The US passenger car market is hemorrhaging market share, forcing auto makers to rethink their product lineups. Most are scrambling to catch up with customer expectations, which are turning more and more to crossovers and SUVs. “It’s a fundamental shift,” said Jessica Caldwell, director of pricing and industry analysis for Edmunds.com.
Cars today are getting better fuel economy than ever. Even the big, hulking trucks and SUVs that Americans crave now get EPA mileage ratings that fall into the “not awful” category. But a funny thing has happened on the way to better fuel economy. Most manufacturers now use smaller, turbocharged engines in place of the legendary V-8s that powered the golden age of American cars. They recommend using premium gasoline in those new, more highly stressed engines.
In 2007, Americans started driving less, buying less gasoline, and putting less carbon dioxide into the atmosphere. According to Inside Climate News, gasoline usage hit a peak that year and then shrank as much as 18% nationwide, hitting a low of 8 million barrels a day in January 2012. This reflected the enactment of strict new fuel economy standards for US vehicles, record high pump prices, and a deep recession.
There were other factors leading to lower gasoline sales, too. Those higher fuel economy standards caused manufacturers to start thinking seriously about more fuel efficient hybrid cars, younger Americans seemed less interested in owning an automobile, and Baby Boomers were driving less. With those shifts underway, climate activists hoped that US gasoline consumption would not resume its steady rise once the economy recovered.
But gas prices plummeted in the past 2 years to levels not seen since 2009. Also, the US economy has gradually improved to the point where people feel they can dump their old car with 200,000+ miles on it and get a new car or at least a newer one. Now, Americans are driving more, which means carbon emissions from automobiles are on the rise.
“In most places, gas is at the lowest prices we’ve been for 6.5 years,” said Tom Kloza, global head for energy analysis at the Oil Price Information Service, a data provider and the owner of GasBuddy.com “We’ve seen a surge in demand. This has been the first summer since the recession that the concept of a driving season has been more real than mythical.”
In California, one of the world’s largest gasoline markets, gasoline use rose 11.7% in 2014 to 14.7 billion gallons. Through the first four months of 2015, gasoline consumption is up 3.5% even though a refinery outage bumped California’s prices well above the national average. The state is on pace to use almost as much gasoline this year as it did in 2006, when it set the all-time record by guzzling 15.8 billion gallons of gasoline in 12 months.
According to TrueCar, now is the time to get your best deal on an electric or hybrid car. “Fuel savings are not top of mind to many consumers right now, and that makes this a great time to buy a hybrid or electric vehicle,” said John Krafcik, president of TrueCar. “With gasoline prices now averaging just $2.10 per gallon, and vehicle preferences tied so closely to short-term gasoline prices, automakers are heavily discounting their most fuel-efficient cars to clear inventories.”
For example, buyers of the electric Ford Focus can get 16% off the MSRP right now, and Prius buyers can save 10% off that car’s $25,025 sticker price. Thanks to the plunge in gasoline prices, interest in high mileage, eco-friendly vehicles is waning and manufacturers are having to discount their inventory to move those cars off dealers’ lots.
“Gasoline prices and vehicle type preferences are strongly related, and this relationship is cyclical in nature,” said Krafcik. “Fuel is relatively inexpensive right now, but when the pendulum swings the other way it will make future alternative fuel vehicles more appealing.”
While low prices are good for consumers, they are not necessarily good for the environment. Even though the world is awash in cheap oil right now, should we be content to celebrate like there’s no tomorrow? Should consumers demand that GM start producing its ginormous, gas sucking HUMMER behemoths again?
Say what you will about governments and regulations, we car buyers now have the ability to buy some of the cleanest burning, most efficient vehicles in history. Today’s cars have fewer greenhouse gas emissions than the trusty horses our grandparents relied upon. Emissions and gas mileage standards are not going to be relaxed even if gas is free. The world simply can’t afford to party like it’s 1999.
Remember, this is Gas 2.0, where our motto is “Burn rubber, not gasoline.” We are all about a future fueled by clean, renewable energy. Cars that offer an alternative to gasoline are coming, ready or not. BMW just announced that it is retooling its entire fleet of cars from 3 Series sedans to every Rolls Royce to run on electric power exclusively. What internal combustion engines they have will perform range extender duty only.
So what should low gas prices mean to you? Only that you should use this opportunity to trade in the old family bus on a modern, high efficiency automobile and save some cash at the same time. That’s the smart thing to do.
Gas prices in the U.S. have hit a four-year low in the past week, which some are pointing to as the cause of slowing green car (but not plug-in!) car sales. But as Bloomberg so pointedly makes clear, anybody rich enough to afford a Tesla Model S probably isn’t too concerned with gas prices.
After all, with a starting price of $71,000 the Model S is well beyond the means of the average American. While it is certainly cheaper to operate to a comparable conventional car (or just about any car really), unless it is literally your job to drive, it’s difficult to make a cost-savings argument for the Model S. Simply put, if you can afford to buy a brand new Tesla, gas prices probably aren’t much of a concerns.
Unfortunately for Tesla, investors don’t quite see it that way, and low gas prices have spooked investors, sending the TSLA stock spiraling down towards $200 a share (as of this writing TSLA sits at $209 a share). For some this is the long-awaited burst of the inflated Tesla stock price; for others though it’s seen as a chance to buy up some hot stocks for cheap.
Bloomberg is right in a sense, but they shouldn’t underestimate the persuasion of a lower operating cost either. Rich people usually don’t get that way by spending frivolously, and Norway has proven that generous cash and driving incentives can get people into electric cars more willingly than talking about their environmental credentials. Lower gas prices could make the Cadillac Escalade a more tempting proposition versus the Tesla Model X, especially when the latter has a waiting list of close to two years even if you put in your order today.
When you take those incentives away, plug-in car sales are bound to fall, and I’m not sure Tesla will be entirely immune from the consequences of lower gas prices.
Despite regional conflicts and unrest that has taken 4% of the world’s oil production offline, weak demand has kept prices relatively steady. This is good news for consumers, but bad news for oil companies, many of which have taken on tons of deb.
The International Energy Agency, or IEA, has scaled back its yearly production expectations by some 180,000 barrels per day, based largely on weak demand from the U.S. and European markets. Even China, which has been a big buyer of oil over recent years, is curbing its appetite for fossil fuels as it looks to curb carbon emissions by promoting generous electric vehicle incentives. Meanwhile more-developed Western economies are getting used to more efficient vehicles, which are going farther and farther on a single gallon of gas. In the U.S. for example, the average MPG of new cars is over 25 MPG, up from just 20.8 MPG in 2008.
This lowered demand means prices aren’t inflating like they did back in 2008, even though traditional oil-producing nations like Libya and Nigeria has seen production slowed to a trickle. Meanwhile Russia and Iran’s oil production has been hit by Western sanctions for not being good global citizens, which a few years ago would have contributed to skyrocketing oil prices. But just go to just about any gas station in America, and you’ll see that prices are more-or-less par for the course.
None of this is good news for oil companies, which have invested heavily into finding new sources of oil, often in far off, remote areas. Oil companies need demand, and hence prices, to rise in order to fund this exploration, as well as production methods like wringing oil from the Canadian tar sands, which is a costly process requiring huge upfront costs. The IEA estimates that the 127 oil and gas companies it analyzed have taken on some $106 billion of additional debt, while selling off some $73 billion, reports The Telegraph.
With global worldwide oil revenue stagnating at around $568 billion, this means oil companies are approaching dangerous levels of debt, and the future isn’t looking much better as more efficient hybrid and gasless electric and hydrogen cars gain in popularity. But there’s also the increased likelihood that oil prices could suddenly skyrocket, as a lack of exploration combined with increased regional conflicts could mean that suddenly, there’s not enough oil to go around.
It also doesn’t mean the era of Big Oil is over. But the days of easy oil, and easy money, appear to be at an end…and green energy might finally start to gain an upper hand on an aging industry from another era.
Natural gas has been in the news a lot recently, whether it’s been about the explosion in New York, Ford’s adoption of CNG as a fuel, or President Obama’s push to take natural gas to the mainstream– you can’t argue that the future of natural gas is very much a topic of conversation. So, how will the current Crisis/civil war in Ukraine impact natural gas prices around the world?
That’s the question the Oxford Institute set to answer. You can read about it here in a piece by Karel Beckman that originally appeared on the Energy Post. Enjoy!
What the Crisis in Ukraine Means for Natural Gas Markets
Originally published on Energy Post. By Karel Beckman. A new report by the Oxford Institute for Energy Studies discusses what the current Ukrainian crisis could mean for EU and global gas markets. According to the report, “The change of government…
We’ve spent a lot of time covering the Keystone pipeline here on Gas 2, and despite all the evidence of price-gouging, the lies about ethanol, the lies about AAA warnings, the laughable attempts at fear-mongering by CEOs, and record after record falling to alt-fuel powered vehicles, there are still millions of Americans who think it’s a good idea to believe what “Big Oil” tells them about the Keystone’s safety. Millions. Some polls show public support over 40%. Numbers like that make me think of this clip from South Park …
… and then I remember: the Keystone is only one small part of a very big problem.
Here’s a quick rundown of three more controversial pipelines, each as big a threat to wildlife, drinking water, air quality, and quality beer as the Keystone XL. “Enjoy” just doesn’t quite cut it, but “read, share, and act” probably does.
You won’t hear much about the Keystone pipeline in the mainstream press, but you’re here reading CleanTechnica, so you already know that. As our recent post covering the March 29th ExxonMobil Pegasus pipeline oil spill also made clear, there are…
A newly released report by the nonprofit group Consumer Watchdog shows that Keystone XL will not decrease gas prices in the U.S., and will actually have the opposite effect: raising gas prices 20-40 cents per gallon in the Midwestern U.S.
How is that possible? The answer lies in the fact that the Keystone XL pipeline is not being built to benefit Americans at all: it’s being built simply to get dirty Tar Sands oil a cheap passage to ocean shipping lanes so that Canada can sell its oil to China and other foreign markets.
Currently, oil extracted from tar sands (aka Bitumen) in Alberta is mostly sold in local markets, like the U.S. midwest, at about $70 per barrel. But if oil companies are able to get that oil out to global markets like China, they can charge $100 per barrel. The Consumer Watchdog report shows that that oil will easily be diverted to higher profit export if the Keystone XL pipeline is built. Losing that less expensive source of oil, the U.S. would see prices higher at the pump as far west as California.
Judy Dugan, the co-author of the Consumer Watchdog report, said, “Any reduction of deliveries to Midwest refineries would crimp gasoline supply, further driving up pump prices, and Keystone XL’s backers want to move cheap oil out of the Midwest. Many major Midwest refineries have also made expensive changes to maximize their use of the tar sands oil and could not operate as efficiently using different grades of oil from other sources.”
Here’s a video explaining more:
Tar sand oil may be the worst environmental disaster mankind has ever unleashed on his fellow citizens and the world. According to author Andrew Nikiforuk, it creates three times as much greenhouse gas to produce one barrel of bitumen as it does for conventional oil. In addition, Nikiforuk writes about the subsidies given to oil companies, both direct and indirect. Part of this is to cover the giant open pit mines often created to extract bitumen: “Canadian taxpayers, who made $150 million [Canadian] in royalties from mining activities between 1966 and 2002, have spent more than $4 billion tidying up scores of contaminated sites”. Further complicating the process is that highly toxic petroleum coke (petcoke) is a byproduct of refining tar sands oil, and petcoke is among the dirtiest fuels in the world.
Who is really benefiting?
Keystone’s proponents long insisted that if we didn’t build the Keystone XL pipeline in the U.S., then the oil would simply be shipped through Canada and off to China. That idea was rejected strongly by the British Columbia government in June, which cited the potential despoiling of one of Canada’s greatest natural treasures, the Great Bear Rainforest, home to indigenous communities, Spirit Bears, pristine salmon rookeries, as well as a great number of other natural resources that create jobs and sustenance.
That rejection gave new strength to opponents of Keystone XL in the U.S., who are further bolstered by the lack of evidence of any long term job creation and economic development being promised by oil companies and TransCanada, the company chiefly behind the Keystone XL proposal. This lack of proof of long term economic benefit, coupled with potentially very substantial environmental destruction, and higher gas prices for U.S. drivers is all covered in the Consumer Watchdog report (which you can download here in PDF form).
And, as it turns out, the main beneficiaries of any construction on Keystone XL will be the Koch Brothers (who regularly buy and sell politicians, lobby against renewable energy, and promote anti-sustainability efforts in higher education), ExxonMobil, Shell, ConocoPhillips, Chevron, and others.
None of whom need any more money. Here’s a graphic from the report showing who owns the Tar Sands, and who owns the Gulf Coast refineries. It this picture doesn’t tell a thousand words…
This article was supported by Social Stream Media, LLC
The anti-ethanol lobbyists really know how to appeal to the lowest common denominator, I’ll give ’em that. “Ethanol is bad for cars!” is one of my favorite hysterical, know-nothing battle cries. The other is “Corn is for food, not fuel!”
The food/fuel “debate” has bascially run like this: a bunch of anti-ethanol, pro-oil corporatists and climate-change denying GOP puppet groups make false, un-backed claims about ethanol raising the costs of food, farmers (you know, the people actually growing the food) say, “No, no- it’s climate change and high gas prices that’s driving up the cost of fuel.” and we go round and round.
The latest crazy-pants to write down a bunch of pseudo-scientific nonsense on the topic of food/fuel is radical neo-liberal Lester Brown, whos is definitely full of
shit brown stuff.
The article originally appeared on our sister site, Sustainablog, which gave this Les Brown jacka** a forum to shout his record profit-having oil industry buddies’ crack-a-ganda from for some reason that I cannot fathom.
So, if you want to build up some proper Saturday morning rage, read on (I made thee mistake of doing so, and the result is the rant you just read). If you have better things to do that upset yourself by reading the pseudo-scientific work of idiots that were seemingly bought and paid for by oil lobbyists, just shut this down and go do those things.
I’ll see you tomorrow. 🙂
Editor’s note: We’re proud to support the Earth Policy Institute’s online publication of Lester Brown’s most recent book Full Planet, Empty Plates by publishing selections from the book. If you missed other installments, you can find them…
“For 20 years, the rule of thumb was that if you made $5 a barrel east of the Rockies, that was a good profit for a refinery,” says Tom Kloza, chief oil analyst at the Oil Price Information Service. Tom’s company exists solely to track energy markets, and what he found should enrage pretty much everyone. Over the past 2 years, Tom “saw a period in the Midwest where refiners were making $40, or $50, or even $60 on a barrel on gasoline.”
That’s right kids, since gas prices peaked in 2008, the cost of oil has gone down sharply. More to the point, the cost to manufacturers- the cost of getting fuel to you, the consumer, has gone way down … but many Americans “haven’t seen a corresponding decrease in gasoline prices.” This is happening, in a recession, even as record windfall profits flow to BP, Koch Industries Inc. and other large, Midwestern oil refiners.
According to industry experts, the correlation between the price of oil, the cost to produce gasoline, and the retail price of gas at the pump has become so utterly f***ing wonky (that’s a scientific term, by the way) that it calls into question one of the central benefits touted by those
“Drill, baby! Drill” retards supporters of the Keystone XL pipeline: that the project would lower American gas prices by providing Gulf Coast refiners with a steady flow of cheaper oil from Canada.
Insert profanity-laced rant about Big Oil, the Koch Brothers, BP, etc. etc. (Sorry Jo, – Ed)
This price gouging is most evident in the Midwest, where “we’ve had crazy up and we’ve had crazy down” said Kloza. “Everything we’ve seen so far in 2013 in the Midwest has had nothing to do with crude. It’s had nothing to do with Keystone.”
Here’s an industry analyst- another industry analyst, I should say, that says the Keystone pipeline’s proliferation of dirty oil won’t lower prices.
What about my claims of oil refinery price gouging? Wikipedia (hardly an authority, I know – but just go with it) defines Price Gouging as “a pejorative term referring to a situation in which a seller prices goods or commodities much higher than is considered reasonable or fair. This rapid increase in prices occurs after a demand or supply shock: examples include price increases after hurricanes or other natural disasters.” Let’s see how this stacks up, shall we?
Criteria 1: CHECK!
A situation in which a seller prices goods or commodities much higher than is considered reasonable or fair? We have an 800-1000% more profits than historical norms leading to unprecedented record profits
Criteria 2: CHECK!
A rapid increase in prices occurs after a demand or supply shock? Gas prices shot up during the 2008 summer spike (which was caused by a spike in oil prices), but didn’t follow production costs (supply) back down.
Looks like we’ve got price gouging! All we need to do now is find some noble attorneys willing to sue these oil refining bastards back to the stone age or – better yet! – skip their bulls*** entirely and just use ethanol.
Yeah, I like that one.
PS: Big Oil is the Devil.
The price gap between ethanol prices and gasoline continues to widen, according Bloomberg, who says the “discount”, or the cost incentive to choose ethanol over gas has increased from “0.26 cents to 36.55 cents a gallon, the steepest since April 26, as a June 5 Energy Information Administration report showed production climbed to the highest level in more than 11 months.”
“It just seems like a lot of gallons have showed up,” said Jim Damask, a broker at StarFuels Inc. in Jupiter, Florida who cites that supply for (ethanol) has gone up, but demand remains relatively low. “We’re seeing a lot of physical for sale and not a lot of buyers.”
Why are Ethanol Prices So Low!?
That lack of demand probably has a lot to do with deliberate lies spread by Big Oil lobbyists, bogus studies by GOP puppet-groups claiming ethanol production leads to higher food prices,
old-school backwards mechanics who incorrectly claim that ethanol detracts from engine performance, and the false impression that ethanol production benefits from more government subsidies than oil or gasoline.
That’s just my thinking out loud, of course – but there is no question that demand for octane-boosting ethanol as a fuel is lower than it has been. Bloomberg states that “ethanol-blended gasoline made up 89 percent of the total U.S. gasoline pool last week, the least since Feb.”
February? Isn’t that about the same time Big Oil got their a**es handed to them in this landmark court case? Why – yes, it is! No wonder they’ve kicked their marketing machine into overdrive!
Here’s hoping that the American citizens wise up. Or, at least, that they start to take advantage of low ethanol prices and just happen to help clean up the air, produce American jobs, and advance the cause of renewable, domestic fuels.
You can check out the original Bloomberg piece at the link, below. Also, in deference to Adventure Time’s copyrights, that’s “Jack the Corn Dog”, not in any way “Jake the Awesome Adventure Time Dog”.
According to the United States EIA (Energy Information Administration), the average U.S household spent $2,912 refueling their vehicles last year. That is 8.8% of the average American’s income, a record high.
According to the EIA, that is the highest amount of money spent on fuel in almost 30 years, except for 2008 due to a massive oil price spike (to $147 per barrel) that took place during that year. Oil prices plummeted after that in December 2008, and in 2009 to the ~$35 per barrel range because oil demand decreased significantly. People simply could not afford $147 per barrel of oil and gas prices that exceeded $5 per gallon in some areas.
We know that high fuel demand is often the cause of high fuel expenditure, however, this time, it is high fuel prices. Gasoline consumption actually decreased to it’s lowest level since 2001. Gas prices, however rose 26.1% in 2011 (partly due to conflicts in the Middle East), and another 3.3% in 2012, which is a bit higher than the 2.9% increase of average household income.
There are so many statistics to take into consideration, making this a complex issue. We should also add that automobiles in general have become more efficient. Even SUVs and pickup trucks have seen their fuel economy increase. That said, they still consume considerably more gasoline than sedans, and with the economy making a comeback, gas costs seem set to only go up.
It’s Memorial Day weekend and we just finished watching
a 78-lap single-file parade the Monaco Grand Prix. The 96th running of the Indianapolis 500 will be underway here shortly. It’s a beautiful, sunny day in Chicago.
In other words: there is no way I’m getting any serious writing done this morning.
SO, here’s a terrific Cleantechnica article that explains why GM is having such a hard time selling their full-size pickups and SUVs and why the tiny Prius C is the fastest-selling car on dealer lots, taking just 8 days to turn.
Americans Say Fuel Economy Primary Car Buying Factor, Says Consumer Reports Survey (via Clean Technica)
Call it a case of bad gas, bad gas prices, or both. It’s a familiar story: Any time fuel prices approach near record levels, American consumers tend to drive less and start serious discussions about buying smaller, more fuel-efficient vehicles. So says a recent survey by Consumer Reports. According…