By Ray Sweha
Yesterday’s GM-Volt post reminded me of a post I made in the forum making similar observations about the world price of oil, and why the electric car is a needed solution to U.S. energy independence.
I also just happened to re-watch “Who killed the electric car?” and “Revenge of the electric car” and a couple of ideas popped into my head that I want to share and get your feedback on.
But first, I’ll note this will just be some issues I’ll throw out there for your consideration, having looked at them myself for a while now. I’ll qualify my outlook and say I cannot account for all potential intellectual rabbit trails one could also run down given complex geopolitical and macroeconomic variables, so just call this a friendly conversation starter, and I’m open to your views as well …
I’ll start by asking a a question: What controls the price of a barrel of oil?
The short answer is oil prices are dictated by the economic law of supply and demand.
Following is a chart that indicates that the price of oil in the year 2000 was around $30 per barrel.
Why is it around $100 per barrel now?
The product didn’t change and the cost of producing oil didn’t change dramatically to justify a 300 percent increase in price. So why the change in price?
Answer: Because oil has had a monopoly over transportation – i.e. for a given level of supply, the price keeps going up as long as demand exists. And as we know, the demand persisted because people had to use gas to power their car; there was no other alternative.
This is evident if you look at the profits of Exxon-Mobil is the last 10 years which shows its profits being multiplied by a factor of 2.5.
At the end of the day, oil producers (mainly OPEC countries) control the amount of supply to ensure the maximum amount of profit. Every now and then, they are bullied by the U.S. and other big consumers to increase the supply to ease the pressure at the pump.
But ultimately, it is their natural resource and they have the right to control it the way they want!
From the data around Y2K, we know that a $2 per gallon would keep oil companies profitable. I hate to say it, but Gingrich was right to say that $2 per gallon is a possibility. His method is wrong though.
The way to bring the price of oil down is not by producing more of it, but by creating competition to it. Once there is a financially viable alternative to gas, its prices will fall. And they can fall all the way to $2 per gallon.
The second question – and leading to my main point in this article – is how will the mass adaptation of EVs affect the price of oil?
And, I’ll ask further, what will the oil companies do about it?
Linked here is a really good article in the Washington Post blog about the anticipated reduction in the price of batteries.
“New research from analysts at the McKinsey & Company suggests that the price for lithium-ion batteries could fall by as much as two-thirds by 2020,” says the WaPo. “Instead of $600 per kilowatt-hour today, batteries would cost just $200/kwh in 2020 and $150/kwh in 2025. And that, the report suggests, would upend the entire automobile industry.”
For the purpose of this article, this graph is the most informative one:
The above chart tries to estimate at what value of battery price per kwh that EVs can viably compete with internal combustion vehicles.
The graph predicts mass adaptation of EV’s when the price of gasoline hits $5 per gallon – in relation to the current generation of battery technology ($500-600 per kwh).
Fuel prices are predicted to hit $5 in a couple of years when the global economy begins to recover. The question – again – is what will the oil companies do?
Knowing that there is about $100 trillion worth of oil still left to excavate, oil companies won’t wait for EVs to put them out of business. What can they do? They can lower the price of oil.
Now, to the sad part of this analysis: even at $150 per kwh battery (today we are around $500-600 per kwh) an ICE is more economical at $2 per gallon, which is still profitable for oil companies.
So the final question is, could the oil companies kill the electric car again? The answer is, probably yes, by keeping the oil price down thus discouraging consumers from buying EVs. This will force companies to stop producing EVs due to lack of demand.
How can we save the EV? For starters, by better educating the public about our dependence on foreign oil and that we will never have energy security as long as we are addicted to the troubled Middle East oil. Remind them that a gas monopoly over cars leads to an ever increasing gas prices. Giving them examples from history that an armed conflict in an oil-rich region could cause a spike in oil prices throwing the economy into recession and leading to the unemployment of millions of Americans. Ask them how many wars we need to send out troops to to guarantee the flow of oil to global markets?
IMHO, the best case scenario is that EVs and ICEs will co-exit for a while, the existence of EV’s will keep oil prices in check, preventing oil companies from racking record profits relying on the fact that they have a monopoly over personal transportation.
What do you think?
This entry was posted on Thursday, July 19th, 2012 at 5:55 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
+3
Jul 19th, 2012 (6:47 am)The main premise of the article is fine, but the actual fuel is electricity not the battery. The battery is the fuel tank. If batteries are cheaper but electricity goes up, there will be an offset that is not being factored in. Electricity in Australia for example is going up fast, if there is increased demand (which there seems to be); it will continue to grow just like petrol. Admittedly, petrol is finite and eventually will have to be phased out or it will simply be uneconomical to actually buy.
I would further submit that as petrol gets more expensive, bio-fuels will play an ever growing roll into the mix as well. Once Bio-fuels are given the chance to prosper, they should be inexhaustible as we can just grow it.
So actually there are more choices to be had, which all means petroleum’s days are numbered.
+2
Jul 19th, 2012 (6:58 am)SHHHHHHHHHH! Don’t give them any ideas! (joking) I’m sure that they have analyst tucked away in a room figuring this out for themselves. Another factor is solar pricing. If you invest in solar and an electric car or erev car then none of this matters to you except what the price of fuels does to the rest of the economy. (Transport of goods) Also, my Dodge Cummins diesel truck runs quite well on straight vegetable oil, after the conversion.
-1
Jul 19th, 2012 (7:35 am)I agree with xiaowei1 to a certain extent but while biofuels may play some role in the future scalability has been somewhat problematic. Another dark horse is hydrogen, the only real problem there has been storage. I a volumetrically high capacity hydride base tank that is safe can be developed, solar and wind farms can be used to dissociate steam captured from industrial activity. Iceland has already outfitted many of their filling stations with hydrogen generators and re-fuelers. Emission equipment would be unnecessary and could be bypassed allowing for greater thermal efficiency and further development of mobile fuel cells would increase that thermal efficiency beyond the the theoretical limits of the ICE and would trump fossil fuels all together. Hydrogen could also be generated by reforming either methane or natural gas. The standard ICE can use these 2 sources without much modification as it but CO and CO2 is generated. A pre-reformation process allows for the sequestration of the carbon which can be used in some sort of Algol based biofuel manufacturing process. Once again trumping fossil fuels. A fuel cell would reduce or eliminate the battery size of the Voltec drive train and with a baseline thermal efficiency of 45% fuel to electric conversion you would have probably a doubling of the Volt’s Mpge, Batteries or super capacitors would still be needed to capture regenerative braking out-put and boost efficiency. I believe there was a PBS documentary on the subject with Alan Alda as narrator.
+2
Jul 19th, 2012 (8:27 am)Frank,
does your dodge smell like french fries ? mmmm…lol.
l know natural gas and propane can be used in diesel engine quite easily in all heavy equipment and highway trucks and somewhat economically…would we not save a barrel or two of crude ?
l wonder why we don’t see any big trials or transport companies looking at this alternative.
we don’t have to import these gasses….don’t have to support terrorism…..or OPEC…
just thinking..
HaroldC
+9
Jul 19th, 2012 (8:34 am)Breakthroughs in the developments of solar cells and batteries for storage will hopefully reduce pricing.
When that happens, every home will be a generating and storage facility, which will reduce the need for oil. Tie them all together in a smart grid, and our energy problems disappear!!
C-5277
+5
Jul 19th, 2012 (8:43 am)Excellent article and I particularly love the fuel price vs battery price graph. It’s easy to understand and is a good graphical representation of where we are headed as the “recent US conditions” continues to move up and to the left.
My two cents are that in any analysis of this type that is limited to the amount of words you used there are going to be a great many things left out, which is understandable. One of your premises seems to be that at $2 per gallon that oil companies are profitable. What I would say is that there are so many details that make this general statement not as useful as it would appear. For example, the cost to pump and refine Saudi oil, is significantly different than it is to drill and refine deep sea oil or to scoop and refine the tar sands. We are obviously already near the end of the cheap, easily accessible oil and we are increasingly using the the hard to get oil and “unconventional” oil and this is significantly altering the cost and price dynamics of the oil market.
Second, what we are also seeing is that many countries are experiencing declining outputs (the US is not one of them) and increasing domestic consumption. Thus, many countries are thus exporting less, further reducing the supply on the global market.
Third, you make an interesting comment that there is $100 trillion left of oil left. To come to that conclusion you would need to know how much oil there is and at what price it will sell. Could you share your assumptions when you make that statement? It is obviously a key component of supply and demand and it’s always good to hear how people are attempting to calculate how much supply there is left.
Finally, while not a peak oil doomer, I do believe we are soon to face the reality of peak oil. For those not totally familiar with the basic fact of peak oil I would describe peak oil as simply the observation that oil is finite and it will therefore have a peak in production followed by an inevitable decline. If you are interested in reality (surely a loaded term) then you too are a believer in peak oil. Now, the impact on society of reaching peak production and then declining is where the real debate should be but we seem to be stuck in debating whether or not we will peak and when the peak will be.
Anyway, since I believe peak oil is rather imminent (less than a decade) I do not think that oil companies can kill the EV. If we are to maintain any semblance of our current lifestyle the demand for alternatives to oil will be far too strong within the next decade and technology will advance too far on the battery front to holdback the tide of EVs.
So much more to say but this comment is too long as is.
+10
Jul 19th, 2012 (8:46 am)A better title would be: Could cheap oil kill the electric car again.. Umm no.
State-of-the-art in electric and battery technology has reached a point where it is profitable to make hybrids and electric motorcycles, and… the Volt is selling.
It is impossible to get the genie back into the bottle — its out.
+4
Jul 19th, 2012 (8:54 am)Once GM starts building cars with Voltec’s ability to beat ICE only car’s performance, nobody will want to put the Genie back in the bottle. Everybody should be happy, including the oil companies. And the gas free driving capability will always be there, for when it’s wanted or needed.
+1
Jul 19th, 2012 (9:00 am)Thank you Ray for a thought provoking article. I appreciated the historical data presented in chart form.
Oil will be further undercut as General Motors and Ford produce trucks that can be fueled by CNG, electric, or gasoline.
+15
Jul 19th, 2012 (9:06 am)I’ll answer the question in the title by saying yes; oil companies can kill the electric car again. The real question is how they might do it. One way as your article implies is by lowering the price of oil. That might put a dent on pure EV sales but the Volt is immune to that tactic. In my Volt if the price of gas becomes cheaper then charging at home, I’ll just drive using gas. That’s the beauty of the Volt. It is a true dual fuel vehicle. It accepts fuel in two forms, electricity and gas.
Voltec cannot be killed.
NPNS!
Volt#671
+1
Jul 19th, 2012 (9:07 am)I also liked the graph a lot. Will have to save that one for later use.
I think the EV switch has finally been flipped (for real this time). There’s just too much money invested at this point in the technology from too many players for big oil to silence them. They can slow them down (as I’m sure they will try to as they position themselves with the next energy source), but they can’t stop them.
+2
Jul 19th, 2012 (9:19 am)I like the format of your graph, but the scale is all wrong. Batteries have to ge much cheaper. Tesla has it right, to be competetive with an ICE you need a 85 to 100 kwhr battery. And to be price competitive this needs to be about $5k so $50-$60/kwhr. Your graph suggests $250-$300 is off by a factor of 5. These prices are cost to auto manufacturer as assembled packs. Elon Musk stated that raw battery price would soon be $200 /kwhr. The real question is how much of a premium are people willing to pay for EVs and/or sacrifice in range? For many people 100 mile range is enough, and these people will find this EV price competitive at a much higher cost per kwhr.
There are many university research teams working on battery technology and some very promising results bode well for dramatic price lowering and increased range/size. See http://www.greencarcongress.com/2011/09/alginate-20110909.html as best example I have found. Also cheaper manufacturing techniques http://spectrum.ieee.org/semiconductors/nanotechnology/printed-power-sources-for-cars-and-consumer-gadgets
As always, I keep reminding readers that low price electricity is possible with non-polluting, safe LFTRs. Liquid Flouride Thorium Reactors do not produce long term radio-active waste, are inherently safe and load-following. They run on cheap (as in free) thorium and the containment building can be 10x smaller. See flibe-energy.com/attributes
Part of the problem with bio-fuels is the requirement for fertlizer, which is currently made from natural gas. LFTRs can make fertlizer too.
+3
Jul 19th, 2012 (9:28 am)With zero emission requirements in California and customers owning the cars, the EV won’t be sent to the crusher, as in the EV-1 days.
+1
Jul 19th, 2012 (9:33 am)True, an increase in electricity prices would derail EV’s. The good news is that electricity sources are abundant in the US, roughly speaking 1/3 coal, 1/3 natural gas and 1/3 nuclear and renewables. Even if one of those sources got expensive, the other sources will fill the gap. It is a possibility but I think the diversity of the sources would keep the prices in check.
I hope so too, but the fear is that oil companies will kill those new sources of mobile energy early on before they can economically compete.
+6
Jul 19th, 2012 (9:36 am)Electric cars are the only answer to inflict the most competition. Electricity can be generated by nuclear, geo, solar, wind, oil, coal, methane, propane, CNG, hydro, almost anything able to create motion. If oil goes up too high, as it did, the switch at the generation source becomes the easiest answer. The problem still is in the cost of the battery, excellent point, and I’ll add charge stations. A 4 hour wait to recharge is still too long. Tesla is already on that along with a bunch of innovators. God Bless America, even in our dimmest days, thanks to the connection of money to politics (oil to a politician), we still have people thinking.
Jul 19th, 2012 (9:46 am)That is a valid point, I know in the continental north America it is getting more expensive to pump oil, I’m not sure what is the case in Saudi and the likes. My point is that high prices and high profit margins suggests that the increase in price is not due to increase in production cost but simply because they have a monopoly and they can do it. If one doesn’t like $5/gallon let him stop driving kind of mentality.
Another very good question
I quoted an Engineer named Wally_Rippel http://en.wikipedia.org/wiki/Wally_Rippel he gave this figure in the movie “How killed the electric car?” I have no idea where did he come up with this number. But as you said, he must have made a lot of assumptions to get to a dollar figure. The bottom line is that there is a LOT of money to be made in the oil industry and they are not going to set and watch their wealth disappear.
+1
Jul 19th, 2012 (10:11 am)I just want to thank all the commentators on their gracious attitude
I know the premise of the article is a downer, especially the for EV enthusiasts, but I think the more we know and challenge ourselves the more we are prepared to fight.
Special thanks to Jeff Cobb for helping me edit and publish this article
Multiple commentators mention another kinds of fuels, CNG, Hydrogin fuel cell, bio- fuels …etc. For me this is all good news, the more competition to oil there is, the less dependent we are on it.
I think it all goes to the magnificent chemistry of oil, gasoline has an energy density of 47.2 kJ/kg while li-ion batteries has 0.72 http://en.wikipedia.org/wiki/Energy_density#Common_energy_densities Those numbers need to improve fast. Oil price is high not because it costs a lot but because it is a rare commodity.
I think EV’s are economically prices at the current prices of oil. But those new battery technologies need to arrive quickly before oil producers game the market by lowering their prices and disprove the EV economical premise.
Again, thank you guys!
+1
Jul 19th, 2012 (10:43 am)Ray,
i completely agree with your analysis and need for higher density batteries. I’ve been a long time follower of this site (probably close to 5 years) and in that time we have covered a great deal of potential battery technologies…. where are they? Are they still all “5 years” away? Anyone have some updates of what to expect in say the 2014 volt? or will it be using the same chemistry?
Jul 19th, 2012 (10:44 am)Don’t forget recharge time. This is also another EV hurdle, but also plays into the battery size design. (unless you look at a battery swap PBP option)
+4
Jul 19th, 2012 (10:46 am)Why is salt no longer at a high price? Because we can get salt by so many different methods that it’s a commodity with zero growth factor.
The same thing can happen to oil because of competing technologies.
In 50 years, guys will still have ’60s muscle cars that need gasoline to be historically correct. Gasoline will become available at Pep Boys, Home Depot, and other outlets. The ‘gasoline station’ will either change or become extinct.
The oil companies won’t even try to kill the electric car. All cars (electric or not) use substantial quantities of oil to be manufactured and electricity is being produced using NG, which the oil companies control.
One of the many factors not mentioned is the visceral/emotional difference between operating an electric vs a gas-powered vehicle. I believe that the ease of use, instant torque, home charging, and clean operation will make battery-electric the drive-train of choice in the very near future. People will figure out that an electric has lower TCO and 100miles is more than enough range.
+2
Jul 19th, 2012 (10:48 am)I think GM is holding their cards tight. No one knew about the chemistry change of the 2013 Volt until they were already making them. Its anyone’s guess, but my guess is to keep expecting incremental increases vs. an Eestor type breakthru anytime soon.
+2
Jul 19th, 2012 (10:50 am)Ray,
Unfortunately, California killed the electric car when they came off the 10% rule. If they had not, incremental improvements (IE. Chevy Volt) would have been introduced long before now.
The auto companies cannot produce electric vehicles with an altruistic view. It has to be profit or they cease to exist.
For a truly long term solution, IMHO, nuclear will have to become available to generate electricity because the environmentist groups will eventually stop the use of coal, natural gas (fracking) oil and others. Wind and solar are only part time solutions.
The possible solution to enegy might be to haness the ocean tides????
+2
Jul 19th, 2012 (10:51 am)IMO, they are already working to kill the electric car, and at best they are just slowing the process. Like lousloot said above, the genie is out of the bottle, and EV’s already are carving a solid niche and that will grow.
The bigger threat to oil companies than the electric car, which I don’t think anyone has brought up, is climate change. Without consequences to oil use, and public awareness of that, there’s really no reason at all to think that the market for oil won’t continue to grow for a long time to come.
However, my unscientific survey says that this incredibly record-breaking summer in the U.S. has started to make even skeptics and disinterested parties a little nervous at least. If we get another year or two where the same or worse occurs, people are not going to be so easily fooled by the reassuring tones of the right saying that man-made climate change does not exist. In fact they’re going to start demanding some action, and also taking personal action.
Let’s also not forget that there’s another extremely powerful corporate concern at work here and that is insurance companies, who are seeing mounting losses from the impacts of the more severe storms that accompany the changing climate.
The bottom line is that I expect alternative energy subsidies to continue and actually increase over time, and people will vote with their dollars for what they think is in their best interest. There are scenarios where even $1 a gallon gasoline is not going to look all that attractive.
Jul 19th, 2012 (10:52 am)Tex-Arl,
A better way to spell haness is harness
Jul 19th, 2012 (10:55 am)“Why is it around $100 per barrel now?
The product didn’t change and the cost of producing oil didn’t change dramatically to justify a 300 percent increase in price. So why the change in price?”
Oil is priced in dollars, and Bernanke and company have “printed” trillions of them since 2000.
+3
Jul 19th, 2012 (11:00 am)It’s a given that the market will reduce the price of any commodity when demand falls. This will happen repeatedly as competition reduces demand for oil. The best way to take advantage of this would be for the government to introduce a price floor and/or carbon fee. Otherwise, it will be a seesaw effect: every time alternative mobility technology has a breakthrough it will have a rebound effect on oil consumption: demand for conventional transportation fuel will be reduced, the price will drop, and people will be encouraged to purchase conventional dirty vehicles a bit longer.
But if the economy remains strong, growth will again outstrip oil supply, the price of fossil fuels will rise again, throwing the advantage back to EVs. Under laissez-faire economics, we’ll have to endure several rounds of this, wreaking havoc on companies and the Earth alike. If we were really smart, we’d make this a matter of strong policy. We’d phase in a slowly rising carbon levy, *fully rebated to consumers, so not a tax.* But the free marketeers are not going to let that happen without one huge fight. So strap yourselves in and hang on.
All I know is the Volt makes sense to me regardless of the price of gasoline. It’s the feeling I have when I move on electrons that counts. That feeling is priceless. And I know more and more people will begin to agree. We’re very early on the adoption curve, but once people taste true electric mobility, they won’t go back.
+2
Jul 19th, 2012 (11:02 am)Smooth operation and linear torque of electric cars is very attractive. Tunes ups? Don’t need them. Oil changes? Once every year or two. Fill ups? Six or eight weeks is about right.
The price of gasoline would need to get back to $1.99 to offset the benefits of driving electric. EV’s are here to stay. And as mentioned in above comments. Solar assist and battery improvement continue to forge ahead. We’re just warming up.
=D~Volt
+1
Jul 19th, 2012 (11:05 am)MichalelR,
yes, but they probably have not devalued the US currency by 300%, even when you take into account inflation. of course its related to there being a cartel. They literally agree to set production levels and the price (generally speaking).
Though i would add demand has increase in both China and India, and I’m aware of subsidies in at least China (a net importer), so there is less incentive to take notice of the fluctuating price by various consumers. That’s not to say the consumers don’t feel the increase in price, just that they don’t get the full brunt of it.
Jul 19th, 2012 (11:29 am)As if we needed another reason to not like oil, but don’t forget about spills. This just happened.
UPDATE: Barge Spills At Least 1,500 Gallons Of Fuel Into Lake Huron
http://www.wlns.com/story/19064045/barge-spills-thousands-of-gallons-of-oil-into-lake-huron
+2
Jul 19th, 2012 (11:38 am)Great article with lots of areas for discussion. My big first point is that I’d go with Dave K’s observations about the quality of the ride. Reminds me of the joke about divorces — they cost so much because they’re worth it. Applies here. The Volt is just a superior ride and you should expect to pay a premium for it. Otherwise you’re expecting to pay the same for a BMW 3 as you do for a Corolla.
My second point is that I think electrics are cost competitive with ICE vehicles now IF you look at TCO. Most consumers don’t they just look at MSRP and the initial cost. EVs have high acquisition prices and low operating costs. ICEs have lower initial costs and higher operating costs. So when someone says that “EVs are not cost competitive” what they’re really saying is that they’re not cost competitive for consumers who apply very high discount rates. That critical caveat is rarely mentioned.
With respect to the imputed high discount rate that most consumers expect, GM is addressing that by offering low lease prices. The current offer is $249/month, which for many people is about what they’re paying for gas. They can do this because in a couple of years the battery will still be going strong and the next consumer will be willing to pay for that.
+6
Jul 19th, 2012 (11:40 am)We got the Volt, Check.
Doing permitting for a Solar PV array to assist in fueling it – doing that tomorrow.
-1
Jul 19th, 2012 (11:46 am)xiaowei1,
If you look at this graph of money supply from the Federal Reserve, it is easy to understand that yes, they have devalued the currency:
http://research.stlouisfed.org/fred2/graph/?s1id=AMBNS
Jul 19th, 2012 (11:48 am)This proposition has been debunked by any number of serious economists. Try this from Martin Feldstein, the former head of the Bureau of Economic Research and Chairman of Ronald Reagan Council Economic Advisors. http://www.nber.org/feldstein/dollarandpriceofoil.syndicate.08.pdf
Basically the whole idea about the link between dollars and the price of oil only holds if you look at the price of oil in dollars. In other words it’s just tautological reasoning. The actual price of oil moves independently of the dollar.
+4
Jul 19th, 2012 (11:50 am)Hmmm.. wrote out a nice long post, but it seems like it might have been caught up in the spam filter.
Anyways, the short version is that I disagree with the premise of the article. I would argue that oil companies have lost most, if not all, of the control of oil prices. The price is now in the hands of those who trade in oil futures contracts. Every time the economy looks like its on the upswing, futures traders crowd the market and drive prices up, killing economic momentum.
Saying that oil companies have control over prices is like saying farmers have control over the price of corn they grow.
+2
Jul 19th, 2012 (11:51 am)If the price of gasoline dropped to $2 per gallon numerous producers would go out of business (tar sands and deep sea oil). I think, at present tax and production cost levels a price of $2.75 per gallon is about as low as oil prices can go. This should allow for a gradual growth in electric vehicles as the technological improvements occur.
Meanwhile I think the oil companies are taking a “if you can’t beat them, join them” attitude and have their own alternative energy activities. After all, they are in the energy business, not necessarily the oil only business.
+1
Jul 19th, 2012 (11:56 am)I honestly don’t believe you have any idea about the money supply. As for devaluing the currency, that’s actually a game played by China and Germany. By devaluing their currencies they make their exports more valuable. From a national standpoint devaluing a currency is a good not a bad thing. In fact currency fluctuation is one reason why companies locate their auto production in NA. Are jobs created by that a bad thing?
FYI if the Federal Reserve had actually increased the money supply too rapidly you’d see very high inflation. You barely see any inflation much less high inflatin. In fact the issue is more deflation than inflation, and the remedy for deflation, which is truly bad, is monetary expansion. We’ve known that for over fifty years. So the Fed can be criticized for not expanding the money supply fast enough not for expanding it too fast.
+1
Jul 19th, 2012 (11:58 am)If there were only 3 farmers, and they could preserve it indefinitely, they would.
+2
Jul 19th, 2012 (11:58 am)“How can we save the EV?” One way is to gain support from the electrical utilities, since they have excess capacity, and most of the EVs can charge up during those low load period, then those same utilities can lower their cost per KWH. They are the only large corporations that can face off directly with Big Oil and even regulate the prices a bit.
We know the benefits of larger centralized electrical generation, where the emissions are easier and less costly to monitor and control (up to each month) versus the emissions of every ICE vehicle that only need yearly inspections per vehicle. If we can move the “burning” of oil just to the utilities, then the air will be cleaner much sooner. Add to that the other utilities that don’t burn oil (nuclear, geothermal, hydro, wind, solar, etc.) and the distribution of power for EVs will progress.
BTW, my local GM dealer gave me a “maybe in October” as for the first arrival of the Chevy Volt. I might be getting my wish in October.
Raymond
+2
Jul 19th, 2012 (12:03 pm)Oil companies control very little of the production. That’s controlled by national oil companies (eg, OPEC). So they can’t do much on the supply side. The price of oil, like all commodities, is also set by traders. In this system actual demand is less important than what traders expect it to be tomorrow. Eventually those things should follow each other but they can diverge in both the short and intermediate terms. (Much like the price of a commodity like gold which has no actual commercial value).
The question then becomes: What idiots would allow their economic growth to be controlled by the price of a commodity?
+1
Jul 19th, 2012 (12:14 pm)That’s what I gather as well. I’m surprised they have not started buying up all the electric power plants/companies. Oil companies spend a lot of time/money/effort analyzing the future of energy. In the link below, Exxon even states that “by 2040, electricity generation will account for more than 40 percent of global energy consumption.” They are not stupid, and will maximize oil profits as they slowly shift themselves into positions of other energy sources. It’s just a balancing act for corporate profit. Unfortunately (for them), sometimes the government gets in the way, and creates departments like the EPA.
http://www.exxonmobil.com/Corporate/energy_outlook_view.aspx
Jul 19th, 2012 (12:17 pm)Interesting premise, too bad the long version was lost. If you have time I would love to read your full analysis on that.
Jul 19th, 2012 (12:27 pm)kdawg,
Charge time for electrics will be a long term issue as most houses will need a major revamp to go higher than say 40amps on a 240volt supply. Even so this is good for a 9KW per hour charge rate which will be plenty for most people. As technology improves this will be good for at least 35 miles for each hour of charge.
+1
Jul 19th, 2012 (12:42 pm)First, oil markets are a marvelously complex thing. As an example; when the US portion of the Keystone Pipeline was stopped, Canada was not hurt at all: They essentially said “fine, we’ll just sell our oil to China.” Oil demand cannot be tied down on a merely national, or even continental basis; demand on a worldwide scale will always have the largest impact. It seems clearly evident that emerging economies around the world will keep demand accelerating through mid-century, at least.
Second, let’s not magnify the effect of EVs on oil usage beyond proportion: In 2008, 30% of oil in this Country was used for purposes other than transportation; it’s amazing to see even a partial list of things made from the resource (see link below). In the US, 43% of petroleum was used as gasoline for automobiles. EVs will displace only a small fraction of cars for the foreseeable future, and it will be decades before they represent even half of the fleet. That still ain’t chump change, but it won’t be the overwhelming factor we might be tempted to think.
http://alternativeenergy.procon.org/view.resource.php?resourceID=001797
I think one has to ask what response to EVs is economic for the Oil companies to make? Do EVs represent an imminent threat? Will Big Oil lose profits now for a payoff that might be 30 – 50 years coming? Maybe, but I don’t think so. Remember, they have stockholders to sell on the idea, and it would likely be a board-threatening one to advance.
That said, can Big Oil discourage EV usage? I think it already has. I would be very surprised if it wasn’t behind much of the anti-Volt press we’ve seen over the past couple of years. What would this have cost the Oil companies, vs price manipulation?
I think we’ve already seen the response to EVs that the Oil companies find most efficient and appropriate today. Tomorrow is another matter, but soon it will be too late for more than a temporary blunting of the EV trend.
The race is on.
+1
Jul 19th, 2012 (12:50 pm)#7
God send that it shall be true! +1
+1
Jul 19th, 2012 (12:52 pm)Something is killing the Tesla delivery process. They’ve cut their Q3 production to 1/2 of the planned output. Not good for The Tesla.
BP did a pretty interesting “view” of energy usage by 2030. http://www.youtube.com/watch?v=3_LT9nL4gVQ
+1
Jul 19th, 2012 (12:52 pm)#38
Totally cool! +1
+2
Jul 19th, 2012 (12:54 pm)Tony W,
Being that it’s difficult to swap a 400lb battery at home, I wonder if anyone is working on a home quick charger? Basically a device (battery/super-capacitor/whatever) that trickle charges all day, then when you get home, you transfer the energy to your car in 10 minutes.
Seems like there would be a market for this, if you drove a pure BEV. May also work for fueling stations across the country if they had enough of these devices.
Jul 19th, 2012 (12:57 pm)#4
They are. Quite a few short haul trucks in our harbor area are switching to CNG. It’s way cheaper than diesel at the moment. Cummins, Caterpiller, et al, are working flat out on CNG/LNG engines. I read somewhere that it’s estimated that something like 300 CNG/LNG refueling stations along the interstates would enable nationwide truck usage. It’s coming, and sooner than we think.
+1
Jul 19th, 2012 (12:57 pm)Rarely would a household need this kind of rate. A taxi company? Sure. Bus company or delivery truck or utility base? Sure. Many households can do fine with 220V 12A (3.3KW) for 10 miles per hour of charging. Do many people arrive home with Volt depleated, but need to drive 36 miles after dinner and need a 1-hour, 35 mile charge? I think under 1% of people really need that functionality. The majority of people pushing for fast-charging seem to be people who want to buy BEVs with 100-200 mile range who want to fast-charge just like buying gasoline. I think they are people “on the fence” thinking fast charging is the only way they can buy an EV. Little do they know about this top-secret vehicle called The Volt
+3
Jul 19th, 2012 (12:58 pm)DonC,
“As for devaluing the currency, that’s actually a game played by China and Germany”
China’s currency has increased in value versus the dollar more than 20% in the last 6 years. Would have been more too if not for the USA debasing its dollar.
Germany uses the Euro. They cannot, as an individual country, devalue the Euro.
In fact, although Greece, Italy, Spain and France desperately want to devalue the Euro, they are opposed by Germany, who absolutely does not want to devalue their currency. So you are a bit confused there.
“Basically the whole idea about the link between dollars and the price of oil only holds if you look at the price of oil in dollars.” Exactly. Now go check for me and see what currency oil is priced in. That report you quoted BTW is quite old.
“FYI if the Federal Reserve had actually increased the money supply too rapidly you’d see very high inflation.”
Not exactly. The natural effect of the bursting of a credit bubble is deflation. The Fed created trillions of dollars to prevent deflation. They still increased prices a lot over where they would have been otherwise. The inflation rate is an amalgam of many things, and oil and other commodities traded internationally have gone up.
+14
Jul 19th, 2012 (1:05 pm)No, oil companies can no longer be profitable at low gasoline prices. Why? Because most people do not understand the concept of EROEI (Energy Return on Energy Invested – go to The Oil Drum website for all the info you ever needed to know about the industry).
Old oil from the now aging giants could be had at 100:1 levels (one barrel of oil needed to extract and deliver 100 barrels). Those giants are fading and the substitutes are now shale, tar sands, fracking, gas to liquids, biofuels, etc. ). Unfortunately, those new sources have an EROEI of around 4:1 or less (1.3:1 for corn ethanol, for example). People have a hard time understanding this basic concept, especially politicians and thus cannot understand that all delivered oil is not created equal.
The inexpensive low hanging energy fruits are now on the way out and being replaced by low volume, organic, California labor cost, stocked at Whole Foods fruit that less and less people can afford. That is the reality we now live in.
As soon as the real fracking costs are balanced (there was too much drilling and thus the price dropped – supply and demand) we will all see that the prices are not going to be so affordable. This may take a few years to work out but rest assured, the price for fracking and then turning that into liquids needed for transportation will be far more than the prices that those old giants allowed.
Peak Oil is not a theory, it will happen because it is simple physics. The only question is when. What they don’t tell you is that the costs will continue to go up as they have to climb up higher in the fossil fuel tree to satisfy your ravenous demand.
There is no substitute, even on the drawing board, for giant oil that has even the slighted chance of being able to do what was done over the past 150 years. That is why countries around the world are so poor, that is why US infrastructure is crumbling, that is why Europe is collapsing in front of our very eyes. Soon, even China’s and India’s bubbles will burst.
It has and always will be about resources. Here is the real kicker – energy is only one of the major resources humans need to sustain their 7 billion strong population level. We need fresh water, ocean fisheries, good arable land, forests, clean air, metals, minerals, etc. Humans have used cheap oil to draw down all these resources way past sustainable levels of extraction. We are in deep overshoot and we will eventually reach balance. It may take 150 years or so but balance will be achieved, even if we don’t like it.
So, forget about OPEC and big oil conspiracies and face the basics of life and physics. Enjoy the peak resource era because what is coming is not going to be as fun as the ride up that all-you-can-eat bell curve.
+3
Jul 19th, 2012 (1:15 pm)Noel Park,
It may be coming that US trucks will use CNG (Even developing countries like Thailand run huge CNG fleets of trucks, buses, taxis and personal vehicles), but it will not solve our problems. You mistakenly believe that fracked and compressed gas is as cheap (EROEI) as old oil pumped from giant wells. It is not. Don’t let the now cheap prices fool you. That is a result of too much drilling that will then turn to investment losses that will result in less drilling that will result in higher prices. That is the simple reality.
Net energy is the name of the game when it comes to how humans will be able to continue drawing down our resources at unsustainable rates. It gets harder the greater the overshoot and the energy gets more costly as the low hanging fruits get burned. That is two curves running in the wrong directions that should be easy for people to understand what is going to happen. Too bad their psychological makeups make that impossible to accept.
+1
Jul 19th, 2012 (1:25 pm)Why do you need to swap it at home? Better Place is doing it now in Israel with their swap stations. They are now delivering to private customers (already was doing great with fleets) and it is a system that works very nicely, and will only get better with time and refinement.
Their battery costs get cheaper every year. Their network software and hardware gets better every year. Oil gets more costly every year (cheap oil gets burned first). They use renwable energy resources that get cheaper every years.
Can you see this trend? Better Place EVs just get cheaper to drive while fossil fuel burning ones get more expensive.
+2
Jul 19th, 2012 (1:31 pm)Texas,
#51: That’s one of the best articles I’ve seen from you. [+1]
Texas,
#52: I think you are correct, but not in the near term. The energy market is out of balance in that some resources are over-exploited and others aren’t even known. In the current, politically-motivated discouragement of fossil fuel development, much exploration has been curtailed. In other words, we don’t know what the actual resources are. There may be resources off our own coasts equivalent to low EREOI sources of the past; we just don’t know. Exploration and increased development could mean an economic recovery for the world.
I think there is a point of view which sees over-exploitation of any new low-hanging fruit as harmful to the inevitable transition the World must make (resulting in an ever higher EREOI energy future before Civilization is ready). This way lies ultimate and inevitable bankruptcy.
I don’t believe that either scenario, by itself, is the correct motivation for action.
I could be naive, but I like to think that resources of known quantity, combined with enlightened control taking into account both the environment and the economic health of the world, is the only thing which can assure a relatively smooth energy transition. In other words, deal in truth, and even-handedly.
Add to this the fact that Oil is too valuable a commodity to burn for that 30% of uses unrelated to energy production; the sooner we can displace it to other forms, the longer we will have petroleum for things like fertilizer, plastics, medicines, etc.
What many energy/environmental/economic advocates often fail to realize is that we must do everything at once in this very real crisis. Decisions need to be made on the basis of balance, as much as for any other factor by itself.
+1
Jul 19th, 2012 (1:41 pm)Nice article !!, i liked the graphs too
+3
Jul 19th, 2012 (1:45 pm)If the word ‘longsuffering’ has a personification, it is you. I certainly hope you get to drive your Volt before we ring in the new year. Good luck!
Jul 19th, 2012 (1:52 pm)I don’t mean to imply that the Oil companies will necessarily stand up in their stockholders’ meetings and announce plans to kill the EV now to protect future profits. It would be more likely that, when the numbers for a given year are released, many stockholders will rightly perceive that more profit might have been made; and ask “Why?” (having no knowledge of any secret price-fixing schemes). The lack of a credible answer might lead to a shift in board elections.
Jul 19th, 2012 (2:19 pm)I was offering a solution get around some of the reservations people have about PBP (one battery has to fit all, you have to use someone else’s damaged/defective/whatever battery, etc)
Jul 19th, 2012 (2:22 pm)We could always liquefy the dead and feed them to the living.
(sorry your post was depressing me, so I needed some humor. I actually have faith in mankind’s ability to adapt, even if it will be kicking & screaming)
Jul 19th, 2012 (2:37 pm)Or, make fuel out of them (the next step on this road?):
http://www.epa.gov/region9/waste/biodiesel/
http://www.fatforfuel.com/
+3
Jul 19th, 2012 (5:06 pm)IMO, the Better Place battery swap model is going nowhere.
Jul 19th, 2012 (5:45 pm)I couldn’t agree more. Raymondjram has been has been a great contributor to this blog for years. I sincerely hope you are driving your Volt in short order.
Jul 19th, 2012 (6:07 pm)Thx for the article Jeff.
Jul 19th, 2012 (6:08 pm)Bonaire,
When do we get a lead article on your purchase??
I’m sure everyone would be interested in the details!!
Jul 19th, 2012 (6:15 pm)Not that I would really think it would happen, but if the price of Volt came down by 12 percent, the economics of all this fossil fuel price game would become meaningless.
This price point is very well known and understood at GM, but what I think may really be happening is that GM wants a graduated release based in technological advancement that is in tune with about fifty co-variables.
I’ll be completely patient and know exactly when the right Voltec configuration (basic as can be) for a small CUV is at the feasible cost out the door.
Jul 19th, 2012 (6:22 pm)Texas,
just read a news article that better place is in trouble….lowering their prices…..here is link :
http://insideevs.com/with-business-plan-in-free-fall-project-better-place-cuts-pricing/
tesla also cut production in half for Q3…….not good news
HaroldC
+1
Jul 19th, 2012 (7:01 pm)#52
Well actually, I didn’t say that. Obviously natural gas will go the same way as oil in the end game. Sooner? Later? I dunno. I’m just saying that it is going on, which it is.
Jul 19th, 2012 (7:05 pm)DonC,
OPEC can’t do squat except pump at 100%. They no longer have excess capacity to lower the price.
+1
Jul 19th, 2012 (7:06 pm)#54
Offshore oil is never going to be as cheap as “old oil pumped from giant wells”. In the ’20s in CA they used to drill down a few hundred feet and hit gushers that ran for days or weeks. THAT was old and cheap. Offshore? Not so much.
Jul 19th, 2012 (9:23 pm)Nice job, Ray.
Jul 20th, 2012 (3:18 am)In Europe we have gas prise arround $7/gal. That means we must expect Volt boom?
+1
Jul 20th, 2012 (8:43 am)The affirmative response posited by the OP to the headline question assumes that oil companies can increase production as necessary in order to meet demand. Until they and opec learn how to increase oil extraction and refining capacity as fast as the global economies are able to build ICEs, they will not be able to exert such pricing power and demand will continue to exert upward pressure on price.
KNS
Jul 21st, 2012 (11:34 am)Texas,
follow-on to #51
There are some very good alternatives already here and more are coming –
currently crystalline silicon flat panel PV (90% of market) EROI is ~10
(2 year energy payback, >20 year lifetime),
new technology with EROI potential of >50 is on the horizon.
Energy being the core of human (for that matter, any biological) existence is spot on,
EROI of 3.5 seems to be minimum sustainable (from biological/population studies).
What we do is capture, store and use energy (to find more energy) at the most basic level.
Once you have access to cheap, stable, sustainable energy, you can do so much more than just survive.
The alternative is pretty bleak: “Greed is good…”, until you deplete all the resources on your island, then everybody dies. I really hope we are collectively smarter than that.
and, oh, by the way, Saudi Arabia announced a $100B investment in renewables.