When you say "much lower living standards" what you mean is we'll have to drive less and probably in smaller cars. There are a number of benefits to this. For a start, a lot of people drive when they should walk or cycle. It would be better for their health if they did so. Plus, people will start to live nearer their work places which means shorter commutes and more time spent doing what they want. Those that do drive will find that the experience is more pleasant because the roads will be emptier because people are driving less and in smaller cars.

It's not clear the loss of pleasure from driving big cars will not be compensated for.

> There are a number of benefits to this.

Yep. Living in a cave means you no longer have to breathe in all those nasty chemicals. Eating organic self-gathered roots and fruit makes one much healther. And never forget about benefits of an occasional leopard - it definitely improves gene pool by eating dimwits.

I guess such improvement is sorely needed. I propose sending all proponents of lowered standards of living off to their dream destination - some place in Africa where they still have tigers and plenty of caves (though for some reason I doubt there will be shortage of caves).

from wikipedia, tesla uses about 210 watts per mile
http://en.wikipedia.org/wiki/Tesla_Roadster

Here is an article which says that Lithium reserves in the world are rather scarce:
http://www.evworld.com/library/lithium_shortage.pdf

In other words, in the future, when many millions of people start using electric cars, the price of Lithium will start skyrocketing. Even worse, if we attempt to replace gasoline cars with Lithium based electric cars, we will probably start running out of Lithium (like oil.) Thus, even when the mass production of Lithium batteries allows the manufacturing cost to decline, the final price of Lithium batteries will probably stay high.

However, there are some other metals which are far more abundant. For example, zinc is quite abundant (for making batteries, since battery zinc can be recycled 100 %). Zinc-Air batteries can have energy density over 400 Wh/kg, which is much higher than Lithium batteries:
http://www.duracell.com/oem/primary/Zinc/zinc_air_tech.asp
Although it is impossible to recharge Zinc-Air batteries like Lithium batteries, the Zinc-Air batteries can be swapped like ammunition cartridges. Then the zinc in the empty Zinc-Air batteries gets electrochemically recycled, and this would be equivalent to recharging the Zinc-Air battery. The recycling of the Zinc-Air batteries can be done at the local battery swapping stations, similar to gas stations.

The 16 kwh battery for a car that goes 40 miles on battery power means it uses 400 watt-hours per mile. That seems a high rate of electric usage per mile for a car designed for very high efficiency. Anyone have expertise to offer on this?

The battery probably isn't allowed to go to a zero state of charge. It's probably limited to using 8-10 of the 16 kwh available to prolong battery life.

That gets you to a more reasonable 200-220 wh/mile.

Finnsense,

When I say lowered living standards I mean everything costs more relative to our salaries. Across the board reduction in living standards.

You think Peak Oil is just about size of cars? Oil gets used to:

1) Power trucks that deliver stuff to your local supermarket or department store.

2) Power trucks that deliver supplies to farms and from farms to processing plants.

3) Power trains that deliver stuff.

4) Power tractors and combines and other farm equipment to grow food.

5) Power bulldozers, backhoes, and other construction equipment. This stuff is helpful so that we do not have to live in caves and walk on trails. It gets used to build factories, apartment buildings, skyscrapers.

6) To make petrochemical products. See any plastic products around your house? Laminates? Plastic casing on your computer and monitor? What do you suppose that keyboard is made of that you are typing on? Might need some surgery some day? How about plastic needles and other hospital paraphernalia made out of plastics?

7) Pesticides are made from petrochemicals. Get hungry?

8) Wear any nylon, orlon, rayon? Made from petrochemicals. Also, cotton is grown with lots of use of petroleum products.

9) Noticed the skyrocketing of fertilizer prices? As oil prices go up natural gas gets substituted for it. But wait, what else is natural gas used for? Fertilizer production. Oops. Now natural gas in the United States is so expensive that most fertilizer plants in the US have shut down, fertilizer costs have skyrocketed, and fertilizer gets imported from lands where natural gas is cheaper. But natural gas prices are rising in those lands.

10) Also, live somewhere that gets really cold in winters? You are going to get cold when heating energy costs far more. I'm expecting a big migration southward in the US to warmer climes. Air conditioning will be a problem. But I do not expect electric prices to go up as fast as oil and natural gas.

High oil prices are driving up prices across the board:

Costco’s profit was up in the first quarter, but James D. Sinegal, the chief executive, says he is “starting to be confronted with unprecedented price increases” for the merchandise that Costco buys to stock its stores. His first response has been to buy in extra large quantities so that he has stock on hand to carry him through subsequent price increases.

“We just made a big purchase of Tumi luggage,” Mr. Sinegal said.

Procter & Gamble finds itself in a similar predicament. For its fiscal year beginning next month, it expects to spend an additional $2 billion on oil-based raw materials and commodities. That is double last year’s increase, and it is carved from total revenue of just under $80 billion.

Price increases have helped to offset this cost. They have averaged nearly 5 percent for paper towels, bath tissues and diapers, all made with chemicals derived from oil, said Paul Fox, a company spokesman.

Dow Chemical is one of the biggest users of oil in the world. They just increased the prices of raw materials by 20%. Look at what their raw materials go into:

No business in America produces more of the oil-based ingredients that go into the nation’s products than the Dow Chemical Company, based in Midland, Mich. From Dow’s petrochemical operations come the basic ingredients of a wide variety of plastic bottles and packaging, including numerous containers once made of glass or tin.

Indeed, paint, computer and television screens, mobile phones, light bulbs, cushions, paper, mattresses, car seats, carpets, steering wheels and polyesters are all made with ingredients that Dow and other chemical companies refine from oil and natural gas.

Dow normally raises prices piecemeal. Last month, though, the surge in the cost of oil and natural gas, the company’s principal raw materials, produced a rare across-the-board price increase of as much as 20 percent.

So I say: Our living standards are going down.

Randall,

I suspect Turrentine was misquoted - Wired isn't a an authoritative source. Tesla says their li-ion is $400/KWH, and these are standard cobalt based, small format batteries - A123systems has cheaper materials, and a cheaper size (much larger). Tesla's batteries have the advantage of manufacturing experience and large volumes, but eventually A123systems will be cheaper. Both will become cheaper due to manufacturing experience. Early production is likely to have a scarcity premium, so it'll take a little while to shake out.

No one really knows how much less Volt batteries will cost, because they'll come from very large, dedicated factories in volumes much, much greater than anything currently produced, but it won't be anything like $1,000/KWH!

The Volt only uses 8 of the 16 KWH's, to be very conservative and ensure long cycle life.

Don't be too scared by anecdotal reports of price increases: oil as a % of manufacturing costs is still quite low. Look at the Procter & Gamble quote: "it expects to spend an additional $2 billion on oil-based raw materials and commodities. ... it is carved from total revenue of just under $80 billion". That's only 2.5% of sales.

There are a lot of efficiencies and substitutions that can be made: container walls can be made thinner, containers can be made smaller, other materials can be used (glass, metal). Don't forget, more than half of oil consumption is by consumers, not business (gasoline, heating oil), and oil is only 40% of our energy - we're actually in better shape than most oil-importing countries.

The major problem we face is the transfer of wealth to, and growing debt to, oil-exporters. That's serious, but it doesn't imply double-digit decreases in GPD. I do see a serious threat of an extended no-growth period, like Japan, especially due to break-downs in the petro-dollar recycling system (aka global credit & banking).

Advanced Vehicle Testing Activity (AVTA) is conducted jointly by the Idaho National Laboratory (INL) and the National Renewable Energy Laboratory (NREL). The data on the INL web site is generated by the testing activities of the INL. For more information about AVTA, go to the Department of Energy’s Freedom CAR & Vehicle Technologies Program web site.

I found this report: 2002-01-1916, Electric and Hybrid Vehicle Testing by James E. Francfort and Lee A. Slezak. [PDF]

"As measured in km driven per kWh, the least efficient energy use occurred during fleet testing with the four vehicles averaging 2.7 km per kWh (Table 3). The average energy use for the four vehicles during the drive-cycle dynamometer testing (SAE J1634) was 5.4 km per kWh. The average EVAmerica charging efficiency results for the three vehicles was 3.5 km per kWh. The average fleet energy use results were 50% lower than the average drive cycle efficiency results and 23% lower than the EVAmerica charging efficiency results."

The four vehicles tested included Ford and Chevy small pick-ups converted to BEV, a Nissan medium-size station wagon, and the Toyota RAV4 EV*. The RAV4 was the most efficient of the lot with 3.5km/kWh in fleet testing, 6.6km/kWh in dynamometer testing, and 3.7km/kWh in charging efficiency.

Note: this a previous generation RAV$ which was a good deal smaller than the current RAV$.

=========================================================

400 watt-hours per mile = .4kWh/1.6km = 4km/kWh which is better than the RAV4 above. It also equals 400kWh/100km.

1kWh = 3.6MJ. One gallon of Gasoline contains 131MJ or the equivalent of 36kWh. So the 4km/kWh = 145km/gal = 87 mpg.

I think.

Nick,

Are you sure they are only half-discharging the batteries? If so, why? Does full discharge cause the batteries to wear out more quickly? I thought these newer design batteries do not suffer from that problem. What's your source of info?

If the goal is to displace oil for short trips, may I suggest a car running on compressed natural gas? It's half the price of gasoline, still available in large amounts, and can be made from biomass or coal by straightforward processes. The technology to use it in cars is well proven and available now.

The Honda CNG Civic is on the market today and goes about 200 miles on a fill-up.

Are you sure they are only half-discharging the batteries? If so, why? Does full discharge cause the batteries to wear out more quickly? I thought these newer design batteries do not suffer from that problem. What's your source of info?

Yes. They are only using about 8kwh for driving the car. I've seen this printed as well.

No battery willl be allowed to go to a zero SOC, for whatever reason. Probably the new formats are better, but they're not magic afterall.

"Are you sure they are only half-discharging the batteries? If so, why? "

here's info on GM's plans. http://gm-volt.com/2007/08/29/latest-chevy-volt-battery-pack-and-generator-details-and-clarifications/

"Does full discharge cause the batteries to wear out more quickly?"

Only a little - see this chart at 100% depth of discharge: http://www.a123systems.com/#/technology/life/lchart1/

"I thought these newer design batteries do not suffer from that problem. "

GM's just being very, very conservative. They know how important this is to their future, and they're not taking any chances.

Please note that the mileage numbers from DOE varied widely by test method. In particular, real world was less than 2/3 of of dynamometer testing. I assume that the Volt has only dynamometer results yet.

We don't go direct to hybrids, we go via diesels.
Rudolf's invention remains the most efficient means of energy conversion known.
A good turbocharged diesel is very very close in consumption to a good hybrid, and I suspect that taking a whole-life costing analysis the diesel is way ahead of the hybrid.
Then there is the dream-team of diesel-hybrid, which gives the basic diesel efficiency coupled to a hybrid's regenerative capability.
I understand the Germans are heading in this direction.

Peter Melia,

Europe is importing diesel fuel from the US while exporting gasoline to the US. Why? There's a limit to how much of each barrel of oil can be converted to diesel. Gasoline hybrids are therefore highly necessary.

Diesel used to cost less than gasoline. Now I'm seeing the cost of diesel running between 14% and 21% higher than gasoline and this is before Americans buy diesel cars in large numbers. I do not see how diesel is the solution.

0.17 ppm of lithium seawater
http://www.seafriends.org.nz/oceano/seawater.htm

IMO GM cannot afford to fail with the Volt. There is nothing quite like it (yet) and GM better jump through the window of opportunity.

If they are now trapped by high battery price then price the vehicle accordingly, put a few more dollars into fit and finish, and offer it anyway. Even at $50K or $60K - I never believed that $30K talk for a moment anyway. Quality, not a few thousand dollars, will determine the cars sales.

Like Paul I would like to see more CNG choices. The CIVIC is quite nice. Alas, I drive 1500 miles per year - if that - and have little room to cut my gasoline cost even if it goes to $10/gallon.

Yes, the possibility of extracting Lithium from sea, is actually mentioned in this article:
http://search.japantimes.co.jp/cgi-bin/nn20040418a9.html
But we shall see how much this process will cost, because if hundreds of millions of people start driving electric cars powered by Lithium batteries, then the sea water project must be scaled up. But since the lithium in batteries can be recycled, the cost might be tolerable, since we expect the population of the world to stabilize (one day.)

Similarly, when the world starts building thousands of nuclear reactors, then uranium must be extracted from seawater, at the this moment, the estimated cost of this project is of over $900 per kg ($450 per pound), or 4 times the maximum price in the year 2007. But maybe the cost of seawater uranium will decline to $$250 per pound. This is one reason more efficient reactors like molten salt reactors must be developed.

But to re-emphasize the Zinc-Air batteries (which are really Zinc fuel cells):
http://en.wikipedia.org/wiki/Zinc-air_battery
It turns out that the "recharging" of a Zinc-Air fuel cell can be done by simply replacing the oxidized zinc pellets (or liquid) with new ones at the gas station. Again, zinc is very abundant, cheap, and the energy density is over 400 Wh/kg. The more primitive Zinc-Air fuel cells have already been manufactured with energy density that is in excess of 200 Wh/kg. Thus with Zinc-Air batteries, cars can have a range well over 300 miles per charge.

I wouldn't sweat the battery problem. If we solve it, great, but we already have a perfectly workable solution to energy storage: covalent bonds. The most efficient zinc-air batteries, at 400 Wh/kg, are nothing compared to gasoline, at 12,000 Wh/kg. And the "transmission losses" for gasoline are excellent as well: it takes very little fuel to drive a truckload of gasoline hundreds of miles. (As we say in network computing, "never underestimate the bandwidth of a station wagon full of tapes.")

All we need to do is build enough power plants -- solar, wind, nuclear, whatever -- to produce liquid fuels from carbon-containing waste. It's a completely carbon-neutral cycle: oxidize carbon in your engine, then use green energy to strip the oxygen off later.

Gasoline as an energy *source* is problematic, but as an energy *storage medium*, it's hard to beat.

Gasoline as an energy *source* is problematic, but as an energy *storage medium*, it's hard to beat.

Absolutely correct. Once we have enough cheap electricity, we can easily convert it to liquid fuels. And already, new elecrolysis methods are 85 % efficient in decomposing water into hydrogen and oxygen. Apparently new hydrogen storage tanks are also being developed for efficient and stable storage without danger of explosion.

But fuel cells that convert gasoline into electricity, would be even more efficient in cars, instead of internal combustion engines. Also this would cause no pollution from burning gasoline in a fuel cell in a car.

But the trouble is that we don't yet have the nuclear reactors to do the job.

Randall,

Every year oil becomes a less important part of the economy, about half that of the 70s. More oil will come on line, and the price will probably decrease. Why not make a prediction of where oil will be in November 2008 and November 2011? $135? $200?

The standard of living hasnt dropped for more than a year or so (every few years) over the past 75 years, and it sure won't start to now.

The 'much lower living standards' line just slashed the amount of credibility Randall has as a Futurist.

Even with the oil spike, the IMF says World GDP will be above 3% a year in 2009 and 2010. THis is down from 5% a year when oil was $80/barrel.

If people have to have smaller cars, carpool occasionally, and take fewer unnecessary trip, that is not a 'decline in living standards'.

Ignoring the ability of technology to adapt to market needs, and the accelerating rate of economic growth, is a criminal sin for any Futurist to make.

Jeff Bonwick: "All we need to do is build enough power plants" and
Wolf-Dog: "Once we have enough cheap electricity"

Won't doing that with low-CO2 sources take about 30 years?? Won't we be likely to have cheap batteries by then??

Wolf-Dog: "already, new elecrolysis methods are 85 % efficient"

Could you provide a source?

There certainly seems to be a consensus that a hydrogen cycle would be much, much less efficient than batteries: there are large losses in elecrolysis, storage and at the fuel-cell.

How many years is it likely to take for portable fuel-cells to become cost-competitive? Given the cost advantage and continuing steep cost-decline of batteries, how can fuel-cells ever catch up?

cancer_man: "Every year oil becomes a less important part of the economy, about half that of the 70s."

That's changed. Take a look at econbrowser.com I don't think we'll have a 30's style depression, but oil is a big problem - we could easily have a 10-year Japanese style stagnation, until we transition out of oil.

Nick G:

Here is an article about the new Nonoparticle electrodes of QuantumSphere that have 85 % efficiency for decomposing water into hydrogen and oxygen:

http://www.greencarcongress.com/2008/03/quantumsphere-n.html

When I said "when we have cheap electricity" I was not talking about cheap batteries, I was talking about cheap solar or nuclear electricity that will be abundant. Nuclear electricity has great potential if the new molten salt reactors can be developed to use 99 % of all the non-fissile uranium and thorium, as well as the nuclear waste as self-breeding fuels.

TTT,

When I talk about living standards declining I'm referring to the OECD countries. Living standards in China will continue to rise. They are smart but have very low living standards. They are accumulating capital. They can use electricity in ways that will raise their living standards even if they will simultaneously be forced to cut back on their car usage.

My credibility as a futurist: Well, time will tell. But you can go read posts I did about solar photovoltaics companies 5 years ago where those companies were making big promises of cost reductions Real Soon Now. Well, Real Soon Now came and went. PV costs haven't dropped in the last 5 years.

Jeff Bonwick,

Sure, synthetic liquid hydrocarbons are possible at some price. But what is that price? Let us do some simple calculations.

Assume we want high quality gasoline with about 125,000 BTUs per gallon. Well, therea re 3413 BTU per kwh. So a gallon of gasoline becomes 36.7 kwh. So suppose we want to start with electricity to power a liquid hydrocarbon synthesis process. What is our conversion efficiency? I figure it might be a third. So maybe about 100 kwh per gallon. That might be optimistic. Plus, there'll be capital costs and some materials costs (e.g. hauling in the carbon source and processing it).

What does 100 kwh cost? At retail in America on average electric costs about 10 cents/kwh. That'd work out to $10 per gallon just for the energy cost. Though a big operation could buy at a price lower than retail. But what would be the real total cost? I've yet to come across a credible source on this point.

New nuclear power plants especially designed to produce hydrogen could cut the energy cost (said plants would take years to design and more years to get regulatory approval and more years to build). Why bother boiling steam to spin turbines to generate electricity when you can split water into hydrogen and oxygen and separate out the hydrogen? Then react those energetic hydrogen ions with carbon and polymerize it into chains long enough to be liquid.

All this will take time to develop. Looking out 15-20 years special nukes will put an upper ceiling on liquid fuels costs. But in 3, 4, 5 years time I see little prospect for totally synthetic hydrocarbon generation. At most we will see coal-to-liquid in that time frame.

A 9-month recession is a VERY small price to pay in order to get an economy fully adapted to $120/barrel oil.

Yes, oil prices are the reason for the current recession, and the adjustment will cause mild to moderate pain.

But don't ignore the positive side effects over the medium and long term :

1) Less driving = less traffic accidents. Traffic accidents in the US cause $500B in damage, 2 million injuries, and 40,000 fatalities a year (mostly children and young adults). A 10% reduction in driving and migration to smaller, lighter cars will reduce this number.

2) Automakers are rapidly innovating in MULTIPLE areas, including
a) alternative fuels (electricity, ethanol, etc.)
b) more efficient engines
c) lighter nanomaterials that greatly reduce the weight of cars.

3) Less driving reduces wear and tear on roads (which are very expensive to repair), reduces traffic (that wastes tons of productivity), and reduces competition for parking.

4) If 10% of the land consumed by parking lots and gas stations reduces, that frees up a LOT of land for other uses. Think about how much land that is.

5) Of course, less oil consumption means less pollution.

6) Technologies like videoconferencing, Skype, Webex, etc. accelerate. Telecommuting will increase, as corporations adapt to accomodate this.

7) Iran, Venezuela, etc. subsidize gasoline. As oil prices rise, this becomes more costly, even as their domestic consumption rises. Thus, the barrels they can export shrink, and the dollars of export revenue they get actually shrink. This will cause these brutal regimes to burn the candle at both ends, and collapse eventually.

So I think the short-term negatives are more than exceeded by medium and long-term positives, just like the last oil spikes.

Quit whining and adapt. Invest in areas likely to benefit.

I've been one of the bulls for near term plug-in hybrids.. but these costs seem to show the Toyota hybrid strategy is smarter right now. Which is what the President of Toyota has been arguing. Going from a 15mpg large vehicle to a 45mpg prius or prius equivalent, obviously cuts the fuel bill by 66%. Or from a 15mpg large vehicle to a 30mpg large vehicle. If the premium is only say 2,500$.. its a pretty strong argument.

To put it another way IF going from 15mpg to 30mpg costs 2,500$ and cuts 50% of your oil use.. And for arguments sake the Volt cuts 100% of your oil use and costs a 16,000$ premium. That means you are paying 16k-2.5k= 13,500$ for the second 50% reduction. But only 2,500$ for the first 50%.

It still might make sense if oil is 10$ a gallon.. eg.. in parts of Europe. But its clear the key thing now is the cost we are talking about. After a couple years of mass production how cheaply can they make those batteries?

TTT,

The rising prices and adjustments we've made so far slightly decrease our use of oil. We must make far larger adjustments when world oil exports start declining at 5%, 6%, 7% per year. What has happened so far is pretty mild stuff compared to what's in store.

aa2,

Going from 15 mpg to 30 mpg actually can be done by buy cheaper cars like a Ford Focus or Toyota Yaris. Then we have to go up in price by $10k to get up to 45 mpg with a Prius. Still higher fuel efficiency (maybe 55-60 mpg) is possible with a hybrid subcompact that could cost less than a Prius (if only a car company would sell a hybrid subcompact). But probably as some industry analysts Toyota is selling Prius for little or no profit. So a high volume hybrid subcompact that would need to be sold for a profit probably is going to be near $25k. That's the easy part.

Beyond hybrid subcompacts we get into pluggable hybrids and suddenly the costs go way up. We do not know when the batteries are going to come down in cost to make pluggable hybrids more affordable. But gasoline is going to have to become extremely expensive to justify a $50k Volt.

Randall,

I'm curious why you won't predict the price of oil 6 months from now and 2 years from now. You seem to be absolutely positive that prices will be higher. So why not give prediction a shot?

I think it may be that you'll say $170 in 2010 when we see it is around $60. Is that the reason?

"I don't think we'll have a 30's style depression, but oil is a big problem - we could easily have a 10-year Japanese style stagnation, until we transition out of oil."

10 years?? Japan came off a huge bubble with banks deep in the red.

Your grim outlook, along with Randall's, ignores all the breakthroughs we will see in the next ten years.
That is what is so odd about this topic. I can see how the average Joe might think things are grim for a decade, but futurepundit readers (and owner) are supposed to understand that progress keeps coming at a faster pace.

Don't make me excommunicate all of you chicken littles...

Randall,

I agree that it will take time to build all the power plants we truly need -- we've be stalled for three decades. My point was just that even if we never solve the battery problem, we're not screwed -- liquid fuels are a fine way to store and transport energy.

Wolf-Dog: "Here is an article about the new Nonoparticle electrodes of QuantumSphere that have 85 % efficiency "

That's great! That'll help put a cap on fertilizer prices.

"When I said "when we have cheap electricity" I was not talking about cheap batteries, I was talking about cheap solar or nuclear electricity that will be abundant."

I know. There are several problems: 1) even with 85% efficiency for electrolysis, you still have storage and fuel-cell losses of at least 20% and 25%, respectively (for round-trip efficiency of about 50%, vs 90% for a li-ion battery, 2) we're not going to have excess electricity for at least 20 years, and probably 30, and 3) batteries are much cheaper than fuel-cells, and are now both practical and cost-effective vs gasoline. As a result, I believe the window of opportunity for light-vehicle fuel-cells has passed forever.

Randall: "PV costs haven't dropped in the last 5 years."

PV costs have plummeted in the last 5 years. It's prices that have stagnated, due to overwhelming demand. As a result, PV makers are making enormous profits.

"gasoline is going to have to become extremely expensive to justify a $50k Volt."

True, but we'll never see a $50K volt. The initial price is arbitrary and unpredictable , because they'll be 1) low volume (and therefore expensive initially), 2) price depends on how RE&D is amortized, 3) they may get tax credits, and 4) they'll almost certainly be sold at a loss, as is done by any sensible manufacturer in this situation.

They'll certainly be less than $30K in 5 years with large volume mass-production - probably less than $25K.

cancer_man: "Your grim outlook, along with Randall's, ignores all the breakthroughs we will see in the next ten years. "

Oh, I think we have all the technology we need. The problem is, we're currently importing oil worth about 6% of our GDP - that's not something we can fix quickly - it takes time to ramp up any new tech. At best we'll have to sell a lot of t-bills, which will increase federal interest expenses, and reduce available spending for other things. Or, we'll reduce our consumption by 6% in the form of additional exports. At worst, we'll have a dollar crash, very high interest rates, and all sorts of weird fluctuations in the financial systems which will kill confidence and investment, mis-allocate capital, and just distort things in all sorts of way which will cause an extended recession.

Jeff Bonwick: " agree that it will take time to build all the power plants we truly need "

We're all in agreement here - it's the next 10 years that's the problem.

cancer_man,

I wrote 6 blog posts yesterday and do not have time to respond to every comment.

Oil prices: Prices are harder to predict than production. I can say that world oil exports will be lower in 3 years. But how much of that will translate into price? It depends on demand destruction which depends on many factors that are hard to model. For example, a deep recession will cut demand and therefore demand and shrinking supply could equal at a lower price point. Or China, India, and a few other countries could let their internal oil prices rise to world price levels and therefore dampen their demand more and allow supply and demand on the world market equal at a lower price point.

The below-the-ground factors are more knowable. The list of countries in decline will get longer. The rate of decline for those already in decline will accelerate.

I think what we'll see with oil prices will be akin to what Paul Volcker did with interest rates to the US economy in the late 70s and early 80s: a choking off of demand that comes in waves. We'll hit some high point in oil prices and a lot of demand destruction will ensue. Then prices will go down some (e.g. from $160 a barrel down to maybe $120 or $130). Then Asian economic growth will push up their demand while production declines. We'll see another surge in prices hitting another high point and the US demand destruction will go even further. The cycle will repeat.

Nick G,

No, we do not have all the technology we need. Production technology is part of what we need, not just designs. Substitutes still cost too much to make. We might need new designs in order to cut down production and new breakthroughs to come up with the insights needed to create newer cheaper designs. Sure looks that way for solar.

Then we have the next step problem of building all the new capital and consumer goods (e.g. cars) that incorporate all that technology. That takes years and is very expensive.

So far the only new viable substitute that has matured is wind. Nuclear hasn't come down in cost. In fact, nuclear costs have risen. Solar might be able to come down a lot. But it needs to come down a lot. When will batteries become affordable? Hard to say.

"The problem is, we're currently importing oil worth about 6% of our GDP - that's not something we can fix quickly - it takes time to ramp up any new tech."

That assumes the price of oil stays above $130. There is no reason to assume this at all.

Randall,

"a deep recession will cut demand "

It may not take that. From 1978 to 1983, US oil consumption fell from 18,847MB/day to 15,231, a drop of 19%, with GPD growth of 2% (total). We could do that again. World consumption has been stagnant for several years, and US consumption is already falling. It didn't take $4 gas to do it, it took the beginning of a social consensus that high prices were permanent. Oil prices at $70 will eventually make oil obsolete - there are too many substitutes at that price, including fast ones, like carpooling.

"The rate of decline for those already in decline will accelerate."

Not for the US. The decline rate for the US is very likely to decelerate. I think there's a decent chance we'll get another plateau for some years.

" Production technology is part of what we need, not just designs"

I'm not sure what you mean. EV's have been produced for 100 years. ErEV's are a trivial extension. Both simply couldn't compete with dirt-cheap gasoline. Now they can.

"Substitutes still cost too much to make."

No, they don't. Lead-acid EV's are cost-effective at $2 gas. Li-ion is too. Mass production economy of scale isn't a "technology".

"Sure looks that way for solar."

Solar is already cheap to manufacture, and getting cheaper (see First Solar's last quarterly report: $1.12/Wp manufacturing cost, 55% gross profit margin). Current prices are a scarcity premium.

"Then we have the next step problem of building all the new capital and consumer goods "

I agree. That's the big, big problem.

"When will batteries become affordable? "

Now, for lead-acid. With mass-production, for 2nd gen li-ion.

cancer_man : "That assumes the price of oil stays above $130. There is no reason to assume this at all."

True. I think that the clearing price is below that. But how far? It's likely to stay above $100 for quite a while, and that's still way too high for good economic health for the US.

Nick,

EV's have been expensive for 100 years.

ErEV? What's the Er stand for?

Lead acid cost effective: Okay, then why don't we see a lot of lead acid EV's in Europe? Europe has the oil prices of our future. What Europeans have on their roads is a measure of what is technological feasible and cost effective at high energy prices. I see very small cars and diesels and very small numbers of EVs.

A lot of work is going into lower HEV and PHEV production costs. I expect to see substantial price declines in the next 5 years. But right now we do not have the manufacturing technology we need for PHEVs.

Nick G,

Currently module prices are $4.82/watt on average in the US. First Solar's profit should be enormous. But I wonder if their quoted $1.12 cost includes fully aseembled module.

"They're over $1,000 a kilowatt hour," Tom Turrentine, director of the Plug-in Hybrid Electric Vehicle Research Center at UC-Davis, told Wired.com. "The Volt battery is 16 kilowatt hours. That's $16,000 just for the battery."

I asked Tom Turrentine directly by e-mail. He said that he was merely repeating someone else's estimate of the current market costs for lithium phosphate li-ion. That has very, very little to do with what GM (or Toyota, in roughly the same market) will pay in 3 years for larger format batteries in large-volume mass production.

This is what I said to Tom, and he didn't disagree (though he didn't discuss it at length - you should know that he's a research anthropologist, doing social research related to plug-in's, not a technologist!):

"Tesla Motors says that they are paying $400/KWH, for small format, cobalt based batteries. I would think
that A123system's chemistry would be cheaper, that a large format would be cheaper, and that li-ion costs in general will fall by 2010. That assumes, of course, large volume production."

I would estimate $300/KWH by 2010.

"EV's have been expensive for 100 years. "

By ErEV I mean an Extended range EV - IOW, a serial plug-in. The name emphasizes the dominance of the electric drivetrain.

Only relative to cheap gas.

"why don't we see a lot of lead acid EV's in Europe?"

That's a great question. Fuel is twice as expensive in Europe, but that's countered by 50% lower average VMT per vehicle - when gas was cheap it was still a relatively small % of vehicle ownership costs, even with much higher fuel taxes. Capital costs are also higher there, with high purchase taxes. This hurts EV's, as capital costs are higher for them. I would note that lead-acid is less convenient than gas (because of greater weight and volume); and that regenerative braking (which largely eliminates the importance of the lead-acid weight penalty) is relatively new. It also has something to do with the historical development of vehicles in Europe, I'm sure, as well as a different role for vehicles, given better transit but I'm not sure about that.

"we do not have the manufacturing technology we need for PHEVs"

I'm not sure what you are referring to. Most manufacturing improvement I would call "engineering", not "technology", to emphasize that no breakthroughs are needed. There is one partial exception of which I'm aware: there seems to be great opportunity for automation of the hand-winding of li-ion batteries. I suspect that's held back by really cheap chinese labor.

"First Solar's profit should be enormous. But I wonder if their quoted $1.12 cost includes fully aseembled module."

It's for what they call a "panel", which I think is what you mean.

oops - the comment about ErEV is in the wrong spot. I wish I could go back and edit comments...

"Our ability to technologically respond to declining oil production is still pretty poor. "

As a country, we certainly have real problems ramping up what we need. OTOH, for forewarned individuals it's not that hard. Put in an order for a Prius, and wait 6 months.

"Choose job and residence address to minimize your commuting. "

I don't know why anyone would mover closer to work just because of gas prices - it's much, much cheaper to get a more efficient vehicle.

Let's say you live in a $250K house in a cheap suburb like Temecula, and have the average, $28K, 21MPG car. You could buy a $500K house in San Diego and pay at least $75K for 5 years ($15K per year) in additional interest (plus additional RE taxes, which probably balance out the interest tax deduction), or you could buy a $25K Prius (which is cheaper than your current car, which may be due for replacement anyway), and cut gas costs in half (i.e., turn the clock back to $2.25 gasoline) - which makes sense?

Yes, you could downsize in San Diego, but you could downsize, and stay right in Temecula, and save a lot more money.

If you can't afford a Prius, you can't afford housing in SD! And, if you can't afford to change your car any time soon, what about carpooling, telecommuting, or a 95 Corolla?? Carpooling is fast, cheap, and extremely efficient (up to 80% reduction in fuel consumption).

I don't know why gas prices would force anyone (sensible) to move, if they weren't ready to move anyway for other reasons.

I'm baffled that carpooling (and telecommuting, for that matter) hasn't gotten dramatically more popular, but I think it will soon. Internet matching should make it much, much easier than in the 70's, when it had to be employer-based. It should be possible to match up almost anyone with someone whose home and work are both in close proximity.

Nick G,

Thanks for pinging on Tom Turrentine about his source for that battery cost number. Maybe it will be a third that price in mass production. I certainly hope so. But we do not know what the prospective suppliers are telling GM.

Europe and miles traveled: It is a more densely populated place. So people do not have to travel as far to work and shops. This reduces the value of hybrids and PHEVs. Still, in those countries with $8, $9, $10 gasoline some people have to travel further. Yet EVs are rare.

Transit in Europe: I've seen charts showing that vehicles account for 80+% of passenger miles in all European countries. The role of mass transit in Europe is much exaggerated by liberal American tourists who themselves ride much more on trains than do the locals.

Houses: I think we've had this discussion before but people move:

In 2006, 39.8 million United States residents moved within the previous one-year period.

The moving rate remained statistically unchanged from 2005 at 14 percent.

Of course some people move often while others move rarely. But those who move can cut their commuting costs. Ditto those who look for new jobs.

First Solar's costs: If their costs are $1.12 and the average price is $4.82 then their mark-up or profit margin is more than 55%. Granted, the retailers tack on margins as well.

Temecula car owners and Priuses: Most people drive cars worth less than $25k. I'm not sure that Temecula mortgage payer can afford a new Prius. But even if they can the months they have to wait to get one illustrate just how not ready we are for Peak Oil.

Nick G,

To put my advice about moving more succinctly: The poorer you are the more you need to live near where you work. Poor rural folks are hardest hit by higher fuel prices. The extent of their hit is going to get a lot larger. Most of them are going to need to move to urban areas.

"Thanks for pinging on Tom Turrentine about his source for that battery cost number."

Your welcome!

"Maybe it will be a third that price in mass production. "

Well, it can't be more than 400 - that's where conventional, small format li-ion is now at wholesale, with medium-volume. The only thing that could make it higher than $300/KWH is a scarcity premium - that would only mean that prices would rise to match supply with demand, but all available production would be used, and it would grow at high rates.

"people do not have to travel as far to work and shops. This reduces the value of hybrids and PHEVs. Still, in those countries with $8, $9, $10 gasoline some people have to travel further. Yet EVs are rare."

Yes, I don't feel I have a completely satisfying explanation for that. I really think it has to do with the convenience of gasoline outweighing the cost advantage of electricity. Remember, Europeans use 18% as much fuel as Americans, per capita, so fuel consumption, even at twice the price, just isn't that important.

"The role of mass transit in Europe is much exaggerated "

I agree that it's somewhat exaggerated. OTOH, Europeans really do drive much less: They have 50% as many cars per-capita, and drive each car 50% as much. Then cars use 70% as much fuel per mile, so their fuel consumption is 18% as much per capita. I'm not really sure why mass transit is only 10% of VMT - even with much greater density it seems a bit contradictory.

"people move:"

Yes, but they're not moving to more expensive housing to reduce fuel costs, and they're not going to, very much.

First, housing is a much larger cost than fuel - people live in low-cost rural or exurban locations for a reason

2nd, more efficient vehicles are a much less expensive solution than urban housing.

3rd, moving is correlated with poverty: from the Census:

"Hispanics had the highest moving rate (18 percent), followed by blacks (17 percent), Asians (14 percent) and non-Hispanic whites (12 percent). In 2006, nearly one-third (30 percent) of all people living in renter-occupied housing units lived elsewhere a year earlier. The moving rate for people living in owner-occupied housing units was 7 percent.
For the population 16 and older, 24 percent of those who were unemployed in 2006 lived in a different place a year earlier. This compares with 14 percent of those who were employed in 2006 and 10 percent for those not in the labor force. "

Renters, minorities, and the unemployed move much, much more than employed, middle-class home-owners.

OTOH, I keep hearing people talk about moving closer to work due to fuel costs. Is it just talk? Do most people not do the math on high-efficiency cars vs moving??

"First Solar's costs: If their costs are $1.12 and the average price is $4.82 then their mark-up or profit margin is more than 55%. Granted, the retailers tack on margins as well."

Yes, a 55% margin suggests a sales price of about $2.50. I presume that's wholesale. Plus, higher efficiency silicon can charge a bit of a premium. Also, I think the price of close to $5 is out of date, at least for large installations - I'm hearing about price drops very recently.

"Most people drive cars worth less than $25k. "

50% of VMT is provided by cars less than 6 years old. OTOH, used Honda Insights (50 MPG) are cheap, and used Prii can still be bought for $10K. A 10 year old Corolla (40 MPG highway, 32 combined) is $3K - a lot of those rural drivers are still driving pickups and trucks for 12MPG.

"even if they can the months they have to wait to get one illustrate just how not ready we are for Peak Oil."

I agree.

I'm still baffled by the relative lack of interest in carpooling. I see interviews with rural drivers who say that fuel prices are an enormous problem, but they have low MPG vehicles, and they don't say a thing about trying to carpool. I'll believe people really are desperate when carpooling really picks up.

Nick G,

Moving to save gasoline: I've read articles about real estate prices that claim housing prices in suburbs distant from cities have fallen far more than housing prices closer to cities. That suggests people are choosing their homes with gasoline prices in mind. Here is a report that tries to quantify this effect:

Authored by economist Joseph Cortright, "Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs," finds that declines in housing prices “are generally more severe in far-flung suburbs and metropolitan areas with weak central cities ... (due to) the dramatic increase in gas prices over the past five years."

The study examined neighborhood housing prices in five cities, including distant and closer-in suburbs. “In each case,” the report says, “housing prices fared worse in the more distant neighborhood.”

The full study shows changes in median single family housing prices between the fourth quarter of 2006 and the fourth quarter of 2007 in five metro areas - Chicago, Pittsburgh, Los Angeles, Portland and Tampa - according to distance to the center of each region’s central business district.

Prices declined most in the most distant suburbs, according to the analysis. “On average, over the past twelve months, the decline in a neighborhood 12 miles from the center of the business district is two to four percentage points greater than the decline in housing prices in neighborhoods two miles from the central business district."

The market responds to price changes by changing other prices.

Carpooling: People all go in different directions and come and go at different times. Seems hard to get it to work well. For some small fraction of the population it would work. But not for most people.

Nick,

Some people do not have the money needed to reduce their energy usage via efficiency:

I see a problem with a fuel tax increase-other tax decrease. It is just taking money out of one pocket and putting it in the other so they can continue buying as much fuel as usual. The tax if raised should be used for energy efficiency programs and renewable energy projects. There are still 100 million households that could use more insulation and new more efficient appliances. I would love to have a ground source heat pump but such a system would cost more than I paid for the house. (There a some real housing bargains to be had in small town Iowa.) I am stuck with a 13 year old car and an 18 year old minivan both of which get only 20-22 mpg. Would love to have a small diesel car but like tens of millions of Americans there is no way I can afford it.

He's got to have a $20k house. I've seen such houses on the web on sale in Iowa. He could shift to a smaller car though. There are cheap old ones available.

"in the heated atmosphere of the bubble, gas price increases may have been the trigger that broke the expectation of continued growth."

Ponzi-style bubbles don't require a trigger - they depend on the "greater fool" theory, and when the string of greater fools runs out, they crash. Look at the chart on page 6: gas prices weren't very high when the bubble peaked, and they hadn't been there very long - that's far too weak a trigger. This is a purely correlational study, and extremely weak.

There's an easy way to test this hypothesis: SUV sales and prices should crash at least as quickly as home sales and prices, and they didn't. There are different, and better explanations: price declines are fully explained by the pattern of pre-peak price increases (on the coasts), combined with economic hardship (esp. the industrial mid-west), combined with the patterns of construction and loan-type: the fact is, exurbia was bubble-land: that's where spec home construction was strongest, and where lower-income buyers were using sub-prime loans. Another data point: the UK has an even worse bubble, despite much greater housing density.

A contrary note: if exurban home prices are falling, this will provide a counter-force to the pressure of rising commuting-fuel costs.

I would note that this study was sponsored by "CEOs for Cities", an advocacy group for dense cities.

"Carpooling: People all go in different directions and come and go at different times. Seems hard to get it to work well. For some small fraction of the population it would work. But not for most people."

I don't think you're thinking about this deeply. Most people work in the daytime, so the distribution of arrival & departure times is skewed, and most would fit into a few times; most people live in reasonably dense metropolitan areas; most people live in residential areas, and work in commercial areas. Online systems would make it easy to match people up. I think people basically have a rigid schedule that's amenable to carpooling (determined by their work requirements, like assembly, or cashiering) or a flexible schedule amenable to telecommuting.

"Some people do not have the money needed to reduce their energy usage via efficiency"

I don't buy it. a review of major carpooling sites indicates that very few people are exploring carpooling as an alternative to their gas guzzlers, and used Corolla's (40MPG highway) are still cheap, so people really aren't fully serious yet about reducing fuel costs, even now.

This guy could sell his 13 year old vehicle, and buy a Corolla of the same age - it would be the same price. He could buy a air-source heat pump - they're much more cost-effective than ground-source, and they work at much lower temps than they used to. He could insulate himself, if he's handy enough to do an algae pond. He just hasn't made it a high enough priority.

Nick G,

I do not believe that the real estate bubble was a Ponzi style bubble. I see several contributing factors including Chinese purchases of US debt which lowered interest rates and caused an asset bubble.

As for a trigger that popped the bubble: I think it would have run out of steam even without the gasoline price rise. But the gasoline price rise contributed to its popping. Now the high price of gasoline is certainly changing the relative value of different houses in different locations.

Yes, of course exurban housing price drops compensate for high gasoline prices. Similarly, the decline in SUV prices compensate for high gasoline prices. If yo happen to be a low mileage driver who wants some benefits of SUV ownership (say you carry a bunch of kids around) now's a good time to pick up a used one. August will be an even better time to buy.

Car pools and deep thinking: It depends on your work environment. I work in an environment where key engineers and software developers never know when they might have to stay late to deal with a problem or come in early for a telecon with Europe or elsewhere. Car pooling doesn't work for us. I realize others have more rigid schedules. Also, it depends on the geographic layout of where you live. Some dense old style cities have a huge wave that comes in from suburbs to high density work environments. I can see car pools working in such settings.

Used Corolla: I've spent a lot of time on autotrader.com comparing used cars of different sizes. A Ford Focus costs more than a Ford Taurus of the same year. A Ford Explorer is similar to a Focus in price. Well, they didn't start out that way. A poor person has got to pay more for fuel efficiency among used cars. Note that someone buying a new car is going to pay less for a compact than for a full sized car and less for the full sized car than for an SUV. So the poor folks really do face different incentives.

Poor people are also less bright and less well informed. They have a lower capacity to figure this out. How many above average people even know what a ground source heat pump is? I am amazed when I get into conversations with co-workers (who are 120+ IQ in my occupation) what I have to explain to them about energy tech choices.

Nick G,

About FirstSolar's module cost and profit: I've been reading stock analysts on the PV industry. The prices really are going to drop a lot. I find it harder to follow batteries since A123Systems is not publically traded and there do not seem to be many pure battery plays. You got any suggestions on how to follow the battery makers?

"I see several contributing factors including Chinese purchases of US debt which lowered interest rates and caused an asset bubble."

I agree. Also recycling of petrodollars. But, despite lower interest rates, carrying costs were rising beyond affordability. The only thing sustaining purchasing power was the expectation of rising prices, which made otherwise disastrous ARM's make sense. Also, there was a large investor component, which was directly based on the Greater Fool theory.

"the gasoline price rise contributed to its popping."

Not significantly. Look at that chart on page 6 - it was too small, and too late.

"the high price of gasoline is certainly changing the relative value of different houses in different locations"

Again, there's no evidence that's the primary thing. Home prices have been dropping for much longer than SUV prices.

"SUV ownership... August will be an even better time to buy"

Yes, the logical thing will be a wholesale swap of high MPG vehicles to high mileage drivers, and vice versa.

"Car pooling doesn't work for us."

Well, first, you're in the group that makes sense for telecommuting. Of course, as a society we're not quite ready for it - managers are afraid of losing control, staff are afraid of being out of touch. Perhaps we need more of a sense of urgency, maybe we need higher resolution video.

2nd, we need to be more creative. As just one example, take a look at www.slug-lines.com/ .

"comparing used cars of different sizes. A Ford Focus costs more than a Ford Taurus of the same year. A Ford Explorer is similar to a Focus in price."

But the Taurus doesn't cost much more, does it? And the Explorer owner can swap directly. They may be disappointed to have suffered accelerated depreciation, but it's there's no marginal cost to switch.

"the poor folks really do face different incentives"

True. Oddly, they shouldn't - there isn't much difference in production cost between small cars & SUV's - that's why SUV's are so profitable - consumers are willing to pay much more, but they don't cost much more to make. Vice versa, that's why car companies hate small cars.

"Poor people are also...less well informed...How many above average people even know what a ground source heat pump is?"

True - this isn't easy.

"I've spent a lot of time on autotrader.com comparing used cars of different sizes. A Ford Focus costs more than a Ford Taurus of the same year. A Ford Explorer is similar to a Focus in price. "

OTOH, it's nice to see that values are starting to shift to reflect MPG. An Explorer & Focus at the same price - pretty striking. Have you seen any other interesting shifts?

"You got any suggestions on how to follow the battery makers?"

I read their white papers & press releases, and industry journals occasionally, as interesting things turn up. For example, http://www.spectrum.ieee.org/ and http://electricitystorage.org/news.htm are good. http://www.energycentral.com/ and http://my.epri.com/portal/server.pt? are pretty good. http://powerelectronics.com/about/ is useful. - http://www.bestmag.co.uk/ I believe was decent, tho I haven't read it for a little while. http://www.batteryuniversity.com/index.htm is a good primer, if a bit outdated.

Randall, want to make a lot of money??

There's $2-$3T in light vehicles just sitting around, utilized only 1% (1 hour out of the day (4% timewise), at an average of only 1.15 passengers (25% capacity-wise)).

Figure out a way to take advantage of this under-utilized asset, and set up a new company/IPO. For example, zipcar.com is finding a way to improve time-utilization of vehicles. Perhaps the killer app is improving capacity (i.e., something kind've like carpooling), through some kind of innovative matching system.

Maybe a dynamic, wireless, minute to minute kind of thing. Need a ride? Post it on the system, which uses your cell-phone GPS coordinates to find someone with extra capacity.

Maybe it's something that looks completely different, like slug-lines. It's out there, waiting for someone to cash in.