I reported on it last week in How Quickly We Forget, but the Houston Chronicle yesterday reiterated the point the people are reverting to bad habits:
GM exec complains ‘nobody wants’ small cars now
General Motors Corp. Vice Chairman Robert Lutz said lower fuel prices are discouraging U.S. sales of small cars and gasoline-electric hybrid vehicles.
Gasoline prices “are completely messing it up,” Lutz said today in a Bloomberg interview, referring to demand for small vehicles. “Nobody wants them.”
Lutz endorses the same fix that I have proposed:
Lutz drew parallels to government cigarette taxes that pushed the price of a carton to more than $20.
“That’s the way the market mechanisms work,” he said. “Guess what, cigarettes are so expensive that people weaned themselves off.”
While I of course strongly agree that price is the mechanism that moves people to action (or inaction), there is a bit of irony in that statement, given that the market mechanism currently has Lutz and his fellow automakers asking the government for a big bailout.
They aren’t selling much of anything Robert. Sure,they can move a few trucks and SUV’s out the door if they sell them at cost. A $7000 discount will buy a lot of gas. Still,demand for gasoline is lower at $1.59 a gallon than it was at $3.99 a year ago. That shows just how deep this recession is.
This is why CAFE is the wrong way to manage fuel economy. It holds automakers responsible for consumer preferences. It is better to tax gasoline or to impose a fuel economy tax and rebate around the desired fleet averages. There are a number of fuel savings that could be implemented quickly and cheaply:
* Reduce weight
* MPG and performance displays
* Replace mechanical cooling fan with electric
* Electric driven power steering
* Six speed auto transmissions or CVT
* Dual clutch manual transmissions
* Low rolling resistance tires
* Improved aerodynamics
* Auto engine stop or shift to neutral at stop
* Regenerative braking alternator
* Direct fuel injection
* Variable valve lift and timing
To show how out of touch Detroit is, how stupid is the comparison with smoking and using gasoline. As a non-smoker when almost all my family did and everyone in the navy did, I could see no benefit while clearly there is a whole list of negatives.
Now that the socialists have taxed the hell out of cigarettes, I have to suffer through lectures telling me not smoke.
The socialists have defined the ICE and larger POV as bad. Their solution is to tax it. While I may agree with a social agenda to not waste energy or cause harm to others with pollution, the socialist approach of behavior manipulation is doomed to fail.
This is why I like ethanol. It is a solution that is working and improving every day. I do not have to manipulate anyone to have a 10% mix. The socialists are against things that work like ethanol and nuclear power and trot out a list of bogus reasons.
Since I am on the production end of energy, I do not see a problem with meeting demand. When socialists blame hunger on biofuels, I look for the root cause of hunger and correct that. There are some evil folks in the world who control their population by controlling the food supply.
To be sure, I am not defending boneheads that buy a Humve to be like Rambo but increasing gas tax punishes all.
A bit OT, but time for a confession. Inspired by RR, I kept much better records of the KoK family energy usage this year. The reason to do so is to make better informed buying decisions in the future. You really need to know how much you drive and how much fuel you actually use in order to conserve more.
Here are our results. Our fleet is a Jeep Liberty, GMC Yukon, and Ford Ranger truck. In 2008 my wife and I drove a combined 33,977 miles consuming 2,016 gallons of gasoline for a combined average of 16.9. We paid an average of $2.94 per gallon for a total fuel cost of $5,927. The highest we paid for gasoline was $3.90 (6/29)and the lowest $1.34 (12/13).
The Yukon sat in the garage most of the summer – long enough to kill off the battery. Most of the miles were driven on the Ranger and the Jeep. I am surprised at the total number of miles we drove. I have a 30 mile daily commute. We spent a lot of time getting kids to activities.
We needed the 7 passenger Yukon to haul kids around. We should replace it with a car or high MPG SUV. But I think we’ll wait until 2010 when there should be more choices. I have to convince the wife though. My main commute vehicle already gets 26 MPG.
Ethanol isn’t the choice of a free market either. The “socialists” decided to subsidize it.
There is both a subsidy and a mandate to put ethanol in gasoline. So we all get to subsidize Iowa and Nebraska’s ethanol blending even though they don’t need it to comply with the Clean Air Act. That and the fact that producing ethanol from corn, neat, is the only way you can get the blend credit. If I want to make ethanol from excess potatoes or sugar cane, too bad. Maybe I want to chuck biomass into a gasifier and make ethanol from the syngas – so sorry, that doesn’t qualify. Or if I chose to produce ethanol at a refinery and use waste heat and gasoline blend streams to optimize the distillation steps – I’m equally out of luck, even if I started with corn.
The WSJ had this today: Gas Engines to get Upgrades to Challenge Hybrids
The automotive section in the paper this morning had an article on the EPA rating of the new Ford Fusion hybrid. 41 City / 36 highway is pretty impressive. The Fusion V6 SEL gets 18/26. I’ve been doing the math on hybrids for 10 years. The Fusion may be the first one to actually pay off. Ford could charge up to $6,000 more for it and still yield about a 7% return at $3 gas. This could be the first hybrid I actually endorse!
Actually under the 2005 Energy Bill there was a small set of incentives to stimulate the free market to make the best choices for biofuel. Some companies will succeed and some will fail. Looking at the 2007, a mandate that is too may be large has been created.
Bush’s ethanol policy was been a success because we are producing ethanol with a new generation of technology. However, before we increased mandates we should have evaluated new technology based on performance. Government should let business fail sometimes.
For the record, I carefully evaluated renewable energy 2005 Energy Bill because the projects I has been working on were wind down and I was looking for new business opportunities. I thought it was very good legislations and results have proved it. I have not looked at what the dems did when in control in 2007. I will not comment on the merit because I had too much work to look for more. Overtime is for the young guys.
@King
I would not swear to it but I do not think that there is any mandate for corn specifically. Corn may have a economic advantage. I also know of facilities that use heat generated by biogas.
In any case, I found nothing from any journalist that indicated that they had read the details of the legislation and resulting regulation.
We all hate taxes, and inefficient and sometimes intrusive government apparatus.
But, anarchy is not an option.
An unfortunate second reality is that while I and most Americans actually subscribe to the ideas of free speech and enterprise, it ain’t that way around the world. Bad people can organize and gain control of entire nations.
A third consideration is pollution, which the unfettered free market system has no answer for.
For all of these reasons, I support stiff gasoline taxes. Consumers respond only, and I mean only, to price signals (I mildly disagree with RR on this). Certainly as a group.
Increase the federal gasoline tax by 50 cents a year, for eight straight years. Announce it. Detroit will know what to do, consumers will figure it out, and our oil consumption would go down for decades in a row, a couple percent or so every year.
Over the decades, literally trillions of dollars would stay in our economy, creating jobs for Americans, rather than financing lunatic petro-dictators and thug states.
If consumers moved to PHEVs (and I think they would), air pollution in cities would start reducing every year too.
And, if gasoline taxes were offset by lower income and wage taxes, we could have less government intrusion.
Imagine a federal tax form that says, “Did you make less than $100,000 in 2009? If so, send back this postcard with the word “Yes.” Your federal taxes are done. We collected at the pump.”
To be sure, higher income brackets would still have to endure all the unfortunate trappings and inequities of tax collection.
But at least the Average Joe could be freed up a bit.
KingofKaty: Great to see your posts again. An LA Times reviewer said he managed to get more than 50 mpg on the Ford Fusion hybrid. Evidently, if you light-foot it, you can even top the reported mpg on the sticker.
“Corn may have a economic advantage.”
Corn’s only advantage is a legion of lobbyists and Corn Belt politicians that have never seen an ag subsidy they didn’t like.
Remember: One’s person subsidy is another person’s tax.
Correction. The blend credit was exteneded to feedstocks other than corn beginning in 2005. You still have to make a 190 proof blend. From the KS Grains Association:
In order to qualify for the excise tax credit, the alcohol may not be produced from petroleum, natural gas, or coal (including peat). For purposes of claiming the 51 cents per gallon credit, the alcohol is required to have a proof of at least 190 (determined without regard to any added denaturants).
That is better, I suppose. When I filled up yesterday at a nearby grocery store I noticed they had 1 pump with E85 selling for $1.20 vs. $1.50 for E10.
Benny – I read the LA Times blog too. He managed to get 52 MPG by not engaging the IC. I regularly now get 35 MPG on my commutes to work in the Ford Ranger which is rated at just 26 MPG highway. It is the short in-town driving that kills my fuel economy..
Someone will surely aftermarket a battery recharge kit to make the Fusion a PHEV. For my wife’s short trips around the suburbs she might rarely need the IC engine.
If the price is indeed $27k with a Federal Tax credit, I might go for it when the time comes to trade up.
If the cover of today’s WSJ is a clue, people are not going to be buying small cars, or any cars at all. Global trade is collapsing.
Japan is reporting a 27 percent decline in exports in Vovember, y-o-y. US trade activity down 18 percent in four months, and still sinking.
I fervently hope I am wrong, but I don’t see how this turns around any time soon.
The regional Far East recession of 1997-8 saw oil hit $10 a barrel. How is it going to be different this time, with a global recession?
Thanks, KitP, that was pretty hilarious!
This is why I like ethanol. It is a solution that is working and improving every day.
Stop! STOP! My stomach is hurting!
I do not have to manipulate anyone to have a 10% mix.
Please tell me you are kidding! Hint: where would that 10% be without the bogus (socialist?)requirement for oxygenates?
When socialists blame hunger on biofuels…
You are going to deny that corn ethanol increased the price of corn!?! Go ahead, I’d like to read that explanation. I am wondering whether you can make it any more humorous?
There are some evil folks in the world who control their population by controlling the food supply.
As a good friend of mine once said: The irrelevance of that statement amazes me…
Bush’s ethanol policy was been a success because we are producing ethanol with a new generation of technology. However, before we increased mandates we should have evaluated new technology based on performance.
New generation of technology? Where is that? Distillation is ~4,000 years old. Fermentation goes back (at least) to Noah getting out of the ark (make that ~6,000 years ago). The rest is minor improvements.
You should call Dubya, he’d love to have someone like you to discuss his successes with!
Government should let business fail sometimes.
Amen to that! Start with the Dead 2 in Detroit. Same on Wall Street. So long ethanol distilleries.
I’m starting to come around to your way of thinking on the demand side Benny. This is an excerpt from an article on November’s trade deficit. The figures were released yesterday.
“In volume terms, the amount of oil imported declined 19.3% to 261.60 million barrels in November from 324.19 million in October.”
Holy cow Batman! 19% in one month? Where does the IEA pull its estimates from,thin air? They say demand will fall 800,000 barrels worldwide. If we import 60% of our oil,demand fell 2.4M bpd in November alone….and that’s just in the US. I’m left to wonder what will happen to prices once the world runs out of storage space. You could be right about $10 oil Benny. Btw,November’s trade deficit was 28% smaller than Octobers,which helps explain why the dollar keeps getting stronger.
Maury-
I have been watching business and economics stats closely for decades. I have never seen so many output figures collapse so quickly, as in the last quarter of 2008. It is “poof.”
Add to that conservation momentum generated by 10 years of rising oil prices (1998-2008).
Right now, Canadian pipelines are backed up with oil, Cushing is flooded, sea tankers are being used for storage, and so forth. Some of this is due to contango–if you can afford it, you can buy oil now, put it in a tanker, and contract to sell it at a higher, fixed price in the future.
I do not know why anybody would agree to buy oil next year at $60. Unless it is an oil exporter trying to game prices higher.
Sooner or later, this game will bust too. Next year, when oil demand is down another 5-10 percent, all this oil on tankers will have to offloaded somewhere. Into a glutted market.
No, oil cannot stay at $10. Eventually, production will dry up. But in the short-run, the lower price will not stimulate demand much–demand for oil is price inelastic in the medium-term.
People will “give the stuff away” rather than pay for storage.
I dearly hope I am wrong. I hope we get a worldwide smasheroo economic boom next year.
But hoping and what happens are two different things.
Anyway, my advice is wait for $10 oil, then buy COP or Shell, or maybe palm oil stocks in Thailand.
But we may not see $147 oil for another 20 years. A reprise of the $40 oil 1980. We did not see $40 again for more than 20 years.
Still, at $10 or thereabouts, you gotta be buying near the bottom, and collecting a yield from COP or Shell while you wait. But it could be a long wait.
Well, that’s how it works out on paper. Real life tends to gum up the best of plans.
In addition to low fuel prices, those of us in the north are being reminded why we wanted those big SUVs in the first place. We are getting pounded by the most brutal winter in recent memory.
It’s good for snowmobiles, ice fishing and 4 wheel drive vehicles. It is very bad for light cars and batteries. Even lighter cars with bigger batteries would be a problem.
“…4 wheel drive vehicles.”
4WD just means getting stuck further from help.
I would think mounting the batteries over the driving wheels would get you pretty good traction. EVs have very good low end torque which ICEs suck at. I used to have a light compact deathmobile with FWD and got pretty good traction back when I lived in Chicago and had to worry about snow.
I don’t need a big SUV to have 4WD. My little Subaru gives me AWD all the time. Contrary to Lutz’s complaint, I like small cars with mysteriously large trunks that astonish people with the furniture I manage to bring home in them.
The battery performance is going to suck in the cold weather so it’s going to be a long time before they sell BEVs outside of southern california anyways.
“It’s good for snowmobiles, ice fishing and 4 wheel drive vehicles. It is very bad for light cars and batteries. Even lighter cars with bigger batteries would be a problem.”
Sorry but for 3 out of 4 years going to college in upstate NY I drove around in a little Kia Rio and never had a problem. I hate it when people act like they HAVE to have a big car if it snows where they live.
I have been driving in snow for many years (all my life) and I have done it in all types of vehicles. Ranging in size from GEO Metro to Conversion van. I have driven with rear wheel drive, front wheel drive and 4 wheel drive. If I am driving in snow, my preference would be 4WD, no contest. Other vehicles work but 4WD is by far the best.
So whats the point? We want more fuel efficiency. Proposed solutions include making vehicles lighter and going electric. But ice and snow pose a problem with traction for light vehicles and the cold will cause problems with EV batteries.
Subarus are nice vehicles and their standard equipment includes a collection of Indigo Girls CDs. The problem is, if you drive one to a Melissa Etheridge concert, you might have trouble figuring out which one is yours.
If I had my choice, I would have a Rio for the commute and a big family truckster. But I can’t afford that many vehicles and my commute is short. So it’s truckster all around.
So the problem with the AWD Subaru is not that they can’t handle the snow and the brutal winters, or that you can’t throw some sandbags in the back if you want more weight for traction. The Subaru functions just fine physically in the wintry north, the only problem is what kind of music you listen to. So the real reason you want a big SUV is not function, it’s image.
The above was re: Dennis Moore’s
“Subarus are nice vehicles and their standard equipment includes a collection of Indigo Girls CDs. The problem is, if you drive one to a Melissa Etheridge concert, you might have trouble figuring out which one is yours.“
I went to a Melissa concert but I didn’t drive a suburu so my car was easy to find.
I am all about function and value. With a big family and lots of stuff to haul, a Subaru doesn’t pass the function test for me. I’m sure they are very nice cars.
Although they are not as bad as a Toyonda Pious, the Subaru smug emissions seem to be a little high…
If you want a big vehicle because you need all that hauling capacity, I have no problem with that, but that wasn’t the reason you gave previously, which was:
In addition to low fuel prices, those of us in the north are being reminded why we wanted those big SUVs in the first place. We are getting pounded by the most brutal winter in recent memory.
It’s good for snowmobiles, ice fishing and 4 wheel drive vehicles. It is very bad for light cars and batteries. Even lighter cars with bigger batteries would be a problem.
I think it’s a bit disingenuous to say you want a big SUV because of the brutal winters, when it’s really about hauling capacity and what music you listen to.
I don’t care for Melissa Etheridge’s music myself, so I don’t have trouble finding my winter-ready AWD Subaru.
Well, I didn’t expect some sort of Spanish Inquisition.
Last summer, when gas was approaching $4/gal, the people with SUVs complained about their gas guzzlers. Now gas is cheap and the snow is deep. And they are all very happy to have them.
I don’t have one but there have been a number of times this winter when I would really have liked to have one. Be it driving a couple of hundred miles in a snow storm or getting out of a slippery parking lot. But you are right, there has not been a single time that I absolutely needed one.
Have you absolutely needed your AWD Subaru? or do you think you could get by with a more fuel efficient front wheel drive vehicle. Maybe Mafiosa’s Kia Rio, they certianly get better mileage that any Subaru.
Well don’t worry about it, I think you and your Subaru are great. I’ll just give you a big thumbs up, close my eyes and say, “Good for youuuuu!”
Nope, I’ve never absolutely needed my AWD Subaru, though it has come in handy at times. But then I never claimed that I wanted a Subaru or a big SUV or a sheep bladder for the brutal winters, when the 4WD/AWD was the relevant feature. I’m sure I could get a small hybrid 4WD SUV of even a small 4WD Jeep for brutal winters that is more fuel efficient than my Subaru, so there’s no Subaru smug emissions to be had here.