Rants

 
Years ago the International Center for Technology (icta.org) issued a comprehensive report entitled “The Real Cost of Gasoline”.  The goal of the researchers was to identify and quantify the various secondary or “hidden” costs of using gasoline as a fuel for transportation.  They categorized these costs into four sections:

•  Tax Subsidization of the Oil Industry
•  Government Program Subsidies for Oil
•  Protection Costs Involved in Oil Shipment and Motor Vehicle
•  ServicesEnvironmental, Health, and Social Costs of Gasoline Usage
•  Other Important Externalities of Motor Vehicle Use

These external costs, according to the report, total 0.6 to 1.7 trillion dollars per year. Since the goal of the ICTA was to assess the total cost of gasoline transportation, they included certain items that would, by necessity, remain in an electric car society.

There is also one notable cost that was excluded from the report and is of particular importance in March of 2009; the economic costs of a disruption in oil. Most recessions suffered in the United States since 1969 (Peak Oil) have been preceded by a spike in the price of crude oil. These economic costs far outweigh the infrastructure subsidies we currently have and bring the “hidden” costs of a gallon of gas to a conservative $7.00 making the true cost of gas around $9.00 today. This is slightly higher than the average cost of gas in Europe due to higher transportation and security factors.

“So what?”, says the American driver, “I am only paying two bucks a gallon”. True, but if you pay taxes you are paying for these subsidies. And if you own a house, have a retirement fund or earn your sustenance from our economy, you are picking up the tab.

Here is an easy example of how heinous these subsidies can be. Let’s say our government policy makers decided to subsidize Harley-Davidson at the same rate we currently help gas. Our tax dollars would give Harley around $14,000 per bike sold and the consumer would only pay $4,000 per cycle. Great time to get a new ride, but the long term effects would include; the elimination of the competition, no incentive for Harley to make better bikes, no incentive for productivity enhancements, and so on. The quality would deteriorate and there would be no alternatives because other companies could not compete at that price. The subsidized company or industry gets a virtual monopoly that is very difficult to bust.

This is our current problem with alternative energy. When all-electric automobiles are compared to internal combustion using a subsidized yard stick, gas wins. But when the comparison is made using real costs, the electric car shows it’s true economic potential. For example, the real fuel cost of a gas car traveling 100 miles is $36 ($9 gal / 25 MPG). The electricity required to travel the same distance costs around $2.40 (0.12 Kwh / 5 MPkWh). With the average driver traveling 11,000 miles a year, that’s a $3,700.00 differential per year. That’s enough to fund an economic stimulus package every year.

If you want to add a little “gas” to the fire, imagine how advanced our transportation system would be today if our representatives would not have been “protecting” our wallets for the last 35 years.

Even with a growing number of companies and individuals working towards reducing the world’s dependence on oil, the majority of the populace are unaware of these efforts, the impact and the benefits we will all gain, now and in the future. Personal transportation is the area that receives the focus of both environmentalist and those seeking alternative energy sources. This is the sector that consumes the majority of oil and produces the majority of greenhouse gasses. Hybrid automobiles have made an impact on our current oil consumption and all-electric cars carry the promise of dramatically reducing our oil usage starting as soon as 3-5 years from now and continuing into the foreseeable future. These advancements are already generating real savings to not only the owner of the electric car, but to all automobile users. The source of theses savings can be found in the way crude oil is priced.

Light sweet crude oil reached an all-time peak price of $147.27 on July 11th, 2008. Since then, prices have declined to the current level of around $35-$40 a barrel. The cause of this dramatic drop is due, almost entirely, to a reduction in demand and a worsening economic outlook. But there are other factors that determine the price of oil, such as political tensions, supply controls and long term demand forecasts. Whereas the Hybrid cars have already made an impact on current demand, the all-electric car is placing it’s own downward pressure on oil prices by altering the forecasts for future demand. A simple scenario can clarify the latter of these two statements.

Suppose you just found an oil reserve under your house of 1 million barrels. Once the euphoria wore off, you would be most concerned with getting the most value out of your finite amount of oil by selling the most product possible at the highest price attainable. Once you have accounted for competitors supply and current demand, you must consider the longer term outlook for oil consumption. If you, and your newly hired, high-priced advisors, determine that consumption will continue to out-pace supply, you may decide to limit your production in anticipation of higher prices in the future. This would further apply upward price pressure as other producers would come to the same conclusion and supply would drop. Conversely, if your conclusion is that prices will decline, you would want to maximize your profit by selling as much as possible now before prices drop. Again, the effect would be amplified as other supplies hit the market competing for a fixed demand.

Part of the process of evaluating future demand must focus on the state of alternative energy sources as these technologies are intended to reduce oil demand. Within the last year the following areas have made significant commitments to all-electric vehicles; Israel, Denmark, Australia, Hawaii, San Francisco, San Jose, and Ontario. These agreements lay the ground work for the roll-out of millions of vehicles that would not require any gasoline at all. As the all-electric car gains momentum, so does the downward pressure on crude oil prices.

Although it would be impossible to speculate as to the amount per gallon we are saving from these efforts, the savings are most assuredly there and will only continue to rise as these new technologies capture larger portions of the market. Even as oil prices continue to fluctuate up and down, we can all thank these pioneers for an ever-increasing amount of savings we all enjoy, regardless of how much these savings might be.