Cartoon of the Day
From Michael Ramirez at IBD.
HT: Warren Smith
HT: Warren Smith
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Friday, February 24, 2012
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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53 Comments:
Bravo!
I'm all for electric cars if they are ever feasible. Why not?
I'm not for the corrupt Obama regime using the idea to funnel money to his cronies at companies like Fisker, Tesla, and the now bankrupt Ener1.
"I'm all for electric cars if they are ever feasible. Why not?"...
Heck yeah paul!
It sure would be nice if technology could somehow speed up the development of superconductive materials to make electric vehicles practical...
$5 a gallon gas and a car that goes 40 miles with an electric charge and needs gas once a month tops.
It runs on coal but no more $5 a gallon fillups....
who would care if it ran on coal as long as they were not paying $100 per fillup?
I think electric cars might have "legs".
larry-
then you have not done the math.
a chevy volt is $40k and a crappy car. absent subsidies, it's more like $45-50k.
a honda accord, which is a better car is $21k.
$23,000 buys A LOT of gas.
even at $5, that's 4600 gallons, which, even at 26mpg, is 120,000 miles of driving before you even reach the purchase price of a volt.
at highway mileage, you get 165k miles.
so, realistically, you'd need to drive at least 140k miles before you even get to the price of a volt AND you'd have a better car the whole time.
oh, and let's not forget that the volt batteries wear out. at 100k miles, you're going to start needing to look at a new one. the honda will be going strong.
i also doubt the volt is any more environmentally friendly either. you have any idea what goes into those batteries? disposing of them is no joke nor is making them.
sorry, but i just don't see it.
electric cars are still a big net loser.
yeah..you're probably right.
how about a Nissan Leaf?
Electric cars were almost feasible at $100 oil, until vast natgas discoveries moved the equation away from electric cars once again.
Plug-in hybrid cars are probably a good medium.
But the US is a stupid country that ensures via regulatory burdens that converting a car to outright natgas costs $10,000 or more.
Without government meddling, the real conversion cost would be just $1000 (and it is in many other countries).
"how about a Nissan Leaf?"
crappier car, $5k less.
still makes zero economic sense and at 100% electric would be impossible to actually use.
at 55mph, it has what a 70 mile range?
at 65-70mph (real highway speed) you're looking at 40-50.
it's a toy. you can't use to to really go anywhere. it would take you a week to drive from SF to park city instead of 10 hours.
Seriously, why is peak oil such a huge deal but peak lithium would be ok? These people act like you can make and run a engine/motor without using or polluting natural resources and I just don't get it.
Oh, and a follow-up on the Tesla Motors story.
Not only does it seem the "bricking" story is true (if the battery drains completely, the car can become immovable, requiring the car to be shipped back to the factory and a $40k battery replacement) but the libel case against the BBC show "Top Gear" has been thrown out for the second time. The show put it on the test track and only got 50 miles on a charge, the company claims 200 miles.
KMG @ 5:15
“But the US is a stupid country that ensures via regulatory burdens that converting a car to outright natgas costs $10,000 or more”
_____________________
I agree that the “U.S. is a stupid country” (with regard to many of its regulations), but I don’t think that the price of conversion is the major issue. The major issue is gaining access to many more nat gas sites, and the permission to “frack” or drill.
If all impediments to nat gas drilling/fracking were removed, that would pave the way to widespread use of nat gas-powered vehicles, including heavy trucks.
"yeah..you're probably right.
how about a Nissan Leaf?"
LOL
Are you going to ask morganovich to explain the economics of each available electric car, or is it possible his previous critique can be applied to all of them as a group?
there's not that many right now.
and Morg can rattle this stuff right off the top of his head so why not take advantage of all that mental horsepower!
:-)
at some point, we may well see a smaller econobox type EV for 20-25K and in a $5 a gallon world - it may well change the game.
can we be so sure it will never happen?
"at some point, we may well see a smaller econobox type EV for 20-25K and in a $5 a gallon world - it may well change the game.
can we be so sure it will never happen?"
yes.
until you see a major breakthrough in battery technology that drops cost and increases energy density, it cannot happen.
at the end of the day, physics are physics and chemistry is chemistry.
no currently available tech (or any promising near term tech that i have seen) could make an electric car actually viable.
until you can take one from flat to charged in 6 minutes and get 300 miles (of real world driving) out of one, they are just silly toys.
until you can get that sort of battery for under $8-10k, they will never be mass market.
""at some point, we may well see a smaller econobox type EV for 20-25K and in a $5 a gallon world - it may well change the game."
Keep in mind that every electric econobox can also have a much cheaper gas powered econobox twin. At 50-60mpg, $5/gal isn't so bad.
If anyone would drive such a car.
You are always looking at the difference in cost of an expensive battery. The smaller the car and the better the mpg, the longer you have to drive the electric one to make up the difference in price.
surely Ron and Morg are NOT saying that there will NEVER be ANY possibility of breakthroughs in battery technology!
I not only think it will happen but when it does, it will dramatically change the economics of oil.
the only real question is whether or not the breakthrough will happen near term or it will be 50, 100 years into the future.
from an entrepreneurial there is a lot of potential.
we're also awash in natural gas (not without some skeptics here) and if T Boone is not suffering from dementia ... perhaps that will happen, though I do not understand why a CNG car is 5K more than a conventional ICE.
perhaps one of you boys knows why CNG cars are more expensive than conventional gasoline ICE.
oh and one more while we're at it.
If nat gas "disadvantage" is it's distribution infrastructure or lack of .... then why not convert it at the point of extraction to electricity rather than pipeline it?
What say you Morg?
larry g what you want is a Sumitomomobile...
World’s first “Superconductor EV”
Sumitomo Electric developed the small superconducting motor and successfully demonstrated to drive the electric passenger car. The motor power is around 30kW and the torque is 120Nm. The superconducting motor will enable to get larger torque, reduce the space and get higher energy efficiency...
"I not only think it will happen but when it does, it will dramatically change the economics of oil.
the only real question is whether or not the breakthrough will happen near term or it will be 50, 100 years into the future."
That IS the question, isn't it. I'm optimistic that soon a new substance will be discovered, and named *plentyfuelium*. A small amount in an adapter that will retail for $4.98 will be plugged into your car's cigarette lighter or power outlet, and you will be able to drive your car for the rest of your life without replacing it.
Meanwhile, I remind myself that there is very little new about current battery technology except advances in packaging and reductions in cost.
There is nothing on the horizon, in the entire world of power storage, that is anywhere near being a viable or cost effective solution, so in the meantime, I won't waste time considering expensive non-solutions funded by unwilling taxpayers.
"If nat gas "disadvantage" is it's distribution infrastructure or lack of .... then why not convert it at the point of extraction to electricity rather than pipeline it?"
You might want to think about that one more carefully.
It's not distribution of nat gas, but the availability of CNG.
You might as well wonder why gasoline as a fuel wasn't common when the auto industry was in it's infancy. You might have thought the obvious solution was to build a gas station on every corner.
re: "fuelonium" with cigarette adapter...
saaaayyyy.. isn't that what the oil companies conspired to keep from coming to the market?
:-)
re: CNG and "distribution".
think about cars and electricity on a timeline...
remember.. cars were "fueled" with different fuels besides gasoline...and .. many rural areas had ICE vehicles before they got electricity.
re: superconductors
and pressured air and hydraulics and other technologies.
I still think that oil is going to be superseded by something else at some point just as whale oil was.
the more expensive oil becomes, the more it will accelerate alternative technologies.
Electric cars will never be a feasable alternative to gas cars.
People are sooooo stupid want want to invest in some technology of the future. I repeat battery technology will never improve and electric cars will never get better.
Gas cars arre forever and of course we will never run out of oil or petroleum products.
The Obama Regime is to blame for everything !!!!!
"The Obama Regime is to blame for everything !!!!!"...
O.K. pseudo benny we get it...
"remember.. cars were "fueled" with different fuels besides gasoline...and .. many rural areas had ICE vehicles before they got electricity."
Yes. One of those fuels was ethanol, which proved to be inferior to gasoline in every way including price, and it remains so to this very day, except as a specialty racing fuel.
larry-
"surely Ron and Morg are NOT saying that there will NEVER be ANY possibility of breakthroughs in battery technology!"
nothing much has happened for 50-100 years. sure, it's possible, but not in the near term.
it's going to require a big jump in some sort of basic science.
one can never say never about such things, but one can certainly say there is nothing on the horizon right now that look at all promising.
"If nat gas "disadvantage" is it's distribution infrastructure or lack of .... then why not convert it at the point of extraction to electricity rather than pipeline it?
What say you Morg?"
that's another whole raft of problems.
small scale nat gas plants are at least one order of magnitude less efficient than the full sixe ones. such a plant needs A LOT of gas. most fields could not support one.
further, transporting electricity is lossy. you lose a ton of current to the wire. so locating pants far away from users is a disaster from an efficiency standpoint.
coal has the same issue.
do you transport the coal to a power plant closer to the area it provides power to?
is the cost to transport the coal to a nearer power plant cheaper than locating the plant closer to the coal?
I'd think a similar conundrum exists for Nat Gas.
"do you transport the coal to a power plant closer to the area it provides power to?
is the cost to transport the coal to a nearer power plant cheaper than locating the plant closer to the coal?
I'd think a similar conundrum exists for Nat Gas."
yes, you do. coal is one of the if not the largest commodity shipped by rail in the US.
nat gas doe not work the same way. it's a question of energy density and shipping costs.
coal is very energy dense. it's also cheap to load and unload onto rail.
gas is not.
it needs to be compressed or liquefied (which adds cost and requires equipment) or pipelines.
i know of no power plants running on c or lng. i don't think it's cost effective.
the answer is pipelines, but we seem to be struggling with that and they do raise a number of thorny eminent domain issues.
The cartoon misses the point. caol plants are able to have extensive claening facilities to process their waste.
The question is whether the marginal cost of pollution for a car is greater or lesser when comparing energy used for the car as being from coal, plus the associated transmission and conversion losses, or from oil carried inthe car alaong with the cars onboard pollution systems.
Not to mention the competing socio-economic issues of both coal and oil.
I think Morganovich is right about the Volt.
Still, (other than the headlight) I can;t complain about either of my Prius.
For only a little mnre money, they get a lot better mileage, and it is a nice quiet, comfortable, reliable vehicle.
Morganovich also left out some other factors. Since the engine is off much of the time, my prius with 170,000 miles has the engine hours of a an Accord with maybe 120,000. The battery is still good, and I receently met a woman with 250,000 miles on hers.
Regenerative braking means the brakes get little wear, and at 170,000 miles my older Prius still ahs the original brakes, and exhaust system.
The first thing to wear out is going to be the upholstery.
I think the mistake the Volt makes is leading people to think the power comes from the batteries, instead of going the Prius route and viewing the battery only as temorary storage for energy that would otherwise be wasted.
"it remains so to this very day, except as a specialty racing fuel."
Ron, think about that for a second. Why would crappy fuel be used for high horsepower racing (NASCAR excepted of course - that's pure propaganda). We don't build engines with high compression ratios that can take advantage of ethanol properties. Running ethanol in a gas engine is not efficient, but that's what we do.
"coal has the same issue."
Oh, it has the same issue, but not the same issue you are thinking of. What happens to the cost of electricity for your home with a couple hundred million Volts and Leafs on the road (assuming the country wouldn't be totally bankrupt from the $10k per car and $2.5k per charging station corporate welfare)?
Would everyone be installing gasoline-powered generators?
These people act like you can make and run a engine/motor without using or polluting natural resources and I just don't get it.
==================================
Bingo.
Every technology has its problems. What these people want is a pollution free perpetual motion machines.
What you really should want is lowest Total Cost = Production Cost + External Cost + Government Cost.
One of the biggest improvements we could make on the energy front is to design stuff for easy repairability, but no one seems to pick up on that.
Re Tesla.
Saw one in a nearby town a while back. Have not seen it since, which may say something.
May not go far, but I hear that first quarter mile is a rush.
Cool thing about electric motors is they have maximum torque at zero RPM. Even my tepid Prius zips right off the line.
is the cost to transport the coal to a nearer power plant cheaper than locating the plant closer to the coal?
=================================
Heh,heh.
Same problem: minimize Total Cost = Production cost + External Cost + Government Cost.
Now you raise the issue of where to draw the system boundary. If you are going to call in the costs of batttery production and disposal, you need equal diligence in accounting for energy costs of conventional autos.
Or, you can assume all those costs show up in the cost of the fuel, and therfore they are moot. I would argue that such an assumption amunts to ignoring the External Cost and Government Cost part of the equation.
Likewise, if you choose to argue against government subsiey of electric vehicles (or wind power or whatever) then you have introduced the Governmnet Cost term, sand you should apply it with equal diligence to whatever your comparison baseline is.
it needs to be compressed or liquefied (which adds cost and requires equipment) or pipelines.
==================================
All of which consume energy, as does transmission loss and conversion of electricity to chemical (battery) storage.
This is is why Morganovich's original analysis is correct as far as it goes, but still incomplete.
assuming the country wouldn't be totally bankrupt from the $10k per car and $2.5k per charging station corporate welfare
===================================
Selectively ignoring technology improvements?
How about a hybrid natural gas car?
Instead of storing short term recovered energy in a battery, you could do the same thing by increasing and releasing the pressure on the natural gas tank.
Eric H: "Ron, think about that for a second. Why would crappy fuel be used for high horsepower racing (NASCAR excepted of course - that's pure propaganda). We don't build engines with high compression ratios that can take advantage of ethanol properties. Running ethanol in a gas engine is not efficient, but that's what we do."
Yes - I think that's what I said. I was thinking specifically of NASCAR when I wrote it. Did you derive some different meaning from my comment?
"One of the biggest improvements we could make on the energy front is to design stuff for easy repairability, but no one seems to pick up on that."
Without wasting time revisiting past discussions, let me just point out that few people want to do their own repairs, but prefer products that are far more reliable than they have ever been in the past, and don't require much maintenance or repair.
That is what manufacturers are producing, based on consumer votes, as you have pointed out using your own car as an example.
It's not likely that you, or anyone else, would be willing to pay the initial price of the products you are wishing for, with its attendant replacement parts manufacturing, distribution, and stocking costs.
So no, designing stuff for easier repairability would not be an improvement over designing stuff that doesn't break.
"What happens to the cost of electricity for your home with a couple hundred million Volts and Leafs on the road..."
Perhaps Dr. Perry can help us with this grammar question. Is that Leafs or Leaves on the road? :)
"Selectively ignoring technology improvements?"
Such as...
Without wasting time revisiting past discussions, let me just point out that few people want to do their own repairs, but prefer products that are far more reliable than they have ever been in the past, and don't require much maintenance or repair.
================================
Making stuff reliable has nothing to do with making it repairable. neither has it anything to do with self repair vs shop repair.
It can be reliable and repairable.
You can easily buy parts for an ancient tractor, long after its automotive counterpart would be in the junkyard.
If the thing craps out all the time and has to be repaired, then I agree with you. The VW beetle fell in that category.
But, I have a haybaler that is ancient. When it finally needed an obscure part, John Deere had it for me the next day. And the replacement part was reinforced where the old one (really old) finally failed.
Compare that to a windshield wiper motor for a Chevy of about the same vintage: not available, please junk car and buy a new one.
"Selectively ignoring technology improvements?"
================================
I am not suggesting anything in particular, only the apparent habit of assuming breakthrough technology one one side of an argument while claiming the other side is a dead end.
Like assuming IC autos will enjoy increasing mileage through technology but electrics or hybrids won't.
It's not likely that you, or anyone else, would be willing to pay the initial price of the products you are wishing for, with its attendant replacement parts manufacturing, distribution, and stocking costs.
================================
My observation is that some companies do this well and diligently, and others just don't give a crap.
There is no reason why the initial price has to be any higher, just because it is repairable.
I was replacing a stub axle and CV joint on a VW one time and discovered the axle was held on with an eight bolt circle of cap screws. Four of them were hex head cap screws and four of them were Torx heads.
Only Machiavelli would do that, considering the bolt circle was blind, accessible only by touch.
There is no savings in such a thing, and it could only be done that way to make things difficult.
Gas cars arre forever and of course we will never run out of oil or petroleum products.
================================
But they will be so expensive we will have to use wind and solar power to manufacture them.
"Like assuming IC autos will enjoy increasing mileage through technology but electrics or hybrids won't."
I don't know who you think is assuming that, there are obvious physical limits to IC technology, but computer control has allowed great improvements in recent decades, while little has happened in the area energy storage devices in 50 years other than improvements in packaging.
I don't expect great improvements in either one in the foreseeable future.
assuming the country wouldn't be totally bankrupt from the $10k per car and $2.5k per charging station corporate welfare
================================
Surely the price of charging stations will come down. And the $10 k subsidy may come down if volume increases enough.
obvious physical limits to IC technology
All technology.
I think we fundamentally agree.
Some people seem to think that energy extraction technology has either no limits or no price.
I disagree.
There will be oil , but We will be cracking coal and growing slime to make oil, and our great grandchildren will read what we did and say, "They burned oil? What were they thinking?"
"There is no reason why the initial price has to be any higher, just because it is repairable."
It has to do with the cost of assembly. Anything using screws or other reusable fasteners is more costly to build and initially assemble.
"I was replacing a stub axle and CV joint on a VW one time and discovered the axle was held on with an eight bolt circle of cap screws. Four of them were hex head cap screws and four of them were Torx heads."
Were you the original owner of this car? Perhaps you are a victim of previous repairs involving parts from different build dates.
You understand, don't you, that using two different fasteners costs more than using one. It's hard to imagine a manufacturer spending more to make a repair difficult. Trained mechanics would be aware of the two fasteners, and perhaps have special tools to make the job easier.
The manufacturer gets no additional revenue from subsequent repairs, so unless it's sole purpose is to annoy you personally, I Don't see a reason for it.
"Surely the price of charging stations will come down. And the $10 k subsidy may come down if volume increases enough."
Wishful thinking. If this was an economic idea, subsidies wouldn't be necessary. As soon as the subsidies end, this nonsense will end.
"...and our great grandchildren will read what we did and say, "They burned oil? What were they thinking?"
Why? Do you say "They were burning whale oil, and plowing with draft animals? What were they thinking?"
but computer control has allowed great improvements in recent decades,
=================================
I'll say. My old Rabbit Diesel got as good mileage as my Prius, but it was a piece of junk by comparison.
It would not get out of its own way, it was noisy, and had no more longevity.
Its saving grace was you could pull out in traffic with impunity, because of the smoke screen it put down if you put your foot in it.
It finally failed after about 300k miles because the fuel injection pump was bolted to a tang that was cast on the block. When the tang fractured and broke off there was no good way to remount the fuel pump without replacing the engine.
It also had a habit of developing a faulty ground, and then setting itself on fire. I replaced several speeedometer cables because that turned out to be the alternate ground path.
Yet today, VW is enjoying record sales. I don't get it. my VR6 jetta was a fun to drive, but it was a hangar queen.
After replacing the $300 motor to adjust the mirror, and several rounds of faulty window mechanisms, along with a bunch of similar aggravating crap, it is going to be a long time before I enjoy any more superlative german engineering.
Cradle to grave, that thing cost me far more than my prius will.
Almost every regional trucking outfit should be converting to CNG. If you aren't doing long hauls away from CNG stations then you have no excuse and you're losing tons of money, or soon will be. Simply announcing these initiatives will scare lots of long speculators out of the oil markets and we will see all fuel prices come back down. I converted my car to CNG for about $2,000 and learned how at www.skycng.com.
Almost every regional trucking outfit should be converting to CNG. If you aren't doing long hauls away from CNG stations then you have no excuse and you're losing tons of money, or soon will be. Simply announcing these initiatives will scare lots of long speculators out of the oil markets and we will see all fuel prices come back down. I converted my car to CNG for about $2,000 and learned how at www.skycng.com.
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