Auto execs see soaring gas prices

Auto execs see soaring gas prices
Industry leaders expect prices to hit $4 a gallon by 2015; see fuel economy standards rising.
January 17 2007: 9:49 AM EST

DETROIT (Reuters) -- U.S. auto executives are bracing for gas prices to more than double over the next decade and for sharply higher U.S. fuel economy standards - a step the industry has long resisted, according to an academic survey released Tuesday.

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IMHO, interesting comments from the auto industry, particularly about the inevitability of higher fuel economy standards. If the auto industry would just quit whining about the short-term costs of higher fuel economy and do it, the world would be a better place. Until then, though, I see releases like this a pure public relations rhetoric. The Volt is a concept car, but GM, and others, know very well that it can be done Today! For possible vastly reduced overall final vehicular weight, add heavy use of carbon fiber/sandwich construction to the body and the required propulsive power would drop, too, perhaps enough so to put 40 mi range well within reach of a PHEV using current batteries.

All the best,
Matthew

 

There are more pollutants expelled during the manufacturing of Carbon Fiber, than the weight savings would ever offset. Most people are unaware of this simple fact.

 

They really expect it to take that long?

 

And yet

http://money.cnn.com/2007/01/16/markets/bc...dex.htm?cnn=yes

 

<div class='quotetop'>QUOTE(Beryl Octet @ Jan 17 2007, 01:50 PM) [snapback]376967[/snapback]</div>

You're looking at a short-term trend. They're talking 8-13 years in the future. Eight years ago >$50 for a barrel of oil would be ridiculous, yet now it's considered remarkably low.

$4/gal in 2015 is only about 8% annual rise, about 5% over inflation (from Dec. '06 prices, not July '06). There's a lot of volatility in energy prices, I think we'll see $4/gal long before then, but it may not be the long-term average for a few years yet. I'm thinking $5/gal is a very good possibility in 2015.

Last summer when gas was going past $3/gal, people were saying what a good decision I made buying a Prius. I didn't really comment (and I haven't heard people saying that recently), but what I was thinking then, and what I am thinking now, is I didn't buy it for the $3/gal, I bought it for the $4/gal or $5/gal that is coming. Don't know when for sure, but I know it's coming, and within the lifetime of this vehicle.

 

<div class='quotetop'>QUOTE(nerfer @ Jan 17 2007, 03:16 PM) [snapback]376981[/snapback]</div>

I agree, I'm definitely in the peak oil believer side of the debate. I just think it's interesting that this drop in prices is happening even as things seem to be further de-stabilizing in the middle east. The Cheap Oil Mirage article on the link below is good reading, too.

http://jameshowardkunstler.typepad.com/

 

Why would PC members start believing autoexec's opinions? 10 years out nobody knows. 10 years could be when production of that huge deep oil reserve they just found in the Gulf of Mexico comes online causing an oversupply. Is Iraq pumping at full capacity right now? I don't think so. Russia is also still building capacity and OPEC is currently cutting back prouduction. Sure China and India are growing but supply has room to grow too.

 

<div class='quotetop'>QUOTE(kDB @ Jan 17 2007, 12:40 PM) [snapback]376829[/snapback]</div>

No.

I expect we'll see it hit $4 at least once either this year or next year. I think we'll hit $5 at least once by 2010. The price of gas is going to creep up. It will be back to the mid $3 this before the end of this year. When it goes down, it won't go down as far. Notice it's down now?But not to low $2. It's mid $2. We now consider *that* low.

What I really don't understand is the stupidity of the auto manufacturers. I'm not saying instantly make every car get twice the mileage. I'm saying you see this coming. Some people are going to want a more fuel efficient car. So build one. And if it's popular, add another. Hedge your bets. Start planning. Because people aren't going to buy your SUVs when gas is $10 a gallon. A few will. But not enough to keep you solvent.

I just can't believe they are so short sighted and stupid. (Or maybe they figure they'll be retired by then and have their money and it's someone elses problem.)

 

<div class='quotetop'>QUOTE(Godiva @ Jan 18 2007, 10:17 AM) [snapback]377187[/snapback]</div>

What are you basing your "predictions" on? I am sure you are quoted on here somewhere saying gas would be less than $2 a gallon by the end of January. As for being long-sighted or short-sighted read this. And as much as you may wish it was the head of Toyota it is the head of GM!

http://www.iht.com/articles/2007/01/17/business/gm.php

 

<div class='quotetop'>QUOTE(Screwdriver @ Jan 17 2007, 12:36 PM) [snapback]376824[/snapback]</div>

I'm not qualified to comment on the process. However, I did find this...

http://www.freepatentsonline.com/4552743.html

...I also cannot say that the patent is valid. However, it claims to be free of pollutants.

I expect that the production process for carbon fiber would improve over time and would become cleaner assuming whoever undertakes such a venture deems reducing pollutants a worthy effort.

All the best,
Matthew

 

<div class='quotetop'>QUOTE(malorn @ Jan 18 2007, 11:55 AM) [snapback]377280[/snapback]</div>

Wow, that has some pretty strong statements from Wagoner, including this one:

 

<div class='quotetop'>QUOTE(etyler88 @ Jan 18 2007, 07:57 AM) [snapback]377128[/snapback]</div>

The problem is, more fields are drying up than are coming online. Look at proven reserves that have been found, and we're using something like 6 barrels for every barrel found. Yes, Russia has some infrastructure problems, but it hasn't increased production for some time, and that could be as much supply as anything. Mexico's biggest field is apparently peaking, as is the North Sea, even Venezuela will be tapping their heavy crude more as the light crude runs out (still produces petroleum, but it costs more).

The big unknown is the mid-east. How long will Ghawar last in Saudi Arabia? Out of all the OPEC members that suddenly doubled their estimated reserves in the mid-80's (so they could increase their allotted share of oil production), and then haven't touched those numbers since, are they reflecting reality? Iran hasn't pumped its allotted amount for some time, although that's probably again infrastructure.

That big reserve they found in the Gulf (Jack 2) is again expensive to tap and ship (it's 5 miles under the sea, which is over a mile deep at that point). We don't know for sure how big that field is, it's got a wide range of estimates, and of course the newspapers picked the high end for their headlines. Same thing with ANWR, even if we decide to allow drilling in the Wildlife Refuge and can build the infrastructure in ten years, we don't really know how big it is. I think at some point we will do it, but why hurry? Why not wait until we've learned how to make the best use of it, and when it's really needed, not just to make it easier to vacation in the Bahamas with the A/C running in the hotel room? This is our emergency fund, let's keep it for that. Canada has big reserves in their tar sands, but that's a massive operation, with untold square miles becoming open-pit mines. Not a pretty picture for environmentalists, especially when you add in the water use and the carbon emitted from all the natural gas needed to refine it enough for the pipelines. Even so, China has already claimed some of their output, despite the proximity to the U.S.

In the meantime, better plan for $5/gal gasoline. Maybe it won't be that high and you'll be saving money anyway. Or maybe it's higher but you'll be a step ahead of the game.

 

<div class='quotetop'>QUOTE(nerfer @ Jan 17 2007, 03:16 PM) [snapback]376981[/snapback]</div>

It is kind of amazing that people will buy a machine with maybe a 12 year average lifespan, based on the price of gasoline this week. And I agree that the most likely gas price trend is up.

Anything might happen in the short run, but I'd suggest that your $5 is about the upper limit of what I would consider plausible over the longer term, due to alternative fuel sources becoming more viable at that price. I read the other day that it is profitable to produce ethanol from cellulose, right now, at $3.50 a gallon or less, which would be the same energy content per dollar as gas at $4.60/gallon. I have heard, but I can't verify, that it becomes profitable to gasify coal once oil reaches and stays in the mid-$80s per barrel, though of course we'd have to be pretty desperate to put up with the environmental impact of that. At $5/gallon, the annual fuel bill gets high enough to start tipping the cost-benefit balance on the cost of EV batteries. If you consumed 600 gallons a year, even $15K worth of batteries starts to have a dollar payback period on the order of 6 or 7 years (at $5 for gas vs $1 for the equilvalent electricity is $2400 a year savings). And at a high enough price per barrel, it becomes profitable to extract even extremely expensive oil, such as the recently announced Gulf of Mexico fields that lie 180 miles offshore and consist of a large number of small, discrete fields under 7K feet of water and another 20K feet of rock.

So when I see people talk about $10/gallon gas, my though is that, absent higher taxes, that seems pretty unlikely to me. At that price, too many substitutes become profitable. But $5 doesn't seem beyond the pale.

Wouldn't surprise me if oil fell to $25/bbl, wouldn't surprise me if it rose to $100/bbl. But over the longer term, I'd bet on $100 before I'd bet on $25.

 

<div class='quotetop'>QUOTE(nerfer @ Jan 18 2007, 01:28 PM) [snapback]377326[/snapback]</div>

Ditto.

Now you have to ask yourself a question. Why would anyone be foolish enough to pump oil out of the ground, put it up for sale, buy it, and pump it back into the ground? Oh, wait, that's the Strategic Petroleum Reserve. I just looked up the data -- currently has about 700M bbl, or about 2 months' worth of imports. Past 4 years we added less than 20M bbl per year on average.

So, that's a good thing to do, to keep the oil for when we really need it. But somehow just keeping it in the ground in the first place, as a matter of conscious public policy, is not an option? I understand that you need to have the wells and pipelines in place to be able to pull it out on short notice.

Anyway, logically, I have a hard time saying, well, as a matter of national policy, the SPR is a good thing, it's our insurance in case we really need oil in the short run, but it's unacceptable to discuss known but unexploited reserves on public lands that way -- that keeping them in the ground might be a good thing, in case we really need them in the long run. You can complain about environmental impact or the effect on tourism or whatnot, but ... you're not allowed to discuss them as if the reserves in the ground are valuable in their own right, that it might be rational to leave them unexploited for as long as feasible.

Who can say why public discussion proceeds this way, but I think it's rooted in the mentality of infinite abundance, which is the intellectual tradition of US resource extraction policy. I mean, if there were an infinte amount of oil to be extracted, then finding it but not extracting it is just plain stupid, from a resource-extraction standpoint. With that mentality, because you'll never run out, you never try to value future conditions, because they'll be the same as current conditions, by assumptioin. And so, there's a kneejerk reaction that to leave known reserves unexploited is inefficient.

But, by contrast, if we acknowledge that there is only a finite amount to be extracted then that open-ended sort of economic analysis is incorrect and inefficient. Optimally, you'd project the likely "end game" of oil consumption, and determine your rate of resource extract based on that. And pretty clearly "hey, it'll be no different from now" is not a very good projection. At some point, I have to believe that opinion will shift on this, but it will have to be obvious to all that we are reaching the limits of what we can extract.

 

<div class='quotetop'>QUOTE(etyler88 @ Jan 18 2007, 08:57 AM) [snapback]377128[/snapback]</div>

I'm confused; so what you're saying is we should assume that there will be lots of cheap oil until we're proven wrong? This doesn't seem like a prudent plan of action.

Also, doesn't it seem like need always expands to fit supply? Another reason why assuming that "we'll find more" isn't such a good idea...'cause no matter how much oil we find, there will *always* be a "need" for it.

 

<div class='quotetop'>QUOTE(Tideland Prius @ Jan 19 2007, 10:55 PM) [snapback]378147[/snapback]</div>

The End of Suburbia:

http://youtube.com/watch?v=Q3uvzcY2Xug

 

FYI,

Aviation fuel here in California already costs $4.00+ per gallon. (That is 100 Low Lead gasoline, not Jet-A).

Keith