Cash-for-Clunkers

According to the Detroit News a cash-for-clunkers program is coming to America. From the sounds of it the program applies to vehicles getting 18 mpg or less. The real strange part is that to qualify for the incentive you need to only buy a new vehicle that has a 2 mpg improvement on what you already have. HybridCarBlog outlines briefly how the program is designed.

I don't really have much to say about this program because it makes so little sense that I don't know what to say. Overall, it looks like another corporate welfare scheme where current SUV owners can trade in for a new SUV. Coincidentally, SUV sales are where automakers made their profits. Any bets on gas prices this summer?

Another Homegrown Electric Car

A while ago I wrote about a 17 year-old converting a car to electric. I was looking for stories about converting an older car to electric and came across a gentleman who converted an '86 VW Scirocco to all electric. At that time he figured he would get ahead when gas was $2 a gallon. I guess he is really happy now.

I can imagine it will only be a matter of time before this becomes commonplace. You'll be able to take your old car that you would normally scrap and have it retrofitted for electric. Can't wait.

Are High Oil Prices Changing Behavior?

This period of sustained, high oil prices could change consumer behavior significantly. Commuting costs are skyrocketing for everybody and the further you live from work the more it is going to cost. The further you live from a major urban area chances are your house is worth less too. Calculated Risk has a short and sweet analysis with great links on the economics of all this.

The question now is whether this will last long enough to get from the talking stage to the action stage. Will people actually do something or just complain? If oil prices fall will we learn our lesson and not revert back to the way we were?

The true test comes if prices decline. If speculation and the risk premium are taken out combined with a demand reduction and increase in the U.S. dollar the price could drop to as low as $70. That is a perfect storm scenario but it could happen. As soon as it does will SUV sales spike and hybrids become cheap. Unless it lasts long enough to create an economic shift away from an oil based economy I'm not overly optimistic. Time will tell.

Higher Food Prices may be Healthy

An article by Sylvain Charlebois in the Globe and Mail this week discusses how higher food prices may be healthy. I can't link to the entire article since it is locked to subscribers so I'll do my best to summarize it. Basically, North America has not felt the impact of higher food prices yet because such a small proportion of spending, 9%, is on food. The food market currently produces cheap food with low nutritional value since consumers have decided to spend money elsewhere. As food prices inevitably rise, so will consumers scrutiny of what they buy. The last few paragraphs from the article:

Yet, if a consumer were obliged to pay more, he or she would ultimately care more about the nutritional value of the foods purchased. It's as simple as that. Consumers these days unthinkingly seek low prices, and don't seek good and safe foods as a matter of course.

As prices increase in time, consumers will need to acclimatize to this new reality. The cost and the value of calories will become more important to them and they will gauge these factors more judiciously.

In turn, with more wealth, the food industry will be better able to contribute to the common good. Assuring the quality of food products, especially their safety and nutrition levels, should be an increasing strategic priority for governments, the private sector and international trade agencies.

Ultimately, with progressively higher food retail prices, consumers' physical wellbeing can only improve.

I agree with the premise of his position and I look forward to watching this play out over the rest of this year. I think other factors will materialize as well. Locally produced goods will become more price competitive as transport costs increase for everything else. Rising corn prices might translate into costlier high fructose corn syrup and increase the prices on foods containing them. Accordingly, consumer demand will shift with the prices and healthier options will become more appealing on price. As gas prices rise convenience foods will be less necessary because nobody can afford to drive anywhere. However, consumer patterns are usually tied to prices and if gas prices drop then people may go back to the bad habits. Only time will tell.

Crude Reality

Crude oil prices continue to go up without any end in sight. Some decrease in gasoline demand is starting to materialize in the U.S. The crude reality is that no alternative exists. I know we have biofuels and fuel cells but they are not deployed on a mass market scale and do not totally solve the problem. We need to realize one fundamental point: we cannot drive everywhere we want, whenever we want cheaply and without polluting.

I saw a BP commercial that highlights their investments in new energy sources and alternatives. One of the people in the commercial basically says that nobody is talking about where the next energy source is. BP, and really all the large energy companies, don't talk about the real problem because it will put a serious dent in their business. One of the arguments against making investments to curb environmental damage is that we don't want to sacrifice "our way of life". Maybe our way of life is the problem.

Deadly Brew: The Human Toll of Ethanol

There has been a documentary called Deadly Brew: The Human Toll of Ethanol provided by Bloomberg Television recently. I haven't seen it but a short review at AutoblogGreen with a video clip is available. The commentary sounds interesting and the post raises a few points for debate as well.

I like the idea of ethanol but the political tinkering with it in the U.S. has made it an exercise in pork spending, which, ironically, raises the price of pork and other foods. We shall see what happens with ethanol but I'm not optimistic.

Ethanol is not the answer?

An interesting petition against ethanol promoted by Co-op America. It is intended to convince Ford and GM to invest in electric cars rather than support ethanol. The idea is that ethanol uses more energy and emissions to produce than it save. Check out the petition at the Co-op America site.

Electric Cars

I read an interesting list at Autoblog Green noting 10 electric cars that are available for purchase. Unlike the Chevy Volt or Tesla they are a little more readily available. I remember a few years ago reading about a company that would convert old Renaults into electric cars. That company, Feel Good Cars, now makes the ZENN, which stands for Zero Emissions No Noise. I like the look of it and on their site they have a calculation of conventional car costs compared to the ZENN. Maybe a little small depending on where you have to commute and the distance. I'm pretty excited about the availability of new technologies in the transportation sector. Some concerns are that while using plug-in electric vehicles will reduce CO2, it will be offset if they are charged by coal generated electricity. If your house is powered by solar or wind then I guess you could be carbon neutral on that front. Like any new technology, economies of scale and consumer demand will determine if it is viable in the longterm.

Fill 'er up

On Treehugger yesterday and on Autoblog Green today they both pointed out a Sierra Club review of the oil companies. Something to think about next time you go to fill up.

BP ranked as one of the better companies. I read the review of BP on the Sierra Club and didn't actually think they were that great. I didn't want to read any of the ones that were worse because I got a little nervous. They were also in the news today about their safety record. Nothing really good in that one either. Lots to think about next time you have to buy gas. While you're there and not really thinking about the price of gas anymore, take time to think about how low oil prices are compared to gas prices. Write some letters to the companies and political representatives who tell you it's supply and demand on world oil prices and all that jazz. Take a look at the Energy Information Administration website and review gasoline and crude inventories and compare it to retail and wholesale gasoline prices. Draw your own conclusions.