It was only a few months ago that the hysterics were dominating the talk over energy prices.
Gasoline was running toward $2 a gallon and destined for $3. Some radical environmentalists were insisting sport utility vehicles be outlawed, Congressmen were demanding 40 miles per gallon, and everyone thought those hybrid vehicles from Japan were the wave of the future. Hundreds of millions of dollars were invested in hydrogen-engine experiments. General Motors and Ford got into a bragging contest over who would have the greatest increases in fuel economy.
And now I just paid $1.16 a gallon in upstate New York, and gas is even cheaper in New Jersey. A world recession is cutting demand. Producers outside the oil cartel, especially Russia and the ‘Stans, began pumping more. And we realized the big oil-price run-up was based largely on speculation anyway.
At today’s prices, panic moves on auto efficiency don’t make economic sense.
Few dollars, no sense
Take a 50-miles-per-gallon hybrid, which is a small car with two engines–one gasoline, one electric–that work in collaboration. It would use 200 gallons for 10,000 miles in a year. That same car with a conventional small gasoline engine probably would get 35 miles per gallon and use 290 gallons. The fuel-cost difference in a year would be $104, but the hybrid engine probably would cost $4,000 more than the small conventional car. Spend $4,000 to save $104 a year? Toyota and Honda sell hybrids now, but at a loss. Even then, the price, $20,000, is a lot for small, relatively slow cars.
Or imagine if Congress mandated a 40-miles-per-gallon average for cars, instead of the 27.5 mpg average now. That would save 114 gallons per car, or $130 a year. For that our driver would be getting a car made of expensive metals and complex composites and costing many thousands of dollars more than any comparable vehicle today. In fact, there would not be much of an auto industry at the prices that would have to be charged.
A partial hybrid system (in which a gas motor gets occasional bursts of help from an electric one) could push a 15 mpg sports utility to an average 20 mpg, a 25 percent decrease in fuel consumption. But at 10,000 miles the saving is 167 gallons–$194–and the system probably adds $3,000 to the car’s cost. GM, Ford, and Chrysler all have promised to introduce hybrid systems, but my guess is their enthusiasm will fall with gasoline prices. A few will be built, but they’ll be difficult to sell and cause little excitement.
Academics propose raising gasoline taxes. An extra $3 a gallon tax (bringing in $300 billion) would force people into tinier cars and save fuel. They say Congress could then cut other taxes. Alas, Congress always finds unmet needs to meet, bureaucrats to hire, and roads in West Virginia to pave.
No need for miracle cures
v I chuckled the other day when the New York Times worried about how environmentalists would react to strong car sales. It reported: “At GM, sales rose 13 percent in November. If its results affirmed GM as the healthiest of the wounded Big Three domestic manufacturers, they will probably not please environmental groups concerned about oil consumption as the country fights a war in Central Asia. GM’s sales have been propelled almost entirely by gas-guzzling pickup trucks and sport utility vehicles. …”
The Times makes it almost unpatriotic for GM to be successful and save the country from depression. It neglected to note that those boys fighting in Central Asia would love to own those “gas-guzzling” GM pickups and SUVs. Nor did it laud GM for helping save jobs for the poor folks in Mexico and Nigeria and other places where the oil comes from.
And what about the term “gas-guzzling”? City buses use more fuel than any car, but nobody calls them “diesel-oil-guzzlers.” Boeing 747s burning 3,200 gallons an hour aren’t called “jet-fuel-guzzlers.” Two-hundred-watt bulbs aren’t called “electron guzzlers.” The Sunday New York Times isn’t called a “forest-guzzler.” Why? Because they do a job.
So do those pickups and sport utility vehicles. They can haul boats, horse trailers, and lots of cargo that ordinary front-wheel-drive vehicles can’t. Many have three rows of seats for extra passengers and, in fact, are just big old-fashioned station wagons. They ride higher and make it easier to look down the road. Four-wheel drive is better in winter driving. And yes, SUVs are fashionable, too. But so are Armani suits and weekend homes, and they all consume resources.
Improving fuel economy is possible with lighter materials and better engines and engineering. With fuel prices down we may get back to doing that and put the miracle cures, like hybrids and hydrogen engines, back on the experimental track where they belong.
Jerry Flint, a former Forbes senior editor, has covered the automobile industry since 1958. Reprinted by permission of Forbes magazine. © 2002 Forbes Inc.