Are We Implementing the Right Automotive Strategy? Part II

Plug-in electric vehicles (PHEVs) and pure electric vehicles (EVs) are being pursued at great cost as the current strategy for replacing gasoline and diesel internal combustion engine (ICE) vehicles.

In the previous article, we looked at existing alternatives, other than CNG, for powering light vehicles.

But why are we pursuing any strategy for eliminating the use of gasoline and diesel oil for powering our vehicles?

There are three popular explanations.

  • The first reason for cutting the use of gasoline is to cut CO2 emissions so as to prevent the threat of global warming.
  • The second is to become independent of foreign oil.
  • There is also the theory of peak-oil and the fear that the world will run out of oil.

Personally, I do not believe that CO2 is causing “global warming”.

If CO2 isn’t a threat, there is no need for a strategy to cut CO2 emissions.

I am also very dubious about peak-oil and the supposed threat that the world will run out of oil any time soon.

It is estimated that the world has proven and probable reserves, referred to as 2P reserves, of 1,200 billion barrels of oil (1,200,000,000,000).

Currently the world is using around 80 million barrels of oil per day (bbls/d) and this could easily increase to 115 million bbls/d as China and India increase their usage of oil. Usage of 115 million bbls/d equals approximately 42 billion bbls/year (42,000,000,000).

At this rate, the world would run out of oil in approximately 30 years.

These estimates, however, do not include oil sands or the oil locked in shale in Colorado, Utah and Wyoming, and possibly elsewhere in the world. They also don’t include the probability that new technologies will result in more discoveries than currently anticipated or that new technologies will be able to extract more oil than currently anticipated from each reservoir.

One thing seems certain: the price of oil could increase because it will be more expensive to extract oil from oil-sands, or shale or from deeper, more difficult to access reservoirs.

The United States spends billions of dollars every year for foreign oil which harms our balance of payments. As discussed in an earlier article, it would be better to drill and produce oil in the United States to eliminate payments to foreign countries, while also increasing revenues to states and the federal government from royalties.

While the United States should increase its output of oil by drilling in areas where drilling is banned by the government, the fact remains that oil will become more expensive at some point in the future.

With these facts in mind, there are five basic strategies the United States could pursue with respect to powering light vehicles (cars, SUVs and pick-up trucks).

  1. Continue to use gasoline and diesel fuel for light vehicles until economic pressures result in the need for an alternative.
  2. Aggressively pursue the development of PHEVs and EVs (our apparent current strategy).
  3. Use compressed natural gas (CNG) vehicles.
  4. Develop hydrogen fuel-cell vehicles using gasoline reformed on the vehicle to produce hydrogen.
  5. Use the internal combustion engine with E85 fuel.

The fifth strategy should be a non-starter unless it can be proven that biomass, other than corn-based ethanol, can be supplied in the quantities required to power American vehicles.(The November 1st article explained why ethanol and other biofuels are not ready for prime time.)

The first strategy, business as usual, will, at some point, result in higher gasoline prices which will hurt the economy. (Saudi Arabia and Iraq can increase output over the next few years if OPEC decides to keep prices from increasing. Together, they can increase output by approximately 5 million barrels per day.) Higher gasoline prices are a virtual certainty. The unknown is, when will higher prices become onerous?

Higher gasoline prices, with their potential for harming the economy, are a legitimate reason for taking action to forestall any precipitous impact higher gasoline prices might have on the economy.

The second strategy, which is the path we are currently taking, incurs huge expenses. Not only are PHEVs and EVs far more expensive to purchase than conventional gasoline and diesel-powered vehicles, but the infrastructure costs are extremely high: There is the cost of additional power plants and the cost of replacing transformers. The November articles on the Hidden Costs of PHEVs discuss these costs in detail.

EVs have the additional cost of installing charging stations in every city and most towns. EVs, with a range of 100 miles, require these charging stations. Fast charging stations, where batteries can be recharged in twenty or thirty minutes, cost around $25,000 each. Charging stations that require around four hours for recharging a battery cost around $2,500 each.

The government is using subsidies, to offset the first-cost of PHEVs and EVs, to encourage consumers to buy these vehicles, and is proposing to spend additional billions of dollars to install charging stations.

It’s obvious we are on a high-cost, go-for-broke path with the current PHEV and EV strategy.

It’s time to reassess where we are going and allow market forces to help guide the road ahead.

Rushing down the path we are currently on could mean we are adopting the wrong technology and wasting billions of dollars while doing so.

A far more prudent strategy would be to stop encouraging the use of EVs, stop subsidizing the purchase of PHEVs and EVs, and stop installing charging stations at government expense.

Market forces would result in a slower adoption of PHEVs and EVs, but this would provide time to asses other alternatives.  

(Part 1 published January 3rd.)

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