Created by OnePlusYou
Archive for February, 2011
Here is a very good quick read into the main issue that I believe exists with hybrid cars as replacements for non-hybrids. The underlying fact is that hybrid cars (and trucks) are more expensive to purchase than for non-hybrids; often by several thousands of dollars. To recoup the additional cost, gasoline (and diesel) fuel costs would have to be significantly higher that any projected short-term future price (say…within the next 10 years). Some might refer to the federal (and sometimes state) tax breaks given to first time purchasers that can make this price difference less of an issue, but what really is happening with these “incentives” is taking money (taxes) from one person and giving it(a gift) to another to make what is really a bad deal look better. I don’t think that most Americans believe that it is a good thing to give their hard earned money to help support what is essentially a product that would be produced at a loss. When looked at at the rate of replacement (called market penetration) of non-hybrid with hybrids, the Toyota Prius – the most successful and longest marketed hybrid has taken 10 years to put 1 million cars in the US market (US car/truck ownership exceeds 200 million) . There is no doubt that these hybrids are, and will remain for the foreseeable future, essentially a “boutique” item, purchased mostly for that “hybrid” badge, by well-to-do folks that the additional cost is justified in the prestige of owning these expensive cars. Like those people that spend $100s on a Louis Vuitton handbag that is actually a cheap $25 plastic bag; its all in the appearance, having the right label. This type of “keeping up with the Jones” doesn’t make sound economic thinking and, unfortunately, will only lead to more subsidies (and tax money squandered) for a market that cannot be supported.
By MATTHEW L. WALD – NYT -February 23, 2011, 7:45 AM
A car buyer who lays out an extra $6,200 extra to buy the hybrid version of the Lexus RX will get the money back in gas savings within five years, according to Consumer Reports magazine, but only if gasoline averages $8.77 a gallon. Otherwise, the nonhybrid RX 350 is a better buy than the Hybrid 450h, the magazine says. The hybrid gets 26 miles per gallon, and the nonhybrid, 21, in the magazine’s calculation.
The magazine’s annual New Car Buying Guide includes a table that compares several hybrid cars with their nonhybrid versions, or, in the case of cars that come only in hybrid models, to similar cars by the same manufacturer that are not hybrids.
For example, the Honda Insight comes only in a hybrid version, so it was compared with the nonhybrid Honda Fit; gasoline would have to rise to $10.08 to even out the extra expense, Consumer Reports said. The Insight sells for $22,010 and the Fit for $16,260.
The researchers use a five-year payback period because that is a typical duration for car ownership. It assumed that the driver would log 12,000 miles a year and pay $2.80 a gallon, a price that now looks a bit on the low side.
The Toyota Prius, the most popular hybrid, did far better in the magazine’s comparison. Consumer Reports paired it with the Toyota Corolla LE, comparing the hybrid’s 44 miles per gallon and purchase price of $22,950 with the Corolla’s $17,950 list price and 32 miles per gallon. The Prius will cost less over a five-year period as long as the price of gasoline averages only 80 cents a gallon, the magazine calculated.
For some models, the choice is close to neutral from a financial point of view. The Ford Escape hybrid would cost $500 more over five years, but would break even if gasoline prices averaged $3.60. The Toyota Camry hybrid would save $500 over five years by comparison with the Camry LE 4-cylinder and remains a better deal if the price of gasoline averages just $1.92.
The magazine also compared diesel and gasoline versions of some models. The Mercedes-Benz GL350 BlueTec diesel, at $66,925 and 19 miles per gallon, will save $8,000 over five years compared with the gasoline GL450 version, which sells for $69,035 and gets 15 miles per gallon. It is cheaper than gasoline at any price, the magazine said.
Some people who bought last year will see different economics because of tax breaks that were still in place then. And some states offer access to HOV lanes, special parking or other perks for hybrids.
But of course, money might not be the major motivator when it comes to hybrids, said Jonathan D. Linkov, the managing editor of the magazine’s auto section. There’s also “that green feeling,” he said.
Thank you oh “Great Hot-Air One” (read Al Gore). What an idiot! Thank God he is fading (a little too slowly, in my opinion) .
Rich Lowry: National Review Online, 14 December 2010
When Al Gore drops an environmental fad, it has truly reached its expiration date.
In his wisdom, the Goracle recently acknowledged what almost all disinterested observers concluded long ago: Ethanol is a fraud. It has no environmental benefits, and harmful side effects. The subsidies that support its use are an object lesson in the incorrigibility of Washington’s gross special-interest politics. It is the monster that ate America’s corn crop.
“It is not good policy to have these massive subsidies for first-generation ethanol,” the former vice president and Nobel Peace Prize recipient said, referring to corn-based ethanol. He called the fuel “a mistake,” and confessed one reason he fell so hard for it is that he “had a certain fondness for the farmers in the state of Iowa.” These farmers vote in the First in the Nation caucuses and practically insist that their favored presidential candidates drink ethanol at breakfast and hail it as the nectar of the gods.
Al Gore’s ethanol apostasy is a symptom of a left-right coalition that has arisen to expose the former wonder fuel. (The Gore of old insisted that “the more we can make this home-grown fuel a successful, widely used product, the better off our farmers and our environment will be.”) But common sense, even cross-ideological, bipartisan common sense with all the evidence on its side, is no match for Congress’s boundless appetite for expensive favors for powerful lobbies and constituent groups.
Tom Harkin and Chuck Grassley, the Democratic and Republican senators from Iowa respectively, stand at the doors of Congress declaring: Ethanol now, ethanol forever. They have graced the Obama-McConnell tax bargain with an extension of a tax credit for ethanol that costs about $6 billion a year, and with an extension of a tariff on ethanol imports. Ethanol is so uneconomical that Congress supports it three different ways — with a mandate for its use, a tax credit to subsidize it, and a tariff to keep out competitors. Rarely are so many levers of government used to prop up one woeful product.
During the past decade, ethanol enjoyed a good run as a notional part of the solution to global warming. Then, environmentalists began to realize it may actually increase greenhouse emissions. Ethanol releases less carbon dioxide per gallon than gasoline. Once the emissions necessary to convert land to corn production and then grow and process it are taken into account, though, ethanol doesn’t look so green anymore.
So much corn — about 40 percent of the U.S. crop — is feeding into the maw of government-created demand for the fuel, that it could be increasing worldwide food prices. In short, in exchange for not reducing greenhouse emissions, ethanol reduces the availability of food to the poor.
The multiple layers of subsidization have their own perversity. Since there’s already a mandate to blend ethanol into gasoline, the tax credit is giving away money for something that would happen anyway. Environmental groups say this pads the bottom line of Big Oil. Harry de Gorter of the free-market Cato Institute has a more complicated take — the subsidy decreases the cost and therefore the price of gasoline, effectively subsidizing its consumption. Your Congress at work.
But who cares about the facts? Once we have fired up a vast machine that from cornfield to distilleries produces 38 million gallons of ethanol a day, it will be nearly impossible to turn it off. Too many people will have a vested interest in continuing the scam, and its supporters — like Harkin and Grassley now — will always argue that any change is too disruptive. We’ll still be mandating ethanol long after the internal-combustion engine is obsolete.
The ethanol experience should counsel against blithely creating new government-supported industries on the basis of dubious promises of cost-free environmental benefits. Judging by the tax bargain, festooned with all manner of other green subsidies and credits, it’s a lesson ignored.
In Washington, the boondoggles may lose their luster, but they never die.
From Geoffrey Styles’ blog http://energyoutlook.blogspot.com/
Wednesday, January 26, 2011
Energy didn’t feature as prominently in last night’s State of the Union Address as it has in some years, including last year’s speech. Rather than making it a primary focus area, the President seemed to mention it more as an example of his broader innovation and competitiveness agenda. That’s probably a good thing, because the administration’s persistence in pitting conventional energy against renewables reflects the muddle in which US energy policy remains. We’re desperately worried that China is getting ahead of us in renewable energy, yet we don’t seem to notice that China is hardly treating oil and gas as yesterday’s energy. I suspect that from China’s perspective, their focus is not especially on renewable energy or clean energy but on cheap energy, which is what their economy needs to grow. I wouldn’t think we’re so different in that regard.
I won’t waste time dissecting the President’s suggestion to strip the oil & gas industry of its tax benefits in order to fund a new or expanded clean energy innovation effort. If the administration couldn’t make that happen when its party dominated both houses of Congress by large majorities, then this idea is simply dead on arrival in an era of divided government. The best way to address those subsidies, along with the much larger per-barrel subsidy for ethanol, is through the kind of tax reform that would make all US industries more competitive globally. So I was pleased to hear the President suggest simplifying the tax code and reducing the corporate income tax.
Innovation and tax reform will indeed be crucial if the US wants to be a leader in clean energy technology, not just as the favored beneficiary of today’s version of our periodic debate over industrial policy–picking winners–but as one part of a more robust and competitive US manufacturing sector. However, it’s myopic to compare ourselves to China on infrastructure and clean energy innovation while ignoring China’s full-court press to meet its rapidly growing demand for oil and gas. China doesn’t have an offshore drilling moratorium or “permitorium”; instead it has focused on offshore drilling as a primary means for expanding its domestic production and limiting its oil imports, which a few years ago eclipsed those of Japan as the world’s second largest, behind our own. Chinese companies are investing in oil & gas projects, joint ventures and acquisitions all over the world, because China recognizes that oil wasn’t just the dominant fuel of the 20th century; it remains a key energy source in the 21st. And for those worried about China’s lead in renewable energy, exemplified by the news that its wind power capacity surpassed that of the US last year, I recommend Michael Levi’s article in Foreign Policy.
On a more positive note, President Obama seemed to signal his support for moving the debate on a national renewable energy standard toward encompassing all clean energy. His remarks suggested that this would include not just nuclear power–by far our largest source of low-emission energy today–but also natural gas and clean coal. With those inclusions, the goal he suggested of generating 80% of our electricity from “clean energy sources” by 2035 could be the most achievable energy goal his administration has put forward since taking office. With coal’s share of electricity generation currently at 45%, it would require increasing the contribution from nuclear, renewables and natural gas by just under half–or less with some help from efficiency and conservation. Not easy, but not impossible, either, as long as we build enough new nuclear power plants to more than replace the ones that will likely have been retired by then.
Whether or not this is truly “our generation’s Sputnik moment”, the speech’s recurring theme exhorting us to “win the future” was perhaps a bit too reminiscent of another presidential speech centered on a different kind of “WIN”. Ensuring that this initiative doesn’t share the fate of that earlier one in the Ford Administration might just depend on making sure that in an environment of tightening purse strings, the government’s investments in new energy are focused on making clean energy cheap enough to compete without unsustainable subsidies. In the meantime, while we’re waiting for that effort to bear fruit, it’s worth recalling that America’s conventional energy industry is still one sector in which we don’t have to catch up with anyone else, unless we deliberately set out to hamstring it.