Some people worry about the slow turnover of the car fleet should oil availability to the US consumer decline rapidly over the next 15 years. They argue that even a crash programme to change over to hybrids wouldn't be able to save us, because even in 15 years half the fleet would still be non-hybrids.
My argument here is really a follow up on the CAFE post. While I think that CAFE is a poor measure to lower gasoline consumption in a low price gasoline environment, high gasoline prices without CAFE can work miracles.
They encourage driving fewer miles in smaller cars. For older fuel inefficient cars they impact the point where repairs are no longer justified, and so will lead to them being driven less and/or scrapped earlier. And they encourage a redistribution of the car fleet, with the most efficient cars getting used most, and the least efficient least. Suddenly the small third car (kept for occasional use by visiting relatives - my parents fall in this category, they've got three cars, and most of the time only 2 drivers, but just in case, they've got a third car) gets used for most journeys, rather than the posh, fuel inefficient SUV.
$10 per gallon will halve gasoline demand pretty quickly, 20% fewer miles, 5% of the fleet replaced by small high efficiency diesels that get 40-50 mpg, sell for $10,000 and would get preferentially used by those having to do a lot of miles, and the rest of the fleet redistributed a bit, and there we'd be in a year or two.
There's a point where gasoline demand does become very elastic. $6000 for 12000 miles at 20 mpg is a pretty good incentive to cut down on gasoline consumption. $20000 for 20000 miles at 10 mpg even more so, even for someone willing to plunk down $50000 for an SUV.
Thursday, December 22, 2005
CAFE
Americans like driving large cars a lot and they don't like gas taxes.
So, as politicians don't want to commit electoral suicide, the pain free solution being sold to the public is CAFE, the idea being that the evil car companies get forced to make large cars that get great mileage for the same price and consumers + the environment + national security are all better off, and nobody gets hurt.
The trouble is, true efficiency in cars (ie getting the same acceleration, size etc. with a better mileage) is exorbitantly expensive. For gasoline engines and for going beyond minor improvements, $5+ per gallon is quite typical.
So, to meet CAFE through true efficiency the car industry would have to get consumers to pay thousands up front as a premium that'll take years to pay off through reduced gasoline consumption, something few consumers will do.
That leaves two alternatives, get around the standards through loopholes (such as the SUV exemption) or sell more smaller cars.
The trouble with the latter solution is, I feel, that as long as prices for gasoline stay low, it may not actually reduce consumption.
Think of it this way, the car manufacturers can sell a small car for $5000 and an SUV for $35000 to meet the standard (in extremis buy an SUV and get a small car for free).
That may not reduce sales of SUV's and large cars significantly, but lead to a lot more smaller cars on the road. If those are second or third cars for wealthier people used only in rare circumstances, then their fuel consumption doesn't change, even though the fleet they own meets a much stricter CAFE target. If on the other hand the small cars are bought by poorer consumers, they might drive a lot more miles in them than they would otherwise (due to the lowering of the cost of ownership).
Yet another possibility is that higher new car costs lead to old, inefficient and polluting cars being kept on the road for longer. It might even be a combination of the above, with poorer people either driving new and cheap small cars, or large, old cars that are being kept on the roads much longer than would otherwise be the case. At least, for poor people willing to drive small cars there'd be a redistributive benefit to CAFE, the rich, through buying SUV's, would cross-subsidise small cars for the poor.
The bottom line is:
There's no pain free way of consuming less gasoline. People will have to make do with smaller cars, driving less, or paying $5+ per gallon for true efficiency improvements going beyond minor tinkering.
So, as politicians don't want to commit electoral suicide, the pain free solution being sold to the public is CAFE, the idea being that the evil car companies get forced to make large cars that get great mileage for the same price and consumers + the environment + national security are all better off, and nobody gets hurt.
The trouble is, true efficiency in cars (ie getting the same acceleration, size etc. with a better mileage) is exorbitantly expensive. For gasoline engines and for going beyond minor improvements, $5+ per gallon is quite typical.
So, to meet CAFE through true efficiency the car industry would have to get consumers to pay thousands up front as a premium that'll take years to pay off through reduced gasoline consumption, something few consumers will do.
That leaves two alternatives, get around the standards through loopholes (such as the SUV exemption) or sell more smaller cars.
The trouble with the latter solution is, I feel, that as long as prices for gasoline stay low, it may not actually reduce consumption.
Think of it this way, the car manufacturers can sell a small car for $5000 and an SUV for $35000 to meet the standard (in extremis buy an SUV and get a small car for free).
That may not reduce sales of SUV's and large cars significantly, but lead to a lot more smaller cars on the road. If those are second or third cars for wealthier people used only in rare circumstances, then their fuel consumption doesn't change, even though the fleet they own meets a much stricter CAFE target. If on the other hand the small cars are bought by poorer consumers, they might drive a lot more miles in them than they would otherwise (due to the lowering of the cost of ownership).
Yet another possibility is that higher new car costs lead to old, inefficient and polluting cars being kept on the road for longer. It might even be a combination of the above, with poorer people either driving new and cheap small cars, or large, old cars that are being kept on the roads much longer than would otherwise be the case. At least, for poor people willing to drive small cars there'd be a redistributive benefit to CAFE, the rich, through buying SUV's, would cross-subsidise small cars for the poor.
The bottom line is:
There's no pain free way of consuming less gasoline. People will have to make do with smaller cars, driving less, or paying $5+ per gallon for true efficiency improvements going beyond minor tinkering.
Tuesday, December 20, 2005
ANWR
Oil exploration in ANWR is a very emotional subject in the United States.
My view is that the US government should do detailed studies to work out how much oil there really is there, where it is, and how much, if any, of it could be gotten at without disturbing the environment too much.
If there's 10 billion barrels there, that's a lot of oil. At $60 per barrel, it's 600 billion Dollars, and any sensible government would not want to just hand that over to oil companies, but would subcontract the job in a fashion that gives a fair return to any private companies involved for their services, leaving the US government with the vast majority of the 600 billion, which could be used for any number of good causes.
Pressure groups opposed to oil exploration in ANWR often compare the 10 billion barrels with total US consumption (about 6 billion barrels per year). Well, not a single country in the world produces enough oil to satisfy US consumption. What this comparison proves is that US oil demand is enormous, not that ANWR's reserves are small.
Take Britain say, a country of 60 million. ANWR would meet all British petroleum demand for 15 years (assuming 10 billion barrels).
I also feel that a fair comparison with other oil producing areas is required (such as Canadian oil sands, which are expanding fast, or oil production in the Russian arctic etc...), is the amount of environmental damage per barrel of oil produced in ANWR really that much worse than elsewhere?
My view is that the US government should do detailed studies to work out how much oil there really is there, where it is, and how much, if any, of it could be gotten at without disturbing the environment too much.
If there's 10 billion barrels there, that's a lot of oil. At $60 per barrel, it's 600 billion Dollars, and any sensible government would not want to just hand that over to oil companies, but would subcontract the job in a fashion that gives a fair return to any private companies involved for their services, leaving the US government with the vast majority of the 600 billion, which could be used for any number of good causes.
Pressure groups opposed to oil exploration in ANWR often compare the 10 billion barrels with total US consumption (about 6 billion barrels per year). Well, not a single country in the world produces enough oil to satisfy US consumption. What this comparison proves is that US oil demand is enormous, not that ANWR's reserves are small.
Take Britain say, a country of 60 million. ANWR would meet all British petroleum demand for 15 years (assuming 10 billion barrels).
I also feel that a fair comparison with other oil producing areas is required (such as Canadian oil sands, which are expanding fast, or oil production in the Russian arctic etc...), is the amount of environmental damage per barrel of oil produced in ANWR really that much worse than elsewhere?
Subscribe to:
Posts (Atom)
