Daily Fuel Economy Tip

Out of Oil? Welcome to the Brave New World.

Unless you’ve been able to avoid the news for the last two years, you’re probably well aware of the fact that the price of crude oil has been on a strong and steady climb.

While there are some economists who claim that the major factors behind the dramatic increase in price are a weak dollar and out of control commodity traders, a vast majority of economists, ecologists and every day people are worried that the real answer is much simpler: we can’t produce enough oil to meet current demand and we’re quickly draining what supplies we have left.

Thanks to the industrialization of the two most populated countries in the world - China and India - the world-wide demand for oil and petroleum based products has soared over the past decade. Unfortunately, since oil is a finite commodity (there’s only so much left in the world, not to mention the fact that there isn’t much, if any, excess refining capacity) this increased demand has done two distinct things:

1. Driven the price of oil up nearly 75% in the last year alone
2. Drastically reduced the amount of the world’s remaining supply of oil

While I’m sure there are plenty of very educated people out there who have a pretty good idea how much oil is left, it seems that considering the wide range of time frames being given, it seems that even most people “in the know” are just guessing. So, I figured why not give Daily Fuel Economy Tip readers a chance to guess as well?!?

About a week ago I put up a poll which asked: “When do you think the world will run out of oil?” Well over 200 people responded, and this is what they had to say:

• 38% said we will run out of oil in more than 100 years
• 23% said we will run out of oil in less than 25 years
• 18% said we will run out of oil in 26 to 50 years
• 13% said we will run out of oil in 51 to 75 years
• 8% said we will run out of oil in 76 to 100 years

It certainly seems like there’s a pretty good split between those who think we have some time (38% for 100 + years) and those of us who think time is running out (41% for less than 50 years). It seems us common folk can do about as good of a job predicting future oil supplies as the so called “experts.”

Unfortunately, since most of the world’s expansion over the last 50 years can be directly attributed to cheap energy (specifically cheap oil) it really does feel as if we are on the cusp of a Brave New World. Will we experience hyper-inflation on everything from fuel to food? Will things like transcontinental flights be a thing of the past? Will we begin to see a gradual decrease in the world’s population?

I know that many of these questions seem rather absurd, especially when they’re looked at in the context of “the here and now.” However, when taking the long-term view, it’s actually very easy to see the world coming to a grinding halt thanks to a significant decline in the availability of oil. The reason being, less oil will have an enormous trickle-down effect.

Just look at the following examples of what could happen due to higher oil prices:

• Obviously, the price of most forms of energy will go through the roof. The price of all transportation fuels will skyrocket. In order to help combat these increased costs, people will become more urbanized and things like the suburbs will become a thing of the past.
• High transportation costs will cause a dramatic trickle-down effect on consumer prices as manufacturers have no choice to pass on the costs to their customers. No consumer product will be safe.
• Any petroleum based product (plastic anyone?) will undergo significant price increases. Do yourself a favor and try and pick out even one item near you that neither contains plastic nor was produced by anything containing plastic.
• As oil prices increase, there will be greater emphasis placed on bringing alternative fuels to the market. Right now, it appears our main efforts are being focused on ethanol. As farmers focus more of their efforts on producing ethanol producing plants, the price of these plants, as well as the prices of every other fruit/vegetable/dairy/poultry/beef/pork product will climb exponentially higher.

These likely scenarios just scratch the surface, and don’t even begin to speak to the increased conflict over the world’s remaining oil supplies.

But, so I don’t end this post on such a gloom and doom note, it does appear that there is reason to be thankful for the recent run of gasoline and oil prices, as there now appears to be much more focus on finding cheap, clean and sustainable alternative fuel sources.  As these fuels/energies become more mainstream, hopefully they will reduce our demand for oil to the point that we don’t even care how much petroleum is left in the earth.

Popularity: 22% [?]

Posted in Oil Prices | 8 Comments »

Gas Above $3.50, Oil Nears $120

The price of oil and gasoline continue to hit record highs with each passing day and, unfortunately, it doesn’t appear as if there is any possibility of relief in the near future.

Today, the price of a barrel of crude oil closed at nearly $120, while the price of a gallon of regular unleaded gasoline climbed over to over $3.53.

At this point last year, the national average price for a gallon of regular unleaded gasoline was at $2.86, or roughly 19% less than today’s average. Even last month, the national average price was “only” $3.25 a gallon, or roughly 8% less.

According to GasBuddy.com, New Jersey currently has the lowest state-wide average price for a gallon of regular unleaded gasoline at $3.33, while California is reporting the highest state-wide average price at nearly $3.88 a gallon. At this rate, it should only be a matter of days before we have the first $4 a gallon state-wide average gasoline price.

Obviously, this isn’t exactly the world’s greatest news, especially considering the current state of our economy. So, since may of us are trying to figure out where gas prices are going to go from here. According to many pundits, we will apparently avoid $4 gas this summer, however, I don’t buy it.

In order to try and prove this people wrong, I used some historical data and some simple logic to see if we will in fact avoid the dreaded $4 gas scenario. Essentially, I took a look at where we were at this point last year - $2.86 a gallon - and compared that number to where gas prices topped out last summer - $3.24 a gallon. In turn, by doing some simple math, I figured that gas prices jumped over 14% during that period.

Assuming the same were to happen this summer (and even this may be wishful thinking), we should expect gasoline prices to hit no less than $3.99 this summer.

I realize this is a very simplistic look at where prices may end up, but I think it does go to show that it’s not going to take much to get us to that $4 barrier. And considering we’ve never gotten back below the $2 barrier, we should probably come to the realization that, at the very least, $3 gas is here for good.

Regardless, all signs are clearly pointing to a very expensive summer vacation season, so hopefully you’ve been practicing your gas saving driving habits!

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Posted in Miscellaneous, Oil Prices | 3 Comments »

Who Do We Blame for High Gasoline Prices?

As gasoline prices have increased over the last several years - for example, right now gas prices are 19% higher than what they were one year ago - many Americans have searched high and low to pinpoint who or what is to blame.

Is it the evil empire of Big Oil? The Bush Administration and their policies? The growing economies of China and India? Something else? All of the above?

Obviously, this isn’t a clear cut issue, and there isn’t one thing in particular to blame. This is a very complex and integrated problem with plenty of moving parts. However, it’s very likely that there’s one reason that’s more at fault than any of the others.

With that in mind, I wanted to see who or what we blame the most for the run of record gasoline prices. To see what people though, I recently had a poll up on Daily Fuel Economy Tip which asked: “Who/what do you blame most for record high gasoline prices?” Here’s how people responded:

• 41% blame the Bush Administration
• 17% blame “Big Oil”
• 15% blame supply and demand
• 13% blame commodity traders
• 6% blame OPEC
• 5% blame China/India
• 3% blame “other”

While I expected a lot people to blame the Bush Administration, I really had no idea it would be nearly half of the nearly 200 respondents. Maybe it’s their disenchantment with the administration’s policies, the current economic situation, the fact that Bush was an “oil man” and still has ties to the industry, or a combination of these and other factors.

While I think these are mostly circumstantial arguments, I guess when you combine everything together, it may provide a somewhat compelling argument. Unfortunately, I don’t buy it. (For the record, I would consider myself a moderate that leans towards the liberal side. Whatever that means.)

Not to discount nearly half of the respondents, but I generally it very hard to believe that the current administration is behind this. Why would the President of the United States deliberately direct policy that is clearly harmful to the U.S. and world wide economies? I can understand being unhappy with current administration, but blaming them for record high gasoline prices seems to be a pretty big stretch.

I think the people who blame supply and demand as the major factor behind the rise in gasoline prices are probably much closer to the actual answer. Over the last several years, as developing nations have become more industrialized, demand for petroleum and petroleum based products (such as gasoline) has increased dramatically. Because there’s only so much oil to go around, and because of a significant decrease in refinery output due to razor thin profit margins, simple economic theory has to take over:

As demand for a product increases while supply of the product decreases, the price will naturally trend upwards.

Maybe I’m just completely naive and the conspiracy theorists are correct, but I just have a very difficult time getting my head around the idea that this is more than a basic economic issue.

Popularity: 66% [?]

Posted in Miscellaneous, Oil Prices | 9 Comments »

Latest CAFE Statistics Show Car Manufacturers Are Making Progress

While many of us have become increasingly critical of the lack of gas friendly vehicles available to us (just check out many of the posts and comments on this site), it doesn’t mean that the major car manufacturers aren’t trying to make some progress.

Based on the latest CAFE statistics, the average gas mileage for new cars sold in the United States has actually gone up nearly 10% in the last four years.

For those of you who don’t know, CAFE is short for “Corporate Average Fuel Economy,” which is essentially a set of laws/regulations created by the United States Congress back in the 1970s to try and get car manufacturers to produce more fuel efficient vehicles. If a car manufacturer fails to meet the CAFE requirements, it must pay a penalty to the Federal Government.

Recently CAFE released its statistics to include all of the cars and light trucks (which include SUVs, vans and minivans) sold in the United States for 2007. Considering we’ve been in a “green push” for well over a year now, I wanted to see if in fact 2007 was a year of progress as far as gas mileage is concerned.

According to CAFE statistics, back in 2004 the “Total Fleet” gas mileage, which accounts for all foreign and domestic passenger cars and light trucks, was 24.6 mpg. By the end of 2007, the Total Fleet gas mileage had risen to 26.7 mpg - an increase of 8.5 percent.

While that might not seem like a very big gain, consider this: on average, Americans use over 400 million gallons of gasoline each day, so if every car on the road got 8.5% better gas mileage, we’d use 34 million less gallons of gasoline each day - or nearly 12.5 billion less gallons of gasoline each year.

Despite this very good news, there are some unnerving statistics in the latest CAFE report, namely, domestic cars continue to fall further behind their foreign counterparts when it comes to fuel economy.

Back in 2004, the average gas mileage for a domestic car (this does not include light trucks) was 29.9 MPG. By 2007, the average gas mileage had increased to 30.7 MPG - a jump of roughly 2.7%. Foreign cars on the other hand, went from 28.7 MPG in 2004 to 32.1 MPG in 2007 - a jump of nearly 12%.

I’m not sure which statistic is more eye opening; the fact that in 2004 domestic cars had a better average gas mileage than foreign cars, or that over the past four years, foreign cars have gained 12% in gas mileage while American cars have eked out a measly 3% gain.

Hopefully these numbers will continue to climb higher as more fuel efficient cars make their way to the market, and people begin to realize that they probably don’t need that huge urban assault vehicle to commute to and from work.

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Posted in Fuel Efficient Vehicles | 1 Comment »

100 Years of Improvement?

Back in 1908, Ford introduced its groundbreaking Model T - the world’s first affordable motorized vehicle and, for all intents and purposes, the basis of America’s love affair with its cars. It also averaged 17 miles per gallon.

Fast forward 99 years to 2007: America’s best selling vehicle is still a Ford (the F-150), is still relatively affordable and is still perpetuating America’s love affair with its cars. However, it averages only 16 miles per gallon. Even the best selling sedan, the Toyota Camry, averages only 22 miles per gallon.

Nearly 100 years of automotive innovation and we’re still not much further along in terms of overall fuel economy.

I understand comparing a Model T to a Ford F-150 or a Toyota Camry isn’t exactly an apples to apples comparison - today’s vehicles are much heavier, better performing and burn fuel much more cleanly than the Model T. That being said, the comparison can’t be completely discounted. Despite all of the changes and improvements over time, one would assume that significantly better gas mileage would be realized as well. Unfortunately, it hasn’t been.

Many of the reasons for a lack of significant improvement regarding gas mileage can be chalked up to the “amenities” that accompany modern vehicles. Here are the primary culprits:

• Improved Safety. Modern cars are much heavier than their predecessors, due in large part to increased safety. In addition to just generally being larger, modern cars are also made out of heavier/sturdier materials. While these materials have helped modern cars withstand tremendous force, the added weight has lead to decreased gas mileage.
• More Power. The Model T had a 20 horsepower engine that topped out at about 45 miles per hour. Compare that to modern cars, most of which have engines with at least ten times the horsepower and have the capability to top out at speeds three times faster than the Model T. Unfortunately, the increased power needs to get its energy from somewhere - and that’s where increased fuel consumption comes in.
• Air Conditioning. As you’re probably well aware, running your car’s air conditioner can be a significant drain on a car’s gas mileage, decreasing MPG by ten percent or more. Considering the fact air conditioning has become a standard feature for most cars, it’s easy to see how it has contributed to diminished fuel economy.

Despite the aforementioned reasons why it’s understandable that most modern cars don’t get gas mileage that blows away the Model T, there are plenty of reasons why it’s pretty disappointing that the best selling modern cars aren’t getting at least double the Model T’s MPGs:

• Aerodynamics. Today’s cars and trucks are much more aerodynamic than the Model T, which was essentially a horse carriage without the horse. The more aerodynamic a vehicle is, the less drag is placed upon it as it travels (especially at higher speeds) and the less amount of fuel it needs to get to and maintain speed.
• Fuel Systems. Modern cars have been equipped with much more sophisticated fuel systems, the main component of which is the fuel injector. These electronic and automated systems are much more efficient than the carburetor used by the Model T.
• 100 Years of Technological Advancement. The internal combustion engine is not the same as it was back in 1908, namely, it has improved and become much more efficient along the way.

So, long story short, it seems to me that while car manufacturers have made plenty of advancements over the last 100 years, it seems as if they’ve been focused on factors like size and speed and have paid far less attention to improving gas mileage.

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Posted in Miscellaneous | 10 Comments »