Chinese Fuel Economy Standards

Keith Bradsher reports in the NYT about the Chinese Fuel Economy Standards. The following picture shows it more clearly (Courtesy: WRI)

Chinese Fuel Economy Standards

Accord Hybrid Review

USA Today reports.

Global Crude Oil Demand & Gasoline Prices

The Big Picture has more on Global Crude Oil Demand & Gasoline Prices. Too bad that Blogger is not trackback compatiable.

Oil = $50 a Barrel

The Big Picture and WSJ agree with me [;-)] that it may be the inventories of oil around the world that may be causing the surge in oil prices.

CARB Approves Greenhouse Gas Rule

If you have been following the AB 1493, then you must know by now that the Air resources Board has approved the regulatory action.

According to ARB staff, the average reduction of greenhouse gases from new California cars and light trucks will be about 22 percent in 2012 and about 30 percent in 2016, compared to today's vehicles. Costs for the added technology needed to meet the rule are expected to average about $325 per vehicle in 2012 and about $1050 per vehicle to comply in 2016. The ARB staff analysis concludes that the new rule will result in savings for vehicle buyers by lowering operating expenses that will more than offset the added costs of the new vehicles and provide an overall cost savings to consumers.

The adoption of this rule makes California the nation's only state that has regulated motor vehicles for their contributions to global climate change. At least seven other states including New York, Massachusetts, New Jersey, Vermont, Connecticut, Rhode Island and Maine, as well as the nation of Canada, are expected to consider adopting the regulation for their use. If all of those states and Canada adopt the rule, the number of cars required to meet the rule will triple.

This will be a de facto fuel economy improvement requirement, and thus will get challenged in the courts. ARB is bracing itself for this over the past two years. There are also hints that the Carmakers may actually take a more cooprative approach in dealing with the ARB. All in all, the battle over AB 1493 is far from over, but CARB seems to be determined to forge ahead with support promised by Gov. Schwarzenegger.

Oil prices jump to record high

Guardian reports:

Extremely high demand and short supplies have been exacerbated by other factors - including increasing insurgency in Iraq - that have increased concern over the amount of oil available to meet winter demand.
...The Opec president, Purnomo Yusgiantoro, said the cartel was supplying enough crude oil to the market, and current prices were not due to any market imbalance. "This is because of hurricane Ivan and some problems in other places," he told reporters. "This is not a supply and demand problem. Opec supply is enough."

There are many things at work here. everything from Iraq, to Yukos in Russia to Hurricanes in Florida are being blamed for the oil prices inching up. Such causal relationships may not necessarily be true. What may also be happening to the market is that the major oil importing nations are building up inventories of oil, and therefor the demand may seem unusually high.

Toyota and Honda in a hybrid-car race?

This is what the articleimplies:

Prius sales took off with a redesign this year and Toyota sold 31,406 hybrids through August, almost three times as many as in the first eight months of 2003. By comparison, Honda sold 17,805 Civic Hybrids through August, up just 16 percent from a year ago.

How many hybrids has Detroit sold so far?

Gasoline and the American People: A CERA Special Report

This a an old Report from CERA, however it is very much worth reading:

How efficient? For decades, gasoline in America was relatively cheap, and supplies of crude oil for making gasoline were more than abundant. Neither motorists nor government worried much about fuel efficiency. The situation changed with the First Oil Shock of 1973-74. Legislation enacted in 1975 established CAFE -- the Corporate Average Fuel Economy standard. The fuel efficiency of new car fleets was to double from the average 13.4 miles per gallon of 1973 to 27.5 miles per gallon by 1985. This was achieved. Since then, improvements in fuel efficiency have plateaued, as Americans have opted for higher performance -- and for minivans, light trucks, and Sports Utility Vehicles. Indeed, what started off as an infatuation has turned into a long-running love affair. The difference is striking. The average new car gets about 27.5 miles per gallon. The average light truck/minivan/SUV gets only 21 miles per gallon. (These are EPA-rated theoretical fuel efficiencies-in actual on-road driving fuel efficiency effectively drops by about 15 percent.)

...How much? Americans drive more and more. In 1980, the average licensed driver traveled 9,700 miles. In 1998, 18 years later, they were driving over 13,000 -- an increase of 34 percent. The number of licensed drivers is now over 185 million. But there are still more registered light duty vehicles -- 203 million -- meaning that, on average, each licensed driver has 1.1 vehicles. A big source of new drivers -- and more gasoline consumption and miles traveled commuting -- has been the entry of a significant number of women into the labor force. Now that the rate of women entering the workforce has slowed and vehicle ownership has exceed saturation, that suggests that the increase in the number of miles driven will flatten out. Another major new factor is the astonishing growth in the driver population over age 65, which has increased from 15.5 million in 1980 to 26.2 million in 1998. Their numbers are increasing, but the mileage that they put on goes down, not up.

Is gasoline the second lifeline?

GM beefs up already fat incentive offers

More on incentives:

The world's largest automaker already offers no-interest financing on loans of up to 60 months for most cars and trucks, or a variety of cash-back and bonus deals. But now the automaker, saddled with about 1.15 million cars and trucks in stock at the end of August, has enhanced the deals.

Rebates for 2005 vehicles now range from $500 to $3,500 on most models, excluding the Cadillac brand. Bonus cash offers for customers financing through GMAC now range from $500 to $1,500 per vehicle. Zero-percent financing is also available on a few 2005 models. Meanwhile, deals on several 2004 models also have been enhanced.

Some dealers said buyers could now negotiate for as much as $7,000 off some large SUVs with the incentives.

The consumers should think about this a little. How does GM afford to offer up to 7000 dollars in incentives? Is this because the SUVs are typically marked up any where between 5000 to 12000?

many of these consumers locked themselves into longer-term loans. The length of loan terms has been growing from 36 months or 48 months to between 60 months and 72 months, meaning many consumers won't be in the market for a new vehicle for a while longer. As a result, some dealers report that most shoppers today have little to no equity in their trade-ins.

Today, only 16 percent of the people who buy a new vehicle say it is because their old one needed to be replaced, reports CNW Marketing Research ofin Bandon, Ore. In 1990, about 61 percent of consumers said they needed to replace their old vehicle.

Worse yet, many industry watchers have started to worry that the incentive game is training consumers to wait for a better deal, which is -- inevitably -- around the corner.

Incentives, Can't live with them, Can't live without them!

The link between ecology and war

You might remember a discussion about betting on Democracy for Oil some time ago. Here is a piece in Haaretz (a leading Daily from Israel) that attepts to talk about the link between ecology and war:

In the 1970s, the environmental discourse was focused on the dwindling natural resources of the entire planet as a single unit. Now the discourse is about how those resources are divided up among the countries and inside them. When the wealthy industrialized nations organize their global security concepts to guarantee free access to energy sources, and when their overuse of those resources accelerates the pace of global warming, an absurd situation results: Armies go out to occupy or safeguard oil reserves, while unbridled exploitation of those reserves could even threaten the victors.

I find that a fairly good assessment. Energy and Water will be the resources over which wars may be fought in this century. Do they have to be fought?

Flex Your Power at the Pump

Flex Your Power at the Pump is a new California campaign. Check this out -- This IS "Drive Lite". Go Schwarzenegger ?!

Raising Toll to Curb Oil Consumption?

Owen Gutfreund writes in the Times:

The Interstate legislation, as enacted in 1956, put a stop to new toll-road construction, and we instead proceeded with a socialized transportation system, available to the consumer at no charge, mostly paid for from general revenue. Toll-road construction ceased, and with the exception of a handful of projects, all new highways built since have been freeways.

There is a mistaken notion that American drivers pay for their roads through gas taxes. Actually, even though states collect gas taxes and a modest federal levy was imposed to pay part of the Interstate expenses, the total of these charges never amounted to more than one-third of highway costs. Such taxes, adjusted for inflation, have actually decreased, and efforts to increase them are politically risky, even though each 1-cent rise in the gas tax costs the average driver less than $8 a year. In practice, our roads and highways have been underwritten by general taxation. With gas taxes and tolls capped by effective lobbying, this annual subsidy has grown, amounting to billions of dollars annually.

With driving so generously subsidized and the true costs hidden, Americans have driven more and more miles each year.

There was indeed a proposal in the house transportation committee to raise gasoline tax by about 4 to 9 cents over the next five or seven years to pay for highway construction related activities. Some, like Martin Wachs, have argued that fuel taxes are in fact the most readily available, effective, efficient and equitable approach to transportation finance.

Detroit Is Over A ($50) Barrel

From Business Week:

For the past decade -- the auto industry's fat years, when average annual sales of 17 million cars and trucks generated big returns -- the U.S. Big Three invested much of their profits in horsepower. The resulting muscle-bound trucks and bulky SUVs proved wildly popular, and probably saved Motown's hide. In the meantime, though, the Japanese and Europeans -- whose home markets have long had more expensive fuel -- were investing in a host of fuel-efficient technologies. So while Wagoner (GM's Chairman and CEO) is showing off a new SSR, Toyota Motor Corp. is boosting production capacity for its 50-mile-per-gallon Prius by 50% and plans the launch of another gas-electric hybrid, the Lexus RX 400h luxury SUV, this fall. Ford Motor Co. will soon launch the first American hybrid, a nearly 40-mpg version of its Escape SUV. But Honda Motor Co. is about to sell its third hybrid, an Accord, promising at least 240 horsepower and fuel economy that tops 30 mpg. The Europeans, meanwhile, are pushing clean diesel engines, which get at least 30% better fuel economy. And all foreign auto makers have a jump on selling "crossover" sport-utes, which are built using the understructure of a car, thus offering buyers the cavernous confines of a big SUV but with a smoother ride and better fuel economy.

Crossover vehicles have been steadily gaining in terms of market share, and Toyota RAV4 and Honda Pilot seem to be doing quite good. With gas prices staying high, consumers may want to buy more of these crossover vehicles as opposed to huge trucks or large SUVs.

Detroit execs argue that SUV and truck sales are still strong, even for monsters like the 15-mpg Chevrolet (GM ) Tahoe and Ford Expedition. Indeed, sales of truck-based SUVs -- which account for most of Detroit's automotive profits -- are up 1.3% so far this year. But look closer: Nearly 50% of consumers who are trading in a traditional truck-based SUV buy something else, says Art Spinella, president of CNW Marketing Research Inc. in Bandon, Ore. Buyers are leaving to make a fashion statement as much as to save gas. But in any case, the vehicles they're choosing -- smaller SUVs and luxury cars -- are more likely to be foreign-made.
Indeed, sales of less-efficient truck-based SUVs are only still rising because auto makers are laying out as much as $6,000 in rebates. That's richer than the deals being offered on any other type of vehicle. Margins, as a result, are suffering for all the U.S. carmakers. Says Detroit-area Chevy dealer Gordon Stewart: "They're overcoming the fuel-cost increase with incentives that you can't believe."

Hmm...Incentives. It has been three years since the latest wave of incentives continues. I wonder if the results have started to show already in the bottomline now. IF the sales drop for a year or two, Detroit may be in for a big trouble. Not only would it loose on new sales, but also on the vehicles that they forced down the market by means of these discounts. Meanwhile, hybrids have started knocking on the door.

. Now Toyota and Honda have been selling hybrid-electric cars for seven years, working out the kinks and priming consumers to think of it as trustworthy technology. It will be three years before GM offers a hybrid system on its new full-size SUVs. That will be more robust than the 10% mileage boost that commercial-fleet buyers now get with a "mild" hybrid version of the Chevrolet Silverado truck. GM execs argued that they could make a bigger impact on fuel consumption and tailpipe emissions by adding hybrid systems to their big SUVs than the other guys were through hybrid small cars. But with the shift that's under way, by the time the hybrid trucks arrive Detroit could be defending a smaller market.
To be sure, no one knows how big a market hybrids will become. The technology adds $2,000 to $5,000 to the cost of building each vehicle, some of which gets passed on to the customer. But as gasoline stays close to $2 a gallon, hybrids can only get more attention. Dealers already have waiting lists for the Prius.

We all know that there is tremendous overcapacity in the cars market. All is not well, not even as good as it should be. We are in for some rough ride in the automotive sector here in the US.

Laissez-Faire My Gas Guzzler, Already

From the NYT:

The four-week average for gasoline demand for the week ended Aug. 27 was 9.421 million barrels, essentially unchanged from the period a year ago, according to the Energy Information Administration.

Part of the explanation is because gasoline prices actually declined during the summer, to a national average of about $1.86 a gallon, from a record of $2.05 in May, while frenzied trading in financial markets pushed the price for a barrel of oil to nearly $50 from $40. (The price of crude oil is still far from its inflation-adjusted peak of about $80 reached in 1980.) That is because refineries in the United States produced ample amounts of gasoline in the last three months, meeting demand from consumers even as speculators placed bets on future swings in the price of oil that may have had little to do with actual petroleum supplies.

"I don't think we're going back to $50 without a big supply disruption somewhere," said Juha Laiho, a Houston-based oil trader for Fortum, a Finnish oil company. "It's logical for gasoline to pull back a bit."

It is interesting how many times the issue of supply disruption is coming up these days. Yet, I don't think that an average consumer cares much about the issue just yet.

Seeking out energy-efficient vehicles still seems to be the exception rather than the rule. Sales of recreational vehicles, for instance, climbed 14 percent in the first half of the year from the period in 2003 and rental reservations for the vehicles made in the early summer were up 34 percent from last year, according to the Recreation Vehicle Dealers Association in Fairfax, Va.
...While certain areas of the economy seek to adapt to higher energy costs, such efforts are lost on most drivers. Julie Battistelli, 51, a nurse from Saugus, Mass., said she shunned public transportation, preferring instead to drive a BMW sport-utility vehicle acquired in April that costs about $10 a day in gasoline. "I have to have a car; I have a little girl I have to drive everywhere," Ms. Battistelli said. "In the suburbs you have to drive."

Sometimes it's a necessity, sometimes it's a choice.

"Extra 3m barrels' to keep oil price down"

The IEA executive director has called for additional investments in oil capacity expansion. IEA's call for increased invetments is not new. In the 2003 World Energy Investment Outlook, IEA concluded:

The total investment requirement for energy-supply infrastructure worldwide over the period 2001-2030 is about $16 trillion. This investment is needed to expand supply capacity and to replace existing and future supply facilities that will be exhausted or become obsolete during the projection period.

That is a lot of money :-)