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Enter the Electric Car
The car business is being wrenched into its future by forces beyond its control. One force is the destruction of demand for its current product offerings because of the bursting of the credit and housing bubbles combined with consumers’ knowledge that rapid technological developments are on the horizon. This potent combination means consumers who do not absolutely need a new car (the vast plurality of all OECD consumers) don’t need to consider buying one. Their disposable income and feelings of being wealthy have both been cut off at the knees. Equally important, they know that much different cars with newer and perhaps much more desirable power plants will be available in the 2010 - 2012 time frame. So car sales are setting new records for low sales numbers and will probably continue to do so for 12 - 18 months.
Meanwhile automotive technology experimentation and development and venture funding impacts are starting to make their appearance. New electric cars - though decidedly “niche” vehicles - are actually on the market. Consumers can buy either a $100,000+ sports car or an under $20,000 golf-cart-on-steroids that is road worthy. More new automotive and battery technologies are getting readied for the market. They are pushing major car makers who now offer the temporizing hybrids to move more rapidly into the next generation, Plug-in Hybrids, which should be in showrooms in less than two years.
True, our out-of-nowhere economic disaster courtesy of the housing and derivatives markets collapses, which have cut oil prices in half, make the need for more fuel efficiency less immediately compelling. If oil prices stay “low” for a while, which seems a pretty good bet, there may be less need for the major car makers to rush new engine technologies to the market before they might be fully optimized. But the electric future for cars has now become ingrained in the thinking of top executives around the car and related industries. It is going to happen.
Recently, an editorial in Oil & Gas Journal (10/13/08, p. 32) - a publication that tends to echo thinking at the top of the energy business - said this about the future of the automobile:
“The biggest European car maker by sales is testing the Golf TwinDrive, in which an electric powertrain supports a diesel motor. The company also wants to introduce a purely electric model of it “Up!” small car.
Daimler AG’s Mercedes-Benz cars unit plans to build an electric version of its Smart car from the end of 2009, while Mitsubishi Motors Corp. plans to launch a mass-produced electric vehicle next year in Japan.
Would these developments en mass effect the oil and gas industry? Well, yes. Gasoline demand could decrease dramatically. And an all-electric car has no gearbox, valves, clutch, muffler, or exhaust and requires no spark plugs, no filters, and - no oil.”
Why does everyone (who matters) now expect the future of cars to be plug- hybrids or, more radically, all electrics? After all, current battery technology is still too expensive to make a comfortable Plug-in Hybrid an economical option for both consumers and producers. One or the other or both (or the government) must subsidize the purchase given current oil prices and current battery prices. The only logical answer is that everyone must be convinced that much higher oil prices and/or much lower battery prices are on the horizon. Readers know I have argued both before and since the latest downtrend in oil prices that higher oil prices are inevitable. It seems clear, to me at least, that those in power in the car business must believe the same thing.
As we know, it takes 17 - 20 years to change out the fleet, so electric motors will not start to have significant impacts on oil demand for at least 5 years and perhaps not for 8 - 10 years. So the way to think about the impact of electric motors on oil prices is to look at them like the “runaway truck ramp” on super-highways. Once oil prices start to ramp up into outer space due to supply constraints (which I suspect starts in 2012), electric cars will make those prices bearable for consumers and will ultimately constrain oil prices from going even higher despite continued shortages of traditional oil.
Tags: peak oil investments
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6 responses so far ↓
1 pure // Nov 4, 2008 at 12:38 pm
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2 robert essian // Nov 4, 2008 at 3:06 pm
Jim, as a dedicated and loyal student (ha! ha!) I have been spending much of my time lately researching all articles in the archives.
I recently went for it and added SQM and CSIQ to my portfolio. The last few days have been great.
The past posts have reassured me that you are the can’t miss investment.
This message is to thank you for having the most thought proking and professional sight around.
I could not have learned or cared to learn without your site.
In my home you are known as the Professor. Compliment intended…Go Lions…Peace
3 robert essian // Nov 4, 2008 at 3:07 pm
PS: That’s provoking…My bad
4 MKR // Nov 6, 2008 at 11:17 pm
The next 10 years will see a transition from hybrid to plug-in hybrid when oil prices again take off. The pure electric car, however, is another matter. Even assuming advances in battery technology, the cost and efficiency of pure electric makes it a very expensive ($30K+), small, and short range (50-70 miles) proposition. It speaks volumes that Honda - the kings of personal propulsion - have abandoned development of a pure EV.
However the whole alternative energy universe will be put on hold until the economy reaches some kind of stability and the price of oil returns to the $100/bbl+ range. With gas under $2.50 per gallon, hybrids, plug-in hybrids and full electric are all but dead.
5 wkwillis // Nov 21, 2008 at 1:58 pm
When does the electric mommy van come out?
Your standard mommy van weighs a ton and caries a ton of cargo and passengers.
So an electric mommy van would be two tons van, one ton battery, one ton cargo? Four tons total, carries a whole third grade soccer team, and it can punt an SUV into oncoming traffic.
A ton of lead costs about one thousand dollars. Steel is a few hundred dollars per ton. Fabrication cost for the battery in large quantities isn’t going to cost much more than that, so why aren’t they already available?
Maybe it’s because suburban streets are weight limited?
6 df // Dec 15, 2008 at 4:24 pm
Daniel Ritz, the manager of Tempeltoncapital.com, said the outlook for energy companies was brighter than it was for many other commodity producers, because energy prices were more likely to remain elevated in a slowing economy. He predicted that over the next five years, annual global economic growth would be around 3 percent, on average, down from around 5 percent in recent years. “That’s a pretty negative outlook,” he said, because it is based on his assumption that growth will be flat to negative in developed countries and slower than its recent pace in developing ones.
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