s probably overwhelming public support to get rid of car dealers. But when it comes to negotiating the price of a car, in realty, they operate just the opposite,” he said of car shoppers. “What we find with most buyers is they dislike car dealers but they like their dealer.”

Further, Wolters said dealers are among the most highly regulated, and said this to Musk who he recently visited “with my hat in my hand” in Palo Alto. Wolters said he explained he wanted to help Musk and Tesla succeed, is in no way against electric cars, wanted to help Musk find a legal compromise that would work for him, but Musk would hear none of it.

What does he think Musk’s core motives are then?

“Well, I think his core motives are, one: to publicize Tesla. I think this is a public relations campaign to promote his vehicle,” said Wolters.

Musk has been getting lots of free press, he said, and waging a grassroots campaign to stoke flames of public support, Wolters said, adding that any press is positive press, and in his view, most press has not been that bad, as the charismatic Musk has won over the media.

Tesla’s efforts to rouse support was suggested in Musk’s leaked e-mail.

“The Texas auto dealer association is trying to stop us from selling cars in the state and they have way more money and power than we do with legislators,” Musk wrote, “so we need to rally the people pronto to stop them from winning.”

Secondly, Wolters suspects what Tesla poses as a more egalitarian way will ironically erode safeguards to the marketplace and economy although there may be many who have not seen this.

Musk wants to “give himself a free reign in the marketplace without competition, said Wolters. “He doesn’t want his cars sitting next to a hybrid or a diesel or another battery powered vehicle … And to me that raises a red flag if he just wants to have an isolated showroom that a consumer cannot compare his product. There are a lot of magnificent automobiles that are wonderful for the environment in showrooms.”

But Musk told Automotive News a different story.

“There’s better things to do than attack Tesla. We’re a little company selling a small number of electric cars. And we’re just trying to make a go of it and not be yet another body in the graveyard of car company start-ups,” said Musk. “We’re not trying to poke a finger in their eye or do something unreasonable. If I thought there was another way to be successful, I would take that path. But the evidence suggests if we don’t at least initially pursue a direct sales model, we will fail.

“In the future I could certainly see us embracing a mixed model, where there’s a mixture of company-owned and franchised stores. There are good examples of those, like McDonalds. But we need to be a bigger company.”

What is a “bigger company” in Musk’s estimate?

“Roughly 1 percent,” he said. “That’s not a large number. But I think we’ve got to be at least 1 percent of new car sales in America, which would be around 130,000 or 140,000 cars.”

And On It Goes

Tesla is operating successfully in some states now, and is undoubtedly full of promise.

Musk said to Automotive News he would consider going above states by lobbying the U.S. Congress for legislation allowing direct sales of electric cars made by startup companies. He said such legislation could be tied to an energy or transportation bill.

He said he could also file a federal lawsuit challenging state restrictions as unconstitutional violations of interstate commerce.

The constitutionality of the franchise system was already evaluated a decade ago however, said Wolters, who gave testimony before the Federal Trade Commission on this very subject. It was found to be constitutionally valid.

But Musk said he was still mulling his federal-level options.

“If we’re seeing nonstop battles at the state level, rather than fight 20 different state battles, I’d rather fight one federal battle,” Musk said.

This Tesla store couldn’t be any closer to an Apple store.

The chairman of the NADA, David Westcott, was quoted as saying this would be a “mistake” and “NADA will vigorously defend the franchise system.”

The NADA has attempted to step back for now, although it has previously voiced strongly that Musk will learn the error of its ways.

“The National Automobile Dealers Association supports a state’s right to enact and enforce auto franchise laws in the public interest,” said Hyatt. “State governments require the dealer to invest in brick-and-mortar facilities to ensure there is an independent franchised dealer available to car owners for the life of the vehicle, not just at the point of sale. Tesla should be required to play by the same rules as everyone else.”

But the game is not fair, unrelenting Tesla has insisted while in other quarters it is being rewarded with much praise for its product and the hope it represents to a public among which many remain largely unaware of how alternative vehicles operate, or that Tesla even exists.

Wolters said Tesla’ ability to sell the sizzle and dazzle the less-than-fully informed has further enabled Musk in efforts to win the hearts and minds of supporters, many of which cannot afford his present products, but hope to in a few years when Tesla releases a less-pricey car.

All of which brings us back to the question of who holds the moral and ethical high ground? Both sides say they do, observers have their opinions, but this ultimately has yet to be fully determined.

The post Why Auto Dealer Associations Oppose Tesla appeared first on HybridCars.com.

This could be true if projections by LMC Automotive, a strategic partner of J.D. Power come to pass.

According to the forecast, 36 percent of an estimated 110 million passenger vehicles sold by then will be powered by something other than a pure gasoline engine.

Top on the list will be HEVs – gas-electric Hybrid Electric Vehicles – at 17.5 percent of the mix.

Plug-in hybrids (PHEVs) like the Chevy Volt are estimated to round out 5 percent of the total, and alas, all-electric cars like the Nissan Leaf are estimated to be 2.5 percent.

Does that mean Renault-Nissan CEO Carlos Ghosn who’s estimated it at around 10 percent by 2020 and efforts now underway by maverick marketer Tesla Motors will fizzle some time between now and then?

Actually, no one knows, but this is what the latest educated guess pegs, and while it’s at it, LMC Automotive says worldwide diesels will comprise 10 percent and flex fuel vehicles which run on E85, or blends of ethanol mixtures will make up 6 percent.

So that accounts for around 36 percent, a little more than one-third of the passenger vehicles in 2025.

As for the 64 percent of remaining passenger vehicles sold in 2025 powered by gasoline, these too are expected to feel a squeeze. It’s projected that V8s – now still enjoying a heyday and presently outnumbering hybrids by number of units available and by sales volume – will be down to just 10 percent, said LMC Automotive.

More than half of the gas engines will be four-cylinders and conventional gas engines will also be utilizing all manner of efficiency aids including turbo-charging, direct injection, stop/start systems, and 8-, 9-, and 10-speed transmissions.

J.D. Powers via AutoGuide

The post By 2025 Alternative Powertrains To Comprise 36 Percent Of New Passenger Cars appeared first on HybridCars.com.

In recent years high oil prices caused by high demand have allowed Alberta’s oil sands to become truly profitable, ending the need for billions in government subsidies and tax breaks. With starry eyed dreams of $200-plus a barrel oil prices, rapid expansion is underway with hundreds of billions of dollars in private capital being invested in new, mostly in situ projects. After 40 years of careful nurturing by government and private industry the future finally looks bright for Canada’s oil sands.

Author is the cool-looking teenager second from the left in the back row. Photo taken in 1978 at the Syncrude Project site Fort McMurry Alberta. Today he is a commercial pilot and flight instructor; his car of choice is a 2012 Chevy Volt.

Oil sands crude is used for everything from plastics to aviation fuel, but the vast majority of it is consumed powering transportation for average North American drivers commuting in the family sedan. No steadier customer could be imaged. The fact that oil sands crude is already the most expensive to produce in the world, and climbing with each new project, is of no matter. Since there is no substitute for gasoline, soaring production costs are easily passed onto the consumer. As long as the global price of oil continues to rise faster than the cost of new synthetic crude production, the Canadian Oil Sands are golden.

Then 18 months ago a challenger arrived to provide the daily commuter with an electric escape hatch to the spiraling costs of crude production. This escape artist was spawned not by nagging environmental concerns, but by the relentless forces of technical innovation and the laws of economic efficiency. Enter the first-generation mass produced plug-in electric fueled family car.

The arrival of plug-in electrified vehicles such as the extended-range electric Chevy Volt, which can be fueled by either electricity or gasoline, and the all-electric Nissan Leaf created a media super storm, particularly in America. Buried under a blizzard of misinformation including various critical editorials and attacks, hype also from the manufacturers and a putdown by a U.S. presidential candidate against the Volt is a startling fact striking at the heart of the purported value offered by oil sands:

Plug-in vehicles use less energy per mile than gas-powered cars

Plug-in vehicles can go further on electricity generated from the energy sunk into producing one gallon of oil sands-based gasoline than an average car can on the gasoline. The Chevy Volt, able to utilize both electricity and gasoline as fuel, can actually go as far on the energy used to create a gallon of gasoline as it can on the gasoline!

How can this be? It turns out that the oil sands, just like ethanol and other forms of synthetic crude production, in addition to being capital and labor intensive, also consumes a large amount of other types of energy. Even under ideal conditions, 13 kwh of electrical energy could be created from the energy input added “well to wheel,” to mine bitumen, transport it, transform it into synthetic crude and then refine it into a single gallon of gasoline.

Synthetic crude oil’s dirty secret

Whether secret or not, the fact is this: Whatever its source, synthetic crude oil is more of an energy carrier than a fuel. Read on and we’ll show you why.

The two biggest synthetic crude sources, oil sands and corn ethanol, both have questionable energy return on investment (EROI) ratios. This doesn’t matter if your only method of delivering energy to a car is to convert it into gasoline. The threat posed by battery powered electric cars is that they are powered by electrical energy from a wall socket combined with an electric drivetrain that is dramatically more efficient than the best gasoline engine. It is simply more efficient to feed energy directly into an electric car’s battery bypassing the costly steps involved in turning this energy into gasoline. Not only do you short circuit the need to line up at a gas station, and the environmentally unfriendly steps involved in creating and then burning gasoline, but you can save a lot of money doing it.

The savings per mile driven are dramatic. By cutting out the oil sands middleman, labor costs, and his billion-dollar capital investment, the Chevy Volt costs only 4 cents per electric mile to run versus 10 cents per gas mile (based on U.S. national average of $3.80 a gallon gas and 0.12 cents per kwh).

To see this efficiency challenge in action, let’s follow the energy path a barrel of oil sands bitumen takes to your gas tank from one of Canada’s newest, most efficient stream injected oil sands extraction sites now under development. Pengrowth Energy Corporation’s new Lindbergh thermal bitumen project is state of the art and well managed. It is also insulated from the labor and cost pressures facing most other oil sands projects thanks to its easily accessible location. Lindbergh is a good example of the next generation of oil sands thermal extraction built with environmental waste water and energy efficiency in mind. It is also primed to take advantage of efficiencies created by the new Keystone XL and Northern Gateway pipeline infrastructure.

Step A, extraction: At Lindbergh Alberta, using the latest and most cost efficient in situ technique, burn 1,100 cubic feet of natural gas input energy per barrel to extract and process bitumen with a diluent into a barrel of crude feedstock called Dilbit. This process includes energy used recycling 90 percent of the waste water and chemicals used during the extraction and adds 1 part diluent to every 3.3 parts of raw feed produced (a best case 30-percent ratio). We will assume the most efficient diluent source, the proposed Northern Gateway Pipeline which is actually a twin pipeline. One Pipeline will export 525,000 barrels and the other will import 193,000 barrels of diluent back from the refinery’s processing the crude. For our calculations we will assume the diluent is shipped to the coast and piped to the site over the rocky mountains under ideal conditions adding only 4 kwh per barrel.

Step B, transport: Pipe the resulting dilbit 1,600 miles from Canada through six U.S. states using the planned $7 billion Keystone XL pipeline. This pipeline will use 30 grid-fed electrically driven pumping stations to move crude before it finally ends up at a refinery hub in Port Arthur, Texas. According to the state of Montana, each station is expected to draw 82.3 million kwh per year. That’s 6.7 million kwh per day in total to move 830,000 barrels, or only about 8 kwh per barrel. See Keystone XL pipeline info here.

Step C, upgrade the dilbit into synthetic crude: This “pre-refinery” process transforms heavy oil into a lighter synthetic crude oil ( SCO) that can then be further refined into diesel and gasoline in step D. This is an upgrade process that needs to be done to crack the heavy oil into lighter synthetic crude. This use to be done first before transportation to a refinery but thanks to the proposed XL pipeline and economies of scale, it is more energy efficient if the upgrading is done after transportation to the Refinery. Estimated energy input is about 870 cu ft of natural gas per barrel or 15 percent of the feedstock itself (1.15 bbl. = 1 synthetic crude).

Step D, refine the synthetic crude into gasoline: Each refinery is different and this is a topic that electric vehicle enthusiasts have been discussing for years (sometimes without realizing that the majority of energy is consumed in steps A to C above). Even Elon Musk, CEO of Tesla Motors, has joined this debate. A good discussion can be found here and a good number for energy consumed is considered to be about 6 to 8 kwh per gallon of thermal energy (not electrical energy) or 240-280 kwh of thermal energy per barrel. We will be conservative and take the lower number and assume that, on average, 66 percent of the energy needed will come from the oil itself (reducing the end product from a 42 gallon barrel to 36 gallons), 22 percent from more natural gas and 12 percent from the local electrical grid to produce an end product. That would be 29 kwh of electricity (either produced on site or sucked from the local grid) and 200 cubic feet of natural gas per barrel.

Step E, transport it to your local filling station: Using trucks, rail, ships and pipelines deliver gasoline to the consumer and then pump it into his tank using electricity. Lets just say it’s a pipeline level of efficiency of 8 kwh as this figure is all over the map, pun intended, depending on where the product is going.

In Total: That’s 49 kwh of grid electricity and 2,170 cubic feet of natural gas per barrel. What if this natural gas was burned by your local utility’s existing gas turbine generator instead? Using real world figures from the Energy Information Administration of 125 kwh per 1,000 cubic feet of natural gas and transmitted with average 93 percent efficiency to your wall socket you would have 252 kwh of Electricity. With new co-generation technology this could be 50-percent higher, but we will use the conservative 252 kwh number. So in total that’s a minimum of 252+49= 301 kwhs of electricity “invested” into each oil sands barrel.

Now we need to take into account that a 42 gallon barrel of synthetic crude can produce up to 45 gallons of product using 100 percent external energy input. But as mentioned most refineries produce 36 gallons of refined product as they are built to consume part of the barrel for the energy required during the refining. Of the 36 gallons, (30 percent of 42) or 12.6 gallons of diluent (required in Step A to process the bitumen into dilbit) needs to be recycled back into the process. That leaves us with 23.4 Gallons of which at most only 19.6 gallons is motor grade gasoline.

Let’s use the 23.4 gallons figure to be generous. That’s 301 kwh / 23.4 gal = 12.86 kwh /gal.

That’s a 13 kwh of grid electricity that could have been delivered to your wall socket from the energy used to produce each gallon of oil sands based gasoline under ideal conditions. This doesn’t take into account the energy used in finding, developing and finally repairing the environmental damage of the oil sands operation.

Accounting for average battery charge efficiency (see EPA sticker for each car), how much above the 23 mpg average can the new technology cars go on 13 kwhs from your wall socket? That’s enough electricity for the Chevy Volt to go 37 miles, the same distance it can go burning the gasoline. The Nissan Leaf can go 38 miles, and the Tesla Model S 34 Miles. The Tesla family sedan also has the advantage of being able to spank many purpose-built sports cars such as the 10 mpg 500 hp Dodge Viper.

It appears that using natural gas and grid electricity to produce oil instead of applying it directly to our transportation needs is like feeding bread to a cow instead of grain. Yes it works, but it is an unnecessary and costly waste that only the baker benefits from.

Here is Mark Brooks still looking cool beside his 2012 Chevy Volt in classic -15 C Canadian weather.

The good news for Alberta’s oil industry (a.k.a. the Baker) is that its nemesis is still in its infancy and like all new car technology, it’s expensive. The average new car consumer is just beginning to struggle up the learning curve around understanding and trusting plug-in vehicles. Only a tiny fraction of new vehicles being purchased today can plug into a wall socket for some or all of its fuel needs. Intense lobbying efforts by a vast array of vested interests also appear to be dampening the quick adoption of the new technology. This will ensure that the tipping point for the mass adoption of plug-in vehicles is still years away.

The bad news is that the genie has escaped the lamp and no amount of lobbying or nay saying has ever buried American technological innovations of this magnitude in the past (i.e., Ford Model T, Wright brothers’ airplane, personal computer, etc). Advances in everything from battery storage densities and costs, to improved electrical grid energy generation are on the way. Sales of the new technology vehicles are already accelerating (Chevy Volt sales tripled last year) as consumers climb a wall of worry to discover that the cars are a robust and seamless replacement to gas-only models.

The long-term implication for Canada’s economy and North America’s fossil-fuel dependant society is massive. The cost to drive a mile into the future just dropped dramatically and as a side benefit, electric drive enables the removal of a key source of the CO2 emissions creating global warming. Already more than a dozen other automakers are rolling out plug-in vehicles to test the technology and consumer demand.

But don’t cry for Alberta’s oil patch. Even a generation from now when it is no longer an affordable consumer fuel, oil sands crude will still be in high demand for everything from plastics to aviation and industrial fuel. The difference will be that burning oil sands gasoline in the family car will be considered an unnecessary luxury rather than a necessity.

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