cars

Ten million cars off the road, 1970s style GDP growth

CIBC World Markets has just released a stunning yet detailed economic analysis of near-term oil prices and impacts. The PDF has some excellent figures I will convert to JPEGs.

The two key pieces are "Getting off the Road -- Adjusting to $7 per Gallon Gas in America" (PDF) and "Oil and Growth -- That 70s show Re-Run" (PDF). Main points:

• "That additional 200,000 barrels per day pledged from Saudi Arabia is a pittance compared to the four million barrels per day this year that depletion will hive off world production. What little increase in production Saudi is capable of will probably all be gobbled up by that country's own voracious appetite for energy."
• China's recent oil subsidy drop? Another yawner: "Most North Americans would gladly line up at the pumps for China's now $3.25 a gallon gas."
• "The only supply response to date has been yet another round of cost overruns and lengthy project delays running the gamut from Canadian oil sands to deepwater Gulf of Mexico wells."
• "With the basic laws of supply and demand no longer operative in crude oil markets," CIBC is "compelled to once again raise our target prices for oil" to "an average price of $200 per barrel by 2010." That "should translate into a near -- $7 per gallon pump price within two years, a 70 percent increase from today's already record levels."
• "Higher oil prices spell stagflation for the US economy next year" and beyond. The report has a good analysis of why "The US economy has managed to avoid feeling the full brunt of oil prices over the last few years, but 2009 will be the year that its luck runs out."

The analysis seems very solid and suggests the only thing that can "save" us from near -- $7 gas by 2010 is a major global recession, but even that would only be a temporary respite. The implications for Detroit are staggering:

S&P cites automakers’ cashflow concerns

Originally posted at the NDN Blog.

While news about high fuel prices this past week centered on disingenuous calls by President Bush and others to drill our way out of the crisis, perhaps the most significant -- and ominous event -- was the barely publicized action by S&P Friday to place the Big Three U.S. automakers on a credit watch. In taking the action, S&P cited "renewed concerns about the three car makers' future cash flows."

Given Ford's preexisting troubles -- accentuated by its announcement last week as well that it is postponing relaunch of its star vehicle, the F150 truck -- Chrysler's uncertain future under private equity management, and GM's plummeting market share, the announcement raises real questions about the survival of the U.S. auto industry.

Domestic car sales were already down about two million vehicles this year from their high in 2006 before the current fuel crisis. Plummeting sales and oceans of red ink -- as customers struggling under the weight of sky-high consumer debt payments and declining wages eschew the gas guzzling stars of only two years ago -- threaten the U.S. auto industry's very existence. The potential collapse of the Big Three -- still the second largest employer in the country after the government -- calls into question the very essence of the American way of life.

Americans drove less in April 2008

April 2008 saw another sharp drop in vehicle miles traveled (VMT) according to the Federal Highway Administration's monthly report on "Traffic Volume Trends" (PDF). This follows, "the sharpest yearly drop for any month in FHWA history" in March (see here).

I was compelled to blog on this because of the incredibly astute media coverage by AFP, "worldwide news agency," which wins the "Duh!" award for the month:

Observers surmise a possible link between the declining number of miles driven and rising US gasoline prices.

Carmaker knows most efficient freight system: trains

Interesting presser from Honda this week:

Gallons per mile: A better way to express fuel efficiency

Let's say a pollster walks up to you and asks you the following question:

"A town maintains a fleet of vehicles for town employee use. It has two types of vehicles. Type A gets 15 miles per gallon. Type B gets 34 miles per gallon. The town has 100 Type A vehicles and 100 Type B vehicles. Each car in the fleet is driven 10,000 miles per year." The town wants to replace these vehicles with corresponding hybrid models in order to to reduce gas consumption of the fleet and thereby reduce harmful environmental consequences.

Should they (1) replace the 100 vehicles that get 15 mpg with vehicles that get 19 mpg , or (2) replace the 100 vehicles that get 34 mpg with vehicles that get 44 mpg?

If you are like the people who were actually surveyed by Richard Larrick and Jack Soll of Duke University, you chose option two. After all, an increase of 10 mpg clearly sounds better than a measly 4 mpg. And yet, some simple number crunching reveals that the town fuel efficiency is improved more in option one (by 14,035 gallons) than in option two (by 6,684 gallons).

Honda fuel-cell vehicle: Not marketable, practical, or environmental

Technology Review asked me to comment about the hype over the new Honda fuel-cell car, which the company optimistically calls "the world's first hydrogen-powered fuel-cell vehicle intended for mass production." The key word here is "intended." Here it is:

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Would you buy a car that costs 10 times as much as a hybrid gasoline-electric, like the Prius? What if I told you it had half the range of the hybrid? What if I told you most cities didn't have a single hydrogen fueling station? Not interested yet? This should be the deal closer: what if I told you it wouldn't have lower greenhouse-gas emissions than the hybrid?

Other than the traditional media, which is as distracted by shiny new objects as my 16-month-old daughter, nobody should get terribly excited when a car company rolls out its wildly impractical next-generation hydrogen car. Too many miracles are required for it to be a marketplace winner.

Iconic Ford SUV plant to be idled for summer

Ford will close its Michigan Truck Plant in Wayne for nine weeks -- four weeks longer than previously announced -- starting on June 23. Birthplace to Lincoln Navigators and Ford Expeditions, the MTP has come in for hard times due to the plummeting market for SUVs. Since January, Expedition sales are down 31 percent; Navigators, 22 percent. Once bread and butter for American automakers, SUVs have fallen victim to $4-a-gallon gasoline.

To the lay observer, the temporary MTP closure is just another symptom of the shift away from SUVs, but it actually signifies a whole lot more for American automakers: At the height of the SUV boom in the late '90s, the MTP was the most profitable factory, in any industry, anywhere in the world.

Keith Bradsher, Detroit bureau chief of The New York Times from 1996 to 2001, wrote in his book High and Mighty: The Dangerous Rise of the SUV:

Notes from a plug-in hybrid conference

Silicon Valley came to Washington this week to talk about plug-in hybrids at a great conference organized by Google.org with Brookings. The combination of tech visionaries, electric cars on display, Washington heavy hitters such as John Dingell, Chairman of the House Energy and Commerce Committee and even a couple of film stars, Peter Horton and Anne Sexton of Who Killed the Electric Car?, made for a great meeting.

Here are my notes from the standing room only event ...

Toyota and Honda could sure learn something from Chevy!

“I don’t have to tell you how sexy the [Chevy] Volt is. The Japanese and Chinese couldn’t possibly put out something that appealing to middle America.” — Andy Karsner, Assistant Secretary for Energy Efficiency and Renewable Energy at the Department of Energy