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The Alternative Fuel Vehicle & $300 Oil
By Dian L. Chu, Economic Forecasts & Opinions
It is amazing sometimes just by browsing the news you can piece together a totally different picture from the original news. Here are three of them I came across in the past few days.
Pickens: Oil Will Reach $300 a Barrel
"Oil legend T. Boone Pickens, now CEO of BP Capital, says oil prices will continue to rise… So, 10 years from now, the price of oil could well be $300.”
DOE to Spend $300 Million on Alternative Vehicles
"The U.S. Department of Energy..will allocate nearly $300 million from the American Recovery and Reinvestment Act to help fund the development of alternative fuel and energy efficient vehicles displacing approximately 38 million gallons of petroleum per year."
**Note: To put it in perspective, based on the US EIA data, dometic gasoline consumption is estimated at 378 million gallons PER DAY.
U.S. Automakers’ Small-Car Output May Outstrip Demand
"General Motors Co. (GRM), Ford Motor Co. (F) and Chrysler Group LLC (DCX) plan a 63% boost in small-car production capacity by 2015 that may outstrip demand since consumers may not be ready for that many small autos. The small-car push is being driven in part by the U.S. requirement that auto fuel efficiency rise about 40% to an average of 35 miles per gallon by 2016. Automakers also are tapping sources such as the Energy Department’s $25 billion loan program to develop more fuel- efficient vehicles."
Related Thoughts
Unlike other commodities, oil has a long, complex and global chain of supply going from offshore platforms, pipelines, tankers, ports all the way into storage, refineries and ultimately, gas stations. This is one of the reasons that oil is probably the most volatile commodity attracting the most speculators. Demand, mostly from exploding emerging economies, had outstripped supplies over the past 5 years. Speculators further exacerbated the market fundamentals and drove oil prices to historical highs last year.
Now, high oil/gasoline prices, the economic crisis and concerns over global warming have been three of the major factors leading to an increasing interest in alternative fuels and vehicles. The battery powered electric vehicle market is slowly developing while the hybrid electric vehicle market, including plug-in hybrid electric vehicles (PHEV), and electrical vehicles (EV) could move ahead more rapidly. Fuel cell vehicles, however, are in the prototype state and most likely will be late to fully participate in the big new green transportation game. Meanwhile, natural gas vehicles (NGVs) and hydrogen as alternative fuels for vehicles have their own infrastructure and storage challenges.
A study dated March 2009 by the IEA Hybrid & Electric Vehicle Implementation Agreement representing 12 member countries including the US, France & Italy, noted that the growth of the sales share of hybrids is expected to continue; however, supply might be limited due to the battery production bottleneck. The study further projects the share of hybrid cars in 2015 for new car sales is expected to below 10%. And the EV share of new car sales in 2015 is expected to be well below that 10%. The forecast by Just-Auto in 2009 believes that conventional hybrids such as the Prius from Toyota Motor (TM) will represent 3% to 8% of global light vehicle production by 2015. Other plug-in vehicles, such as Volt by General Motor (GRM) will take a much lower share.
Some of the most cited reasons EVs or PHEVs are not used on a large scale includes high initial purchase price as batteries are still expensive, concerns over adequate supplies of electricity; the lack of production and maintenance infrastructure, and limited battery range. Though alternative vehicles still have ways to go due to various production and technical constraints, the evolution and growth is bound to continue through aggressive government subsidy policies and consumer demand.
However, the fact remains that most of the alternative energy and vehicle industry currently are not economically competitive with conventional industries without substantial government funding and subsidies (i.e., taxpayers’ money). Another fact: We are still in the midst of the longest U.S. recession since the Great Depression with a real unemployment rate at 16%. In light of our newly upward revised $9+ trillion budget deficit running in the next 10 years, now is probably not the time to spend billions to fund programs not directly reviving the economy. It makes common sense that those funds could be better utilized elsewhere in the economy to create a more immediate impact.
We also need to come to a common understanding that the world needs all sources of energy, conventional as well as alternative. Worldwide energy consumption is projected to rise more than 50% by 2030, with most of that growth in emerging economies, such as China and India. Even if the use of renewables doubles or triples over the next 20 years, the world is likely to still depend on fossil fuels for about 70-85% of its energy needs, based on various forecasts. (see graph)
It is imperative that we keep investing and developing in all forms of energy to maintain a healthy and competitive energy market without any favoritism or politics. Otherwise, the emergence of lithium (used in batteries to power EVs) as a strategic commodity, and the geopolitics associated with electricity as the primary vehicle power source will mean that the alternative fuel or the hybrid/EV battery market could end up with the same volatility and speculation as the current crude oil market.
By Dian L. Chu, Economic Forecasts & Opinions
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I read zero hedge to get cutting edge news about rip-off artists in finance, not for half-assed energy analysis.
Your statement that "It is imperative that we keep investing and developing in all forms of energy to maintain a healthy and competitive energy market without any favoritism or politics" is accurate as far as it goes, but it seems imply that markets are capable of addressing the oil supply problem, which is total nonsense. Oil does not equal the internet. We need massive intervention in the markets to discourage oil consumption. And that can only come from one place -- government policy.
All markets are fixed. No markets are free.
Unfortunately, the idiots in Obamaland are depending on a biofuels revolution which is technologically impossible on the scales and in the time frames required.
This is an exciting field, many developments.
I think ethanol will /should be limited for energy use, food is the priority.
Natural gas finds are huge, thanks to new technology, and the USA has plenty of it, and it is cleaner. Some promising technology to convert gas to more useable liquid fuel.
The hybrid vehicle makes sense to me, but they should make natural gas an alternative (flex-fuel?) for it in a liquid form. A battery-chargeable hybrid car (Volt), using high-tech batteries, and 200 MPG of natural gas "liquid" would be sweet. Charging the thing overnight is another developing field- the grid needs to be in place to bring green electric sources to the home- which is another subject- some means to store energy is needed with these sources as rely on good winds/sunshine (natural gas turbines as a backup system is a waste, but existing solution- a better one is to melt salt with excess capacity and draw down that stored energy as needed).
Coal should be banned, massive producer of CO2- China (for one) loves to burn coal. They are the 800 lb gorilla, what are their solutions?
we also grow everything in this country including corn for ethanol using PETROLEUM
about 10 cals of petroleum for every calorie of food
this is a cascading problem very similar to what deflation is doing to our economy now, going backwards and shrinking sucks and sucks bad, it is most painful and self reinforcing
Ethanol is the way.
1. We grow things really well.
2. 5% of unusable farmland planted in non food crops meets out energy needs.
3. The infrastructure is in place for ethanol. No new things to invent or massive R&D . We can do this now like Brazil.
Brazil where ethanol is produced for $1 gal and they import no oil.
4. Fueling with ethanol and you suck the money out of the M.E.
Isn't wasting no American lives in that area again worth it?
5. The problem is we have no leadership-Brazil did and they reaped the rewards.
corn ethanol is right at the break even point EROI wise, won't work at the volume we use currently plus you would also be talking about a rather catastrophic drain on our already strained water supply
only reason Brazil doesn't import oil is because they found enough oil to cover what ethanol won't which is a big chunk of their energy needs
they use way more oil than ethanol and they even have the benefit of sugar cane and uber cheap labor
ethanol from sugar cane has an EROI of about 6:1, light sweet crude is as high as 100:1----- this is why we are facing such a dire situation, it is irreplaceable EROI wise and we simply use too much per capita
More information
files.me.com/john.pete...
http://cet.berkeley.edu/dl/CET_Technical%20Brief_EconomicModel2030_f.pdf
http://seekingalpha.com/article/158422-how-phevs-and-evs-will-sabotage-america-s-drive-for-energy-independence?source=email
http://www.altenergystocks.com/archives/2009/05/why_advanced_leadacid_batteries_will_dominate_the_hev_markets_1.html
Guys, these are NOT great points.
The author, like so many others, is indulging in an exercise of leisurely analysis of what % of what unfolds when. Casual and comfortable projections to 2015 and 2030 are in the article pontificating about lithium batteries and rubbing hands in glee at how a brand new trading commodity could unfold and oh, what a chance to go on Bloomberg advertised as the guy who saw it coming.
Well, guess what, people. There is no law of the universe that says Bloomberg or any other TV or radio show will still be on the air in 2030. There is no law of the universe that says oil has to go to $100 or $200 or $300 per barrel before the Saudis hold a grim faced press conference and inform their customers that they are going out of business because of an "unforeseen" crash in Ghawar output.
You guys have got to get this calibrated. If you were an Arab country and you KNEW you were almost out of oil, you WOULD NOT TELL ANYONE. If you did, what little you had left would guarantee invasion and confiscation by whomever. There is no way in hell the planet would say, okay, let's share what's left equally -- because the definition of "equally" would never be agreed upon. If you're an Arab government, you lose your country to that invasion. Far better you don't say you're empty until you are. Then there is no point in anyone invading.
So get your minds wrapped around this. If oil is almost gone, there will be no warning. No price spike. No press conferences. No nothing. Just orders that don't get filled.
And food that doesn't reach the shelves.
You won't have time to look at the ceiling and speculate on economic beauty. There is no commodity market for a commodity that disappears. And there DAMN SURE is no market for a commodity that is confiscated.
On the Oildrum they did a simulation of the remaining oil in Ghawar a while ago.
Due to the special geology of that field the end might come very fast in the not too distant future.
What is going on in Ghawar is top secret, the simulation is based on publicly available data, for example wells visible on google earth.
What makes the situation even worse is that the oil producers use an increasing amount of oil themselves, thus amplifying any decline in output.
The big problem with batteries and lithium is that there just isn't enoug lithium. I would advise everyone to check out wikipedia and lithium before they start dreaming about cars with batteries on a grand scale. The big problem is that we do not have a clue about a batterie produced from commodities that are plentiful. There is a long long way to go before the bulk of us can cruise around in an electric car. In the mean time, we may do as the Germans did during WWII. They made their gasolin from brown coal.
We've Got Enough Lithium To Power Two Million Electrics By 2015
"http://www.businessinsider.com/weve-got-more-than-enough-lithium-to-powe..."
RTK will be a big winner.
--contract about to be announ with the US Air Force (10 yr). Biggest purchaser of fuel in the country every year.
--also other airports, commerical planes, etc
Best technology in the world, by far.
Enjoy the ride
how do u know air force contract is forthcoming; ten yrs specifically?
Hopefully oil will never surpass 100 again
Good post, find more on the subject, eventually it will sink in and we will understand that insolvant banks, $2,500 gold, China, the dollar, the Federal Reserve and Treasury are not really news.
I think Pickens is way off on his dates!
Once inflation hits, we will have $300 oil in the next 4 years.
In my view, I believe we would have stagnation next year, with crude coming down from the current $70 levels. Then the global economy should ramp up from 2011 onwards. So, we may see double digit inflaiton perhaps in 5 years or so, mainly due to the massive and most synchronized global Thanks for your comment.
Yes, we need to drill for oil everywhere we can. We need nukes, coal, wind, solar, geothermal, hydro, EVERYTHING. We need to do it now while we wait for the technologies to improve!
This adminstration will never do all of the above though.
Sarah Palin beats this drum all the time and has for years, that we have to have an "ALL OF THE ABOVE" approach on energy.
When will this country wake up? I guess when they pay 6 dollars a gallon to fill their cars?
Mr. "We'll never see oil under $100 again".
Great points asiablues. The government will keep spending money it doesn't have and the alt energy sector will continue to benefit from that cash infusion. Battery technology has a long way to go...
Christopher
Thank you. Hope to see your here at zerohedge.com more often.
And I think that at this point T. Boone is simply talking his book... and his book now consists of hundreds of windmills that he ordered and has to do his "Tom Sawyer" sales talk to some "Huck Finns" who he hopes will take them off his hands. So in order to unload these expensive useless items... he better tell people that oil is going to $300... otherwise no one will ever want them.
Your points make sense from an economist's viewpoint. However, when talking energy one is constrained to the bounds of the physical world. For example, nuclear fuel contains over 9,000 times the amount of useable energy as coal by mass. Energy is not the problem; building stations to convert it to a useable form is. Technology to store massive amounts of energy is lacking. Technology to make energy portable is lacking. Lithium-ion batteries are a potential help, but as you point out, they will not solve the problem. The mentality of digging things up and burning them for energy will not see us through the next century as well as it did the last. Solving the energy problem will not be easy; nothing worth doing ever is. Still, we must begin work on this problem now, with as many resources as possible....the fate of modern civilization depends on it.
The storage is one problem. The electric grid is another. Do you really think it could cope with 100 mln (or even 20 mln) cars being plugged in overnight? Certainly not.
Thus the answer is fuel-cells and hydrogen as fuel.
http://krotovajanora.wordpress.com/2009/05/04/where-are-the-fuel-cell-cars/
not a chance
first of all hydrogen has a lousy energy density
second it leaks thru everything
third to use it in fuel cells you will quickly run into shortages of the precious metals needed in fuel cells
fourth the inefficiency alone of generating hydrogen using any of the available means now will kill the idea
now, if you wish to scale back autos on the road of the US from the insane 250 million now to something like a few million at best you might get away with it
yes, and in colder climes what happens to water???
I think that the grid rather would have a lot of cars plugged in at night time when there is a lot of spare capacity. The hydrogen producing factories would use electricity 24/7, adding to the already strained grid.
Exactly. 50% of electricity comes from coal which likes to run steady all day and night. The excess electricity during the nightime complements overnight electric vehicle charging well. Additionally, the possibility of future Vehicle-to-Grid technology could support the electric grid during fragile times, like 4-6pm in the summer when everyone cranks the air.
Hydrogen fuel cells will likely not be economic for a long time (with the possible exception of solid oxide high temp fuel cells), there's a huge new infrastructure that needs to be created to produce and transport hydrogen (it escapes from any enclosure), and electrolysis is an inefficient process. Alternatively, it would make more sense to convert natural gas to hydrogen on-board, but not that much sense.
Full electric cars will be too expensive, but hybrids make economic sense and plug-in hybrids with smallish batteries should make some sense in certain applications as well in the near future.