Not much has been going on lately. So I’ve got a few small things to cover…
Volt & Gas Prices
The Volt is scheduled to be unveiled at the GM centennial this Tuesday. It wont be much of a celebration due to the huge losses they’ve been incurring as of late. But its still a very important milestone – and sets the stage for 2009 as they roll out a fleet of test vehicles for the commercial sector.
With gas prices falling somewhat, the pressure on people’s pocketbooks is easing, but I really don’t see a swing back to fuel inefficient vehicles (SUVs, trucks) unless prices fall dramatically – and by that I mean $40/bbl, which is not likely at all. I’m estimating the bottom to be around $75/bbl, though I wouldn’t mind a figure much lower (~$50/bbl or $2/gal after taxes). The interesting thing is what will diesel prices do – since those prices also have an impact on the consumer’s wallet in terms of prices for just about everything we buy. The same goes for airlines, will $75/bbl prices help, or will some airlines like Continental who hedged their future oil prices at around $115/bbl and are now stuck with even a bigger fuel bill than before (paying the loss on the $115 barrel of oil vs current cost).
When it comes to the Volt, you’ll still save money all the way down to $1/gal, its just a question of whether or not its worth it to pay the extra money for a PHEV or just buy a cheaper hybrid vehicle (the new Honda Insight will have a starting price of $18,500, however that’s subject to dealer markup based on demand – in other words, good luck getting it for that price).
If the Volt sells for $40,000, and you get a $7500 tax credit for buying one, that brings it down to $32,500, or about $15,000 more than a 31MPG Toyota Corolla. The Volt has a 10 year warranty on the powertrain and battery, so if you calculate the ROI over 10 years, excluding the cost of money, you have to save $1,500 every year. The Volt will only save about 470 gal. per year over the Corolla (40 miles per day, 365 days per year). Driving 31 miles for the Volt would cost $0.85, while it costs the Corolla whatever the going rate for gas is. At $2/gal, you’d only save $540/yr, or $5,400 over 10 years, far short of the $15,000 required. Now at $3/gal, things get better – over those 470 gallons you save $1,198 per year. Closer, and possibly in the range for those who drive over 40 miles per day and would also benefit from the cheaper price of E85 Ethanol over gasoline as well as the Volt’s better MPG rating over the Corolla. It turns out that on that 470 gallons, the price of gas has to average $4.05/gallon over the next ten years – which is not unreasonable to assume. Be sure to note that the calculations above don’t include any gasoline based driving for the Volt as well as a few assumptions about the charging efficiency and usage patterns on the Volt.
Volt Mileage Sticker
Last entry, I mocked up a Chevy Volt MPG window sticker. Since then I’ve thought about it a little more and have come up with a modification at the bottom. Rather than show just the cost, also show the amount of energy and fuel used in kWh and gallons, respectively. This way, people can start to look at the gallons per 100 miles figure, rather than just the MPG number. The MPG can be deceptive – a jump form 20 to 25 MPG is bigger than the jump from 25 to 30 MPG. This is because, over the course of 12,000 miles per year, 20 MPG is 600 gallons, 25 MPG is 480 gallons, and 30 MPG is 400 gallons. The difference between 20 and 25 MPG is 120 gallons, while the jump from 25 to 30 MPG is only 80 gallons. It gets amplified as the numbers go up – the difference between 30, 40 and 50 MPG is dramatically deceptive, at 400, 300, and 240 respectively. The first jump is 100 gallons, and the second jump is only 60 gallons. This goes to show why the gallons per 100 or per 10,000 miles is much more accurate for the consumer rather than MPG.
Algae Fuel
Solazyme has announced that they’ve produced aviation fuel that meets the standards required. While its welcome, it might be a long while before they can start producing meaningful amounts at quantities worth selling. But its something to keep an eye on – the aviation industry struggles every year under fluctuating gas prices, and even the star of the industry wouldn’t have been profitable last quarter without its fuel hedging strategy, and there is a distinct possibility it’ll miss profitability this quarter (along with every other airline) due to high fuel prices. The volatility is whats killing the industry – airlines are unique in that they raise prices based on current fuel prices. This means that today’s ticket purchasers are paying for the fuel for today’s flights, and not the fuel for their own flights down the road. Its a pay as you go system, much like Social Security is. So when fuel costs go down, prices go down. Thats good, but when prices go up, and fewer people can afford to fly, there are more open seats on an airplane. This causes airlines to cut flights and cause the price of tickets to go even higher. The payments on a 737 don’t go down just because the plane does one less flight during the day or is grounded completely.
A steady price for fuel would go a long way in helping the industry stabailze and return to profitability. Which, if this algae-based fuel can be produced in significant enough quantities, it can provide some stability to the fuel market – as it wouldn’t be affected by geopolitical instabilities, and it would be less vulnerable to weather events like a hurricane. Solazyme’s main source of materials is sugarcane. This is one area McCain is actually ahead of Obama – he plans on ending farm subsidies and dropping import restrictions on sugar cane (which is primarily produced in Brazil, it doesn’t grow all that well in the US). They do plan to switch out to non-food competitive sources eventually, but thats an indefinite period of time.
Possibly Related Posts:
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- Predictions for 2010
- Brightsource to build nearly 1GW of Solar Thermal in Nevada
- California utilities invest in efficiency instead of new power plants
- Nissan to Lease LEAF Battery
- The Ultimate DVR… from Microsoft???
- Editorial: The slow speed of TV/Network integration
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