July 27, 2010
Chevy Volt For $41k

Want to spend (before tax credit) about $16k more than a Toyota Prius to get a pluggable hybrid that can go about 40 miles on electric power? Early adopters with moderately deep pockets please get in line.

General Motors began taking orders for the long-awaited Chevrolet Volt on Tuesday, pricing the plug-in hybrid car at $41,000.

A US federal tax credit of $7500 lowers a buyer's cost to $33.5k. A Volt fits well with a future full of parking lots covered with photovoltaic solar canopies. My expectation is that such solar canopies will become commonplace in 20 years along with electric cars.

So why buy a Volt? If you normally spend $50k or more on SUVs but want unusual bragging rights it is a cheap way to get them. Unlike the Nissan Leaf EV you can take the Volt on long trips. But if you only drive locally you can avoid a trip to a gas station.

Another reason to buy a Volt: world oil production has yet to surpass 2005 levels on a yearly basis. Peak Oil might already be in the rear view mirror. You can see the Volt as an insurance policy against Peak Oil. If oil production goes into decline then what looks now like an excess of federally subsidized electric battery factories could turn into a shortage.

Share |      Randall Parker, 2010 July 27 10:22 PM  Energy Electric Cars


Comments
Sione said at July 28, 2010 1:40 PM:

Passed peak oil already! And porn production is down as well. So peak sex has been passed! A smut shortage looms! Oh dear!

Yeah.

Right.

The reason for both is a less to do with dramatic fiction and more to do with economics. Oil production is down thanks to the recession (which is really an economic depression- just not yet understood as such by most people), arbitrary regulation and plain politiks. Hardly "peak oil" in the sense that various shills and hysterics promote. Best policy is to understand the economics of supply and demand then you'll know why production levels are as they are.
---

Interesting though the Volt may be from a technical point of view, it is not a magic bullet that will save the US or even General Motors in the long term. The US is going to maintain an economic depression which is likely to last for decades.

{Consider, the US owes the rest of us 361% GDP. Yet your government continues to rack up record ruinous deficits. Before the end of the decade interest on US govt debt allied to social security obligations will demand some 92% of tax revenues (assuming US productivity does not continue to collapse for if it continues to do as presently, then you are looking at a mere half decade or so). In the meantime the money supply has been doubled by the Federal Reserve so severe price rises for goods and services are only a matter of time. Add assorted boondoggles to the mix, such as medicare, obamacare, assorted wars and military adventures, Fannie and Freddie bail-outs (up-coming version 2.0), bail outs for bankrupt states (like California) and all the rest of the various alphabet soup of programs/authorities/commissions/regs that succeed in destroying the wealth of generations of 'Mericans, and it is clear that the deficit is not going away any time soon. Soon the whole quagmire will be known as the UDA (United Debts of America). The question is, just how long will anyone continue to lend to such profligate wasters? So, the economic picture is dire for the forseeable future.}

Dire economic expectations means less and less buyers are going to be in the market for $40k+ cars. $7.5k subsidies (on top of all those other debt fuelled welfare handout bilches and schemes, IOU, IOU, IOU, IOU, IOU, IOU etc.) are not sustainable. They won't last because they can't be afforded. As far as GM is concerned, one would have thought they'd have realised that you can't make a profit by manufacturing and selling cars at a loss. Then again, they are operated by the UAW and the government (guys who ruined the company in the first place), so confusion over such difficult concepts as profit and loss, spending and saving, fact and fraudulent fantasy etc. have long had a pre-emminent place in their thinking. Maybe they think they can "make it up on volume!"

Aside from any of this, most of the cars built on the Volt platform are to be conventional gasoline powered cars. Hopefully those will be significantly more affordable and hopefully just enough can be sold at a sufficient profit to offset the losses accumulated by the Volt and keep GM around a little while longer. I seriously hope that the Volt is a good car, but going by most North American GM product it'll likely be indifferent to average. The big test will be if it is exported. Can it succeed against world leading brands? It'll need to be a very good car indeed.

Sione



Bruce said at July 28, 2010 8:18 PM:

"Year-to-date, coal-fired plants contributed 46.9 percent of the power generated in the United States. Natural gas-fired plants contributed 20.9 percent, and nuclear plants contributed 20.3 percent."

Congratulations Volt owners. Your car is driving on coal, NG and nuclear energy. I hope that extra money you spent on your car was worth the environmental devastation you are creating.

Engineer-Poet said at July 28, 2010 9:15 PM:

You have to wonder about some people.

Oil production is down thanks to the recession
No, oil production peaked in 2005.  Prices doubled roughly 1/year through 2008, while production remained essentially flat; supply and demand were balanced by pushing more and more consumers out of the market.  The drain on the US economy was the proximate cause of the collapse of the latest (housing) bubble.

Proof is that oil prices are $70+ today, compared to $10 during the Asian Flu of 1998.

Interesting though the Volt may be from a technical point of view, it is not a magic bullet that will save the US or even General Motors in the long term. The US is going to maintain an economic depression which is likely to last for decades.
The only way out of it is to reduce oil demand, so prices fall and even high prices suck less out of the economy.  We need to get rid of Explorers and Suburbans and build things which use fuel sparingly like Cruzes, Volts and Fusion hybrids.

The "depression" alternative is something like Trev.  Once a lot of oil demand has been destroyed by electric vehicles, the economy will not be limited by oil prices.

Randall Parker said at July 28, 2010 10:06 PM:

Sione,

Oil production is down because $70+ per barrel is not enough to boost oil production. That's a very high price in historical terms. Before 2005 oil hasn't been that high since around 1979-1981. Oil's high prices in the last decade represent a much more sustained rise than we saw in the 1970s. New production to drive down oil prices is still nowhere in sight.

At the same time, rising Asian demand has pushed up prices high enough to cause demand destruction and economic stagnation in other countries.

Bruce,

How is nuclear energy producing environmental devastation? Also, coal's fraction of electric power generation in the US is down a few percentage points with wind's fraction rising. Coal plants face tougher emissions regs too. US electric power is getting cleaner.

Electrification of transportation would greatly improve air quality.

john personna said at July 29, 2010 4:20 AM:

Please be honest and use the Prius (or Insight) base price in your "more" calculation.

john personna said at July 29, 2010 4:23 AM:

(oh, if that was the credit adjusted price comparison, my bad.)

Bruce said at July 29, 2010 7:26 AM:

Randall, cheap gas from 1984 to 2002 was the aberration.

http://inflationdata.com/Inflation/images/charts/Oil/Gasoline_inflation_chart.htm

As for nuclear, Yucca Mountain has been cancelled, effectively stabbing new nuclear plants in the heart.

http://current.com/news/89914163_yucca-mountain-project-cancelled.htm

As for coal being replaced by wind ... I think not really. Hydro is down 27%, so renewable energy is way off.

http://www.eia.doe.gov/cneaf/electricity/epm/epm_sum.html?ref=bookshelf

Coal I think is being replaced by NG, which many of the newer plants can use. NG prices are way down. NG is now double what it was since 1996. Hydro is down 40% since 1996.

http://www.eia.doe.gov/cneaf/electricity/epm/table1_1.html

Sione said at July 29, 2010 5:25 PM:

Engineer-Poet

You make no point of substance and display fundamental lack of understanding of that which you write about. You need to learn a little about economics and something of the nature of your country.

The US dollar is subject to the law of supply and demand, just the same as any other commodity. The US Fed, associated frachisees, fractional reserve banks etc. have called into being so many new dollars that there have been, and are going to continue to be, substantial price rises across all classes. This will not necessarily occur smoothly or across all markets simultaneously. As in the past, it can be manifest in discontinuities, spikes, volatilities and instabilities.

An economy whose subjects are exploited by the large scale fiat money inflation (really nothing more than an organised theft of value of their productivity/resources/savings/time & efforts) often responds by exhibiting what are referred to as asset price bubbles and commodity price bubbles. In the US several of these have been experienced within recent times. Some examples: houses, technology equities and options, commercial property, energy equities and options, mortgage bonds, price of oil and some related derivatives etc. Bubbles are characterised by unsustainable increases in price over a period of time which hit astonishing highs before plunging with rapid finality. That's when the bubble is said to have popped.

The high prices in oil that were experienced were part of a sequence of bubbles directly related to the introduction of newly created US dollars from the late '90s on. The quantity of oil production and the price bids attained were directly affected by this, as well as by the dictates of arbitrary regulation and political expediency (not solely US based).

The price of oil is not the cause of the present economic condition of the USA, it is (and remains) one of the results. Do not be putting the cart before the horse.

---

The way out of the depression is to replace the present central bank and fractional reserve banking system. Fiat money needs to be replaced with a 100% asset backed money. Banking reserves need to be 100% (less than 100% is necessarily fraudulent). Don't hold your breath though. The US is on a race to the bottom. Keynes famously stated that not one man in a hundred understands the nature of money or the fundaments of central banking. Until people do understand, the condition in which they discover themselves is as inevitable as the popping of a bubble. There is no avoidance or easy escape.

---

A partial transfer of energy source from oil to coal and gas (which is all the Volt attempts to achieve in reality) will not make much of an alteration to the US economic situation. The fact must eventually be faced, the US insolvent and is going broke. The infrastructure expenditure required to go electric on the scale you may wish is not available and isn't going to be for a very long time, if ever.

Consider as an illustrative example, will retirees vote to forgo their social security and medicare "entitlements"? Will 55 year olds? What about 50 year olds? Will 45 year olds? Or will they all agree to suffer the loss of such entitlements in order to let some liberal yuppoid youngsters flouncie around in trendy new $40,000 cars?

'Course they will!

Like I say.

Yeah.

Right.

Sione

Randall Parker said at July 29, 2010 5:33 PM:

Bruce, Good of you to reference my favorite EIA pages to make your points.

Agreed in absolute terms natural gas has grown the most. But compare wind in 1996 with today. Wind basically caused a doubling of the "Other Renewables" category.

Hydro: Yes, what's with that? Were 1996 and 1997 especially wet months? The West has been dryer in recent years with water levels way down behind some of the really big dams. So is hydro production going to continue to decline? BTW, I've studied those EIA pages before (and did calcs from them in previous posts) but never noticed the hydro output from the mid 1990s. Good catch.

You are right about total renewables since 1996. 264,942 + 145,205 = 410,147. That's less than the 347,162 + 75,796 = 422,958 for 1996. But was 1996 an outlier? Other renewables doubled but that wasn't enough to compensate for declining hydro.

So the question becomes: Will hydro recover, flatten out, or continue to decline? When will other renewables grow fast enough to outpace hydro's decline?

Solar continues to amount to chump change in spite of all the press it gets. Solar has yet to double since 1996. That seems very odd considering how much solar production factory capacity has grown. Nick G thinks that page does not include home rooftop solar. Maybe little of the PV has gone into utility projects that the EIA tracks.

Sione said at July 29, 2010 5:37 PM:

Randall

The price of oil denominated in gold gives an interesting view of what is going on. The US dollar is fast losing value and that trend has accelerated significantly. Oil producers are not ignorant and act to suit their own interests.

As far as new production is concerned, the US has its own government to blame for that. Similar situation in the UK...

Sione

Engineer-Poet said at July 29, 2010 8:40 PM:
The US dollar is subject to the law of supply and demand, just the same as any other commodity.
Why don't you take your own advice?  World oil production peaked in 2005 and then bumped along while prices inflated astronomically.  The US dollar did not fall against other world currencies by a factor of 6+.

World oil production treaded water while prices skyrocketed.  Contrary to the dogma of Chicago economics, demand clearly did not create supply.  We saw, and are seeing, resource limits in action.

You make no point of substance and display fundamental lack of understanding of that which you write about.
Project much?
The way out of the depression is to replace the present central bank and fractional reserve banking system.
Spoken like a true believer.  The problem is that the thing in short supply is not hard money, it's the resources for which money is just a symbol (if money was denominated in barrels of oil we would have seen everything else deflate).  If we want more output for the available oil we either have to be much more efficient (easy to do, just emulate Europe and Japan) or substitute.  Electricity is the most logical bulk substitute, as "solutions" like biofuels trade one limited input for another one in even shorter supply.

Randall Parker said at July 29, 2010 10:53 PM:

Sione,

I do not believe the "dollar losing value" trope. When I walk into the grocery store I can still get big frozen turkeys for $1.29 per lb and books on Amazon haven't changed much in price. I can buy good shoes for cheap and Ford has cut the prices on new model cars. Oh, and houses are getting much cheaper.

The dollar has risen substantially against the Euro since summer of 2008. Much better time to go Europe now.

I agree with E-P about oil, money, and the economy. The higher oil prices are holding back economic growth. Even without the housing bubble the oil price surge that peaked in July 2008 would have caused a recession anyway. Now we are still in a recession with nearly 10% unemployment and yet oil is back up near $80 per barrel. That's due to supply constraints.

China's growth is pushing up the price of oil and the high oil prices is causing demand destruction in other countries around the world. I expect this trend to continue. Once we come off the bumpy plateau of world oil production I expect an economic depression as a result.

Nick G said at July 30, 2010 10:08 PM:

Nick G thinks that page does not include home rooftop solar.

The EIA states that they only include utility and utility-type solar production. That excludes all distributed solar on the customer side, whether they're large industrial/commercial (e.g., Google or Walmart) installations (80% of kWhs) or residential ones (80% of installation count).

Once we come off the bumpy plateau of world oil production I expect an economic depression as a result.

One has to ask, what would be the feedback mechanisms that would cause a depression? One element of oil shocks is psychology: plain fear. Another is capital expenditure uncertainty: do I buy an SUV or a Prius - I'll wait a little to see what happens with oil prices. A 3rd would be the transfer of income from oil importers to oil exporters. A 4th is the friction of moving labor and capital from one industry to another (e.g., from GM's Hummer division to Toyota's hybrid division). A 5th is the diversion of capital from productivity enhancing investments to R&D shoring up the energy infrastructure, and replacing suddenly obsolete capital. A 6th would be the simple inability of existing industry or employees to operate, due to a lack of fuel.

The thing is, none of these is large enough, or long-term enough, to cause a sustained depression. Which would you see as most important? Would you add any?

Bruce said at July 31, 2010 8:23 AM:

Randall, the "Other Renewables" includes black liquor and wood waste. Which has been very lucrative for pulp mills etc.

Other renewable went up 70,000 since 1996. Hydro went down 83,000. NG went up 470,000

Randall Parker said at July 31, 2010 11:29 AM:

Nick G,

Why I expect declining oil production to cause an economic depression:

1) Oil price shocks cause recessions. Recessions cause lots more debt defaults. Well, this is going to be the mother of all oil price shocks. It will last for years.

2) Debt defaults cause banks to fail. Failing banks mean less credit available.

3) The real estate crisis gets worse as demand collapses for houses in ex-urbs (driving far to work will become a heavily unattractive prospect) and in areas with industries heavily dependent on oil. Dow, Dupont (Delaware), and the Texas oil and chemical plants are going to do massive lay-offs.

4) Prices of oil-dependent products will rise, pulling money away from buying other types of products.

5) This shock will be delivered to a US economy already heavily burdened with debt and sovereign deficits. We already have a large fraction of all mortgages underwater. More declines in ex-urban housing prices will lead to more walking away from mortgages even among those who still have jobs.

6) The US government will be too poor to try to lessen the shock. We already have a $1.4+ trillion deficit. Next year will be similar. The US government will have to cut spending as will already strained state and local governments.

7) Reluctance to invest. Since it will become known that in each successive year less oil will be available long term investments will seem risky. People will expect the economy to worsen and therefore demand for the product of investments will decline.
There'll be exceptions for energy producing investments. But most investment today is for stuff other than energy production.

Paul D. said at July 31, 2010 7:02 PM:

If you want to substitute for oil, push for natural gas vehicles, not electric vehicles. We are not yet at peak gas, and methane can be made from coal, and can likely (IMO) be made from very low grade disseminated organic matter in shales by in situ processing.

Nick G said at July 31, 2010 7:28 PM:

If you want to substitute for oil, push for natural gas vehicles, not electric vehicles.

We also have plenty of electricity, for which infrastructure in the home already exists. Why would you prefer NG vehicles?

Nick G said at August 1, 2010 8:10 PM:

While I'm thinking about PO-induced recession, here are some guesses about the Volt price, roughly in order of plausibility:

1) GM really doesn't want to sell, but it's afraid of a backlash if it only leases, like the EV-1, so it's setting the price high to push leasing.

2) GM's new finance subsidiary wants to increase it's leasing business, so it's setting the price high to push leasing.

3) GM wants to amp up cash flow in anticipation of it's IPO, so it's extracting everything it can from early-adopters. If they lower the price later and lose money reselling lease turn-ins, so be it.

4) Many people in GM prefer to think of the Volt as a "halo" car, which will bring traffic into showrooms, and sell other vehicles. They're content to keep Volt production low, and prices high. In effect, of course, they're trying to sabotage the Volt, because they still have careers tied to ICEs.

5) The CEO of GM is an old oilman, and he's trying to sabotage the Volt.

Reactions?

Nick G said at August 1, 2010 8:13 PM:

Oh, some useful background:

The Volt battery, per the CEO of CPI (the supplier), costs $8K. Without the battery, the Volt costs $33k, $11K more than the Prius, but has similar components. So, clearly the Volt is over-priced.

The Volts 3 year lease, at $350/month is much cheaper than buying. It's also cheaper than most new cars when we include a $75-$125/mo fuel savings.

Engineer-Poet said at August 2, 2010 6:59 AM:

Depreciation makes the leasing arm's performance look better, too.

The high price is probably GM's attempt to capitalize on early-adopter interest.  Who can blame them?

Nick G said at August 2, 2010 9:49 AM:

Depreciation makes the leasing arm's performance look better, too.

I'm not sure what you mean. If Volt production doesn't keep up with demand 3 years down the line (following Toyota's historical strategy with the Prius), depreciation will be low. OTOH, if MSRP prices fall in 3 years, perhaps in part due to competitive pressures (that Toyota didn't experience), then depreciation will be higher, and the leasing unit will have unexpected losses.

The high price is probably GM's attempt to capitalize on early-adopter interest.

Except that they're not doing the same thing with the lease, so one can expect that many people will lease, and GM won't get those extra revenues. It appears to be a lease-maximizing strategy, rather than a revenue-maximizing strategy.

th said at August 2, 2010 3:19 PM:

The Volt's battery, electric motor, gas engine and gasoline weighs about as much as a cast iron big block from the sixties, the 40 mile battery run costs to recharge at avg residential rates the equivalent in gasoline of $4/gallon, bolsheviks now run liquidation motors and nickg thinks its bush's fault, amazing.

http://www.altenergymag.com/news_detail.php?pr_id=16714

Nick G said at August 2, 2010 3:45 PM:

the 40 mile battery run costs to recharge at avg residential rates the equivalent in gasoline of $4/gallon

?? The 40 mile battery run will cost about 50 cents to $1. The average US car would use about 1.9 gallons to go 40 miles - at $3/gallon that's $5.7.

bolsheviks

The current CEO is an old Exxon executive - he doesn't look very bolshevik to me...

bush's fault

Who mentioned Bush??

Engineer-Poet said at August 2, 2010 6:00 PM:

th amuses again:

the 40 mile battery run costs to recharge at avg residential rates the equivalent in gasoline of $4/gallon
The Volt's maximum depletion is 8.8 kWh.  Allowing for 85% charger+battery efficiency, that's 10.3 kWh at the wall for 40 miles.  Guessing 30 MPG for the equivalent ICE car, $4/gallon equivalent would require electricity to be over 50¢/kWh.  If th is getting gouged that much with whatever electric provider he signed up with, no wonder he's cynical (as well as innumerate).

Nick:

If Volt production doesn't keep up with demand 3 years down the line (following Toyota's historical strategy with the Prius), depreciation will be low
But during the 3-year term of the lease, GM gets to take a depreciation charge against the value of the vehicles and use it to offset lease income.  This takes some of the cost of the vehicle and bills it to the US government.  If the resale price is higher than the depreciated value they will have to repay "depreciation recapture", but that assumes they sell the vehicles.

Randall Parker said at August 2, 2010 7:08 PM:

Nick G,

On all components there's a mark-up. If the battery costs $8k then GM has to increase its price to dealers by more than $8k. GM has inventory costs, engineering costs, installation costs, shipping costs, marketing costs, warranty repair costs, etc. The dealers have to tack on a percentage as well. So an $8k component costs a lot more than $8k in the final retail price.

$8k is a lot of money for just one piece of a car.

As for Prius versus Volt for components aside from battery: No, the Volt components are more expensive. The electric motor is larger for higher acceleration under pure electric power and higher speed, it operates a much larger percentage of the total vehicle time (hence need for higher durability) and the current flows are greater. So electrical components cost more in the Volt than in the Prius.

Maybe GM is trying to make some money off the early adopters. But the volume of sales they can hope for is so low that they've got to charge more NRE per car. I doubt that at $41k retail (and some thousands less to the dealer) they will make much if any money from the Volt in the next few years. They have too much NRE cost to pay back and the battery costs too much.

GM CEO Edward Whitacre is former CEO of AT&T and had an extensive career in telecomm starting in 1963 at Southwestern Bell. Whitacre was elected to Exxon's board in 2008. That makes his experience in the oil industry very minimal. Big corps elect retired CEOs of other big corps to their boards.

Nick G said at August 3, 2010 9:14 AM:

E-P,

that assumes they sell the vehicles.

Are you thinking they might hold onto the 2011/12 vehicles when they come off of lease?

Randall,

On all components there's a mark-up...inventory costs, engineering costs, installation costs, shipping costs, marketing costs, warranty repair costs, etc.

Very little of that is affected by the additional cost of the battery. Almost all of that is indirect overhead, which can be allocated in various ways. Yes, a % markup of material cost is one simple and traditional way of allocating overhead, but it's not the only way, and it's likely not the best way.

electrical components cost more in the Volt than in the Prius.

Yes, but the ICE components cost proportionately less. The engine is an off the shelf, high volume item, unlike the Prius ICE engine. All of the ICE secondary components will get used much less, have lower peak loads, and can be smaller and less durable.

Maybe GM is trying to make some money off the early adopters.

The initial price discussions were for under $30K. Then the $7,500 credit was approved, and suddenly the discussions were about high 30's...

the volume of sales they can hope for is so low that they've got to charge more NRE per car.

That's a strategic decision. GM, IMHO, should take a longer view, and allocate their R&D (and other relevant overhead) to a much large unit volume. They should be thinking long-term for the Voltec system, and it's use in various models.

Regarding Whitacre - yes, that's not a lot of exposure - I did put that last and lowest in plausibility. OTOH, cross-linking of corporate boards is a time-tested method increasing communication, cross-fertilization and collaboration between companies (it was a central element of Rockefeller's monopoly strategy). And, oil company influence in the car industry has a long history. For instance, IIRC Standard Oil was part of the well documented illegal effort by GM to dismantle municipal light rail systems after WWII.

Nick G said at August 3, 2010 11:16 AM:

Randall,

One place to start to analzye the hypothesis that an increase in oil prices will cause a long-term economic decline is to look at the economics literature. I've done so, as best I could, and found little support for this hypothesis.

Here is a good study from the website of a PO pessimist: http://www.postpeakliving.com/downloads/Sill-MacroeconomicsOfOilShocks.pdf produced by the Philadelphia Fed. It concludes that a 10% decline in oil availability would reduce GDP, on a one-time basis, by about 2%. This means that GDP growth would be 2% lower than otherwise in roughly the year following the oil shock, then go back to it's historical growth rate. Interestingly, it finds no impact on inflation. Strikingly, the author of the website misinterpreted the study to support his argument for TEOTWAWKI, as he did with several other studies (we can discuss those other studies as well, if you'd like).

We can compare that analysis of a 10% decline in consumption to the forecast of the president of the Association for the Study of PO. Kjell Aleklett forecasts a decline of 11% by 2030 of all liquids. See page 40: http://www.aspo-australia.org.au/References/Aleklett/20090611%20Sydney4.pdf

Sione said at August 3, 2010 1:01 PM:

E-P

I said that you don’t know what you are writing about. It seems like your reading comprehension needs brushing up as well (and that’s being charitable about it).

Anyway, you wrote, “The US dollar did not fall against other currencies by a factor of 6+”

Did I write that it had?

No.

I didn’t.

Never indicated that.

Nope.

Didn’t claim that.

Not at all.

You made that piece of cretinism up all by yourself. Shame on you! That’s a special type of bad habit you have gotten into there. Look, you can’t make up mumbo-jumbo nonsense to paper over the yawing gaps in your knowledge and expect to get away with it. Those gaps remain glaringly obvious.

Again, “The US dollar did not fall against other currencies by a factor of 6+”

Had it occurred to you that the US$ holds special status as World reserve currency? Do you understand what that means in theory and the results when put into practice?

Nope.

Thought not.

Time to look it up then. Go find out.

Had it occurred to you that most other currencies are un-backed or, at best, only partially backed fiat money? Were you aware of the nature of “foreign” central banks, fractional reserve banking and associated inflationary policies? Do you understand the consequences of those?

Nope.

Thought not.

Time to look all that up as well.

Were you aware of an alternative to using US fiat money as reserve? Ever heard of specie? Know what the traditional form of specie is?

Nope?

OK then. Go look that up.

Now having reviewed all that you might care to consider what you have learned in the light of supply and demand. Notice anything? Well you should, it indicates a serious problem for the future. Hint: a really large bubble building.

All goes to reveal your comment as shallow nonsense. Really!

-

You refer to “Chicago economics”. You mean the Chicago School. Look, if you are going to pretend to an understanding of economic matters, then at the very least have the decency to employ the terminology correctly. When you don’t it is plain that you have not the barest knowledge about the subject. Besides, if you did know it, then you’d have instantly realised the analysis I presented was not of the Chicago School. Not even close. If you did know it, then you wouldn’t have attempted to mutilate Say’s Law well out of its context (For goodness sake, if you are going to quote poor old Say have the integrity to read and understand what the man actually wrote about!). Please avoid generating mumbo jumbo nonsense on these topics.

-

You wrote this howler,
“The problem is that the thing in short supply is not hard money, it's the resources for which money is just a symbol (if money was denominated in barrels of oil we would have seen everything else deflate).”

Money is a store of value, not a symbol of resources. You really, really need to learn basic economics. Then you’d also understand why it is oil is generally not employed as specie. Seriously, what you are presenting here is puerile nonsense. It is very hard to take you seriously when your comments are so obviously self-generated mumbo-jumbo. With respect, at this time you do not know the subject well enough to pass rational comment.

-

“If we want….” Presented like a true central planning addict. What YOU might want is irrelevant to me and most anyone else. I don’t care about you or your values or your wishes and dreams and little deceptions. Guess what? There are plenty more people the same as me in this World- people who don’t know you, don’t care about you or for your values or your wishes or your dreams, let alone your prejudices. Avoid the conceit of thinking you are qualified to plan what is best for other people. Best policy is to leave other people alone to live their lives as they see fit. That means none of this speaking for others lark. No collectivism. No more talk like, “If we want….” Always remember, you speak ONLY for yourself. That means you should say, “If I want…” And if you want something, then you have to earn the wealth necessary to achieve, what is really nothing more than, YOUR want. Don’t look to be forcing other people to be encumbered with your dreams.

Finally, you still evade the ten ton elephant in the room. Going full electric is very, very, very expensive. The government of the USA is insolvent. There are some big conflicts over government finances and empty promises soon to play out (social security, medicare, education, research, military, tax, sovereign debt etc etc etc). Infrastructure building and subsidization on the scale necessary to go full electric is going to have to compete for finance and resource with many prior claimants who have themselves been promised much and fully expect to receive it. It is doubtful that they’re going to vote themselves out of their “entitlements” in order to see some yuppoids flouncing about in trendy new $40k+ cars.

Sione

Sione said at August 3, 2010 1:07 PM:

Last line should be, "It is doubtful that they’re going to vote themselves out of their “entitlements” in order to see some yuppoids flouncing about in trendy new $40k+ cars- not over the medium to long term, not once the realisation of soverign debt and insolvency starts to bite in earnest."

Nick G said at August 3, 2010 1:21 PM:

Going full electric is very, very, very expensive.

No, it really isn't. A Prius, which is partially electric, is cheaper than the average new US car. So is the Leaf. Overall life-cycle costs for an EREV like the Volt will be lower than for a comparable ICE vehicle.

Sione said at August 3, 2010 2:12 PM:

Randall

“I do not believe the "dollar losing value" trope.”

You mean “tripe” I suspect. In any case it doesn’t really matter what you believe, hope or wish. Fact is, it has already occurred and is presently continuing to occur. It’s been a matter of Fed policy. Anyway, let’s just see you try to buy an oz of gold for US$36 or even for US$300 or even for US$600. The US dollar has lost value consistently and without pause for the entire duration of the period the Fed has run inflationary monetary policy (see if you can guess how long that has been going on). The only variable has been the rate at which the decline progresses. Since 2000 the dilution of the US$ has become increasingly swift (with a slight pause or two) and since 2007 it has been astonishing. Remember this always. The US$ is fiat money. It is, at best, only partially backed with specie. All newly issued money from the Fed has no backing. This has consequences which are not avoidable.

Note: Inflation is an introduction of new unbacked money into the economy. It is the cause of price rises, bubbles and economic instability. It causes widespread destruction of wealth, espacially savings. It is the cause of malinvestment decisions in response to the misleading economic signals it causes to be generated. Inflation is not the price rises themselves, although people often refer to price rises as being "inflation". It is important to understand what the nature of inflation actually is and not confuse it (a cause) with what it causes (effects).

To a casual observer, it may appear that certain specific goods and services appear "cheaper" or seem to have unchanged prices for a time. Nevertheless that should never be allowed to blind one to the fact that the results of monetary inflation do not immediately appear evenly or equally across the entire economy. That there are delays and time lags does not mean the effects of declining dollar value are not real or are not going to be experienced. Some sectors, some goods and some services remain static for a period and then suddenly are more expensive. Others rise gently or in a series of almost un-noteworthy steps. Some goods and services decline in quality, size, and reliability or even cease to be available at all. Some become unaffordable at any price. These are inevitable results of monetary inflation. Then there are the bubbles. These are the direct result of monetary inflation. They are destructive of wealth- particularly so of savings (consider as analogy, negative compounding interest and what it would do to a savings account).

In the USA you've just encountered a sequence of credit bubbles (most noticable since the late 90s) and are presently enjoying the necessary corrections (or rather, the merest portion so far) with price resets and the realisation of widespread wealth destruction (what should attract your attention is not so much that houses are suddenly “cheaper”, it is that mortgage credit is much more difficult to obtain and more expensive than previously- ask where did all the credit come from and why did it cease to arrive as before?). Bubbles are generated by monetary inflation and are the most obvious manifestation of the destructive nature of that activity. Again, not all sectors exhibit the results of an inflationary monetary environment equally or at the same time. They are not necessarily always in rigid lock step. This means the depredations of the inflationary processes are often not immediately obvious. Nevertheless when the inflation becomes aggressive enough they do become plainly visible. Watch and see. You certainly are subject to the results of the process and definitely will experience it.

Given that geriatric Greenspan, Helicopter Ben, little lush Bush, his colleague the Obamaerroid (rhymes with haemarroid) etc. managed to more than double the amount of US monetary tokens, it stands that the purchasing power of said money tokens must decline. There are two dangerous possibilities for you to look forward to in the short to medium term. If the new fiat money presently held by the big banks in Fed accounts escapes into the US economy at large (as loans etc., remember, banks in the US are fractional reserve, which means they can magnify the effect of the Fed inflation by multiples) there will be significant price rises. If it stays where it is and the toxic assets it defends are not liquidated, you’ll experience prices higher than they would otherwise be anyway. Count on your chicken being reduced in size and quality as well as being pricier. Count on standard of living slipping yet again. Eventually you will personally experience restrained circumstance one way or another. Second, Helicopter Ben is expected to start the presses rolling sometime later in the year. If he does prices will respond soon enough. In such an event, expect sustained price increases and deep economic instability. Both situations are practical realizations of dollar value decline.

As far as the house price bubble and the oil price bubbles are concerned, you would not have experienced either of them without the monetary pumping of the Fed. You wouldn’t have experienced the onset of a recession (let alone a depression) either. What occurred was that the titanic availability of unbacked fiat money newly called into existence manifest itself in the availability of astounding amounts of credit on the very easiest of terms (hell, anyone short of comatose could get a mortgage or a house on zero down, low or no interest teaser terms). Credit cards were all but given away (I was resident in the US for three months and received too many offers of credit cards to count). Demand for houses, consumer goods, services, energy, imports and so on increased. People had plenty of money to spend. They bid prices up strongly. Vendors responded to the market signals. Investors and entrepreneurs responded. Even the Chinese increased their productive and manufacturing efforts mightily in order to meet demand (they, in turn, increased their demand for raw materials and for other factors of production, like oil). Bubble on bubble on bubble with accompanying malinvestments everywhere, unsustainable decisions, practices and behaviors all over the show. Then, boom! The whole mess imploded when the Fed slightly slowed the rate of growth of money supply for only a short time. Demand collapsed and has stayed restrained ever since- less demand and much destruction, widespread destruction, of real wealth.

The onset of the recession/depression was not caused by the rise in the price of oil, just as surely as it wasn’t caused by the rise of the price of houses. These (and other bubbles) were results of the Fed’s monetary policy, which is an expression of the nature of central banking and fractional reserve banking. The collapse was Fed caused. It would have been better if the Fed hadn’t pumped the money supply in the first place. Then there would have been no collapse and no realignment necessary.

As to the present price of oil- it’s up when denominated in USD, but not when denominated in gold. One (of many) sanity test for the claim that peak oil has arrived is that peak gold must have arrived exactly and precisely simultaneously with it (a situation that must then have persisted for decades, far longer even than the time I’ve traded both commodities). Amazing and fantastical!

Oil prices rose during an inflationary bubble. Then they collapsed. Now they are rising (in USD) again. This latest follows the aggressive and irresponsible monetary pumping the Fed undertook right after the housing bubble collapsed. They rise in response to a reduced value of the dollar. Oil producers are not stupid, they conduct careful economic analyisis and act to maximize their wealth and interests- they are not unaware of Fed policy. Just as importantly, prices are also pushed strongly upwards by arbitrary regulations and political interferences in the market. For instance, it is way easier for a producer to crank prices upwards rather than expand production, especially when it is known that the barriers to market (political, financial, capital raising, regulatory and so on) for new or reduced cost competition can be made tougher than ever. Lobbying is often a more successful means of gaining market advantage than innovation, seeking higher productivity or expanding production volumes. Again, oil producers are not stupid. They are well able to undertake economic and political analysis and then play the political system to advantage. They know what inflation is, how it debases the currency (no doubt many would have read Lord Keynes on the subject and possibly Mises, Hazlitt, Resiman, Shostak, Polleit, Schiff and so on as well) and exactly how to take advantage of it. Restricting supply output is one tool that can and has been employed. It’s been used before and since 2005. It’s still being applied (for example, you can look up official statements on the matter made by, among others, the Saudis). Note too, that one of the results of a bubble collapse is that accumulation of capital for new projects is rendered much more difficult. Expanding production or adding new capacity is thus made more problematic than it otherwise would be. Alternatives to expansion become far easier and much more profitable. ETS anyone? What about new tax? How about more regulations? Time to invest in the lobby groups…

Is the World experiencing "peak oil" in the sense of natural resource limitation or exhaustion? No. Nowhere near it. What’s being experienced right now are results of the destruction of wealth in the USA from the deliberate debasement of a nationalized currency and resulting recession (depression).

In the end it comes down to this. Presently the US has a standard of living and a gigantic government well above what can be afforded by the total productive efforts of all US subjects. In order for this state of affairs to progress as it has, it became necessary for foreign investors in other countries to subsidise the US. They did this by lending to the US. Some even went as far as to fix their currencies against the US. Most accepted USD as reserve (!). Should they ever decide that the US is not a safe place to store their wealth watch the dollar reset with a savagery that will surprise- talk about shock and awe! Actually, this reset is inevitable. It is a little while away, but once it occurs you will certainly be able to personally experience the underlying value of the US dollar directly. Just as you can’t spend your way to wealth by writing cheques on an empty account, the Fed can’t print a way to US govt solvency. The real big question is how the coming resets will affect the rest of us over here.

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The Euro is, like the USD, fiat money backed by near nothing. It's likely been oversold relative to the USD on the basis of the PIGS sovereign debt crisis. Frankly, buying US fiat to escape the disaster of Euro fiat is not a safe play. US is like Greece version 2.0. An analogy is a burning house. It is not a good idea to run upstairs to the bedroom and hide in the closet because there are fires in the kitchen and in the living room. Best policy is to run out of the house altogether and escape the searing flames of those fires. Still, enjoy those cheap Euros and get that European holiday in while you can still afford to.

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Poor E-P has not got a sane clue about money, the nature of money, credit, the economy etc. You’d be better off consulting tea leaves rather than taking any “economic advice” from the likes of him.

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Unfortunately the economic depression has already set in upon the US and now runs its course. The Washington/NYC axis is making that much worse than it need be. Present economic policies should be reversed in order to minimize the wreckage and enable a swift, sustainable recovery. They won’t be and that is going to lead to unnecessary personal tragedy and suffering for many good people. I am saddened that this should be so.

Sione

Sione said at August 3, 2010 2:46 PM:

Nick G

Going full electric is very, very expensive. That is not going to alter just by wishing it were not so. For a start there is a significant infrastructure investment required. Secondly, the presence of substantial regulatory and price subsidisation is also very, very expensive. Someone, somewhere has to pay for it all. Thirdly, a hybrid Prius is certainly not cheaper than a conventional ICE car with equivalent payload, performance, utility and so on. Compare like with like (I realise that is difficult since purchasing a new car is also about matters of style, emotion, self-expression, fashion, interest etc.). 4thly, the costs of development and tooling up for hybrids (let alone full electrics) have yet to be anywhere near amortised. That's all still to be paid for. 5th, in my experience, life cycle costs for hybrids are no less and likely higher than for conventional. That's to be expected since the hybrids contain elements of newer technology, systems and components. They are substanially more complex than, say, a Peugeot 405 or even an LS powered Holden Commodore. Hybrids and electrics may well revert to a standard depreciation cycle once there are enough of them around and services (such as wreckers, repairers, modifiers, second tier maintenance outfits and the like) become more common. In one way that'll be good for me, as there will be more interesting stuff about to play with. In other ways it'll be bad as there will be more demand for the el cheapo write downs I can presently get hold of. 6th, the Nissan Leaf is not directly comparable with a real car. It's really a restricted range cart- a toy. Now that's not to reject it. There may well be a market for such. Should they take off in a big enough way there will be downstream ramifications. For a start there will be increased need for substantial new infrastructure to suit them... 7th, the Chev Volt is not in private hands yet. There is absolutley no real cost data available- only propaganda and marketing puffery. It is premature to say that the Chev's life-cycle cost will be cheap. If that car is as mediocre as is typically (but not always) the case for American cars, well then... I'd like to hope it'll be a good car, but it is going to be assembled together by UAW... Worry about that I would.

The full electrics I think you might want to wait for and watch out for are the high end stuff like the Tesla, Audi (possible electric version of the R8), Mercedes SL (e version) or the Karma. How well they do in the market will be the key to what will occur next. Again, none of this is going to be cheap. Nothing free in this life.

Sione

Nick G said at August 3, 2010 3:07 PM:

For a start there is a significant infrastructure investment required.

The majority of car owners have a plug at home. Eventually public plugs will be needed, but that's not a very large investment - the wires are there already.

the presence of substantial regulatory and price subsidisation is also very, very expensive.

Nah. The hidden costs of oil are much more expensive: $2T oil wars, multi-trillion recessions to which oil-shocks contribute, pollution including diesel soot, NO2,CO2, etc.

a hybrid Prius is certainly not cheaper than a conventional ICE car with equivalent payload, performance, utility and so on.

Yes, it's purchase price is a bit higher, but it's lifecycle cost is lower, even with artificially low fuel prices. And, not contributing to oil wars or pollution can be just as valuable to a buyer as whatever it is that attracts people to army-trucks resold as conventional vehicles.

4thly, the costs of development and tooling up for hybrids (let alone full electrics) have yet to be anywhere near amortised.

Toyota has sold 1.5M hybrids - I think they've pretty much amortized their original R&D. GM has spend $1B on R&D for the Volt - that's nothing, in the larger scheme of things.

in my experience, life cycle costs for hybrids are no less and likely higher than for conventional.

Talk to hybrid taxi-drivers. They are extremely cost conscious, and they rave about their hybrid cars.

the Nissan Leaf is not directly comparable with a real car.

It will do all that is needed, for a relatively small niche. For others, EREVs and plug-ins will indeed be the way to go.

the Chev Volt is not in private hands yet.

It's really not that hard to cost-estimate what it should cost (in large volumes). If GM doesn't do it well, someone else will.

th said at August 3, 2010 4:54 PM:

http://www.chevrolet.com/pages/open/default/future/volt.do

It's right here folks, even they admit it will run about $1.50/d "on average", ....on average poet, using their numbers at .12/kwh this thing is using the equivalent of 13 kwh/40 miles to recharge,not 8.8. Gasoline is 33 kwh @$2.50/gal., 2 cycles of this thing "on average" is damn near 33 kwh or $3.00 in electricty, if your own mileage may vary rules apply this POS is close to $4 per gallon of gasoline equivalent, yuk yuk, you need to get away from those poet/greenie blogs, they make you look like a poet more than you know it. BTW, a 1971 chevelle 454 curb weight was 3800 lbs, your govt. green garbage volt and the leaf are both 3500, the advantage of the electric motor is canceled out by the weight of its entourage, 2 permanent big fat asses in the back seat weighing over 500 lbs, another big yuk yuk, don't forget the most conservative estimates on battery replacement costs, lets just say $400/kw on a 10 year warranty are $1.75/d for the volt, and you can see why govt motors figures leasing is advantageous over selling since it will under some future stimulus plan, defer the battery replacement costs to the taxpayer and make production numbers soar and it will be just like a typical soviet russian style preening for hollywood and jon stewart and all the great poets of our time.

Engineer-Poet said at August 3, 2010 6:15 PM:

sione doubles down on dumbassery with a peck of prolix puffery (tl;dr).  S/he also has a Randroid-ish blindness that gold, aside from its industrial and dental uses, is only valuable if other people will exchange you something of value for it.  If you have gold but no bread and nobody else wants gold, you're ---ked.  Gold has also taken some serious dives in value even against fiat money, so the "store" isn't immune from "inventory leakage".

th hasn't figured out that 33 kWh of gasoline only yields 33 kWh of useful output if you're burning it in a Coleman stove; if you're trying to turn wheels, there's a little issue called "thermal efficiency" to be dealt with.  Maybe he can multiply 10.3 kWh by his local rate and divide by 40 miles to get the Volt's electric cost per mile, but given his record I'd bet against it.

Randall Parker said at August 3, 2010 7:44 PM:

Guys,

Whether an HEV, PHEV, or pure EV is a good investment today depends on your use case. For example, for some people the Prius is great because they drive a large number of stop-and-go miles. Their usage fits what the Prius is optimized for.

HEVs, EVs, and PHEVs in that order cost more than regular pure ICE cars. If you drive more miles per year you are more likely to earn a return on your extra money spent. I've made this point in a few posts now. Also, if your driving pattern (not just absolute miles driven per year) fits the optimal use case for fastest pay-back time then the HEV or EV or PHEV can make an especially attractive investment.

Take the person who for some bizarre reason drives every day 90 miles to work, parks somewhere they can recharge while at work, and then drives 90 miles home and that they do this a couple of hundred days per year. Well, for that person the Nissan Leaf is going to pay back in a fairly small number of years.

Gotta say, I wouldn't want to be that person. But there are people who do 90 mile commutes each way every work day.

The Prius PHEV similarly has use cases that make its cost easy to justify. More people fit those use cases than hit EV use case.

The Volt PHEV use case looks like it is especially hard to justify. It is way more expensive than Leaf EV or the Prius HEV. It has less electric range than the Leaf EV. Though it has comparable gasoline efficiency to the Prius. But someone driving 40 miles a day on electric power and then more miles on gasoline is going to have a hard time earning back their added cost.

What is not clear at this point from the Leaf and Volt prices: What's their real manufactured costs? Is the Leaf really cheaper to make? Or is Nissan selling it for a loss? Or what? Its battery must cost about 2.5 times that of the Volt battery. So how can it cost several thousand dollars less?

Engineer-Poet said at August 3, 2010 8:03 PM:

The Leaf is selling for roughly the Volt's first announced price, before GM jacked it up to capture the incentives Washington decided to give out.

Nick G said at August 4, 2010 8:11 AM:

Chevrolet.com shows $1.50 per day for the Volt: that includes both electricity and gasoline.

Nick G said at August 4, 2010 8:51 AM:

Randall,

This is complicated, no doubt. We have a lot of variables, and some unknowns. Still some things are reasonably clear.

First, the Prius is less expensive than a comparable ICE vehicle for the average driver (according to Consumer Reports, based on average market prices, no accounting for external costs, and with no subsidies). The Prius is very roughly 40% electric - this is appears to be very roughly the optimal spot, the sweet spot for electrification at this moment (again, assuming current average market prices, no accounting for external costs and no subsidies). Probably 60% of drivers would save money with the Prius, 40% wouldn't because they don't drive as much as average.

2nd, EVs are cheap to build in large volume. Electric motors are simple, and are built in very large volumes (larger than ICE volumes). EVs do away with a lot of internal support infrastructure, and the motor can have only one moving part. The Balance of System, i.e., everything other than the drive train, is far and away more expensive than the drive train. This surprising ratio of drive train to BOS is part of what tripped up Tesla: they focued on the electric motor and battery pack, and didn't realize just how complicated building the rest of the vehicle has become (actually, they tripped up even within the drivetrain, by underestimating the difficulty of adding even a simple transmission).

3rd, the Leaf battery is 24kWh, about 50% larger than the Volt battery. Nissan's supplier indicates that the battery costs $10K, which is consistent with the $8K reported by GM's supplier for their 16kWh battery. This is roughly $350/kWh for the cells, plus roughly $2k for the battery pack. So, the Volt has $2k less in battery costs, but perhaps roughly an additional $2k for the ICE generator (that # is an estimate from participants on GM-volt.com input is welcome). That would make the Volt no more expensive than the Leaf, but with no range problem.

4th, overhead is important, and pricing is tricky. People don't realize just how effectively manufacturing labor productivity has grown. Manufacturing labor productivity grows by about 5% per year (much, much faster than other areas like ag, or services): that means that all else being equal that the direct labor cost of making motors and batteries drops by 50% every 15 years (it's much faster for newer items, of course). That's the primary reason the UAW has lost most of it's membership in the last 30 years, not overseas competition or even Asian transplant manufacturing in the US South. That means that other organizational costs have become relatively larger, and allocation of overhead has become very important to pricing.

Manufacturers play games with this to achieve their goals. For instance, small cars are priced lower not because they're substantially cheaper to make (they're not) but in order to partition the market and maximize revenue from both lower and higher income buyers: small cars are cheaper to maximize sales to low income buyers, big cars are more expensive to capture maximum revenue from high income buyers (nav systems don't really cost $5k...). The same thing applies to R&D overhead: smart manufacturers typically defer recapture of initial investments in order to maximize market share while building to economies of scale. Others, like IBM (historically), Microsoft and Apple and, apparently, GM, maximize price because they think they can get away with it. Ultimately this strategy didn't do so well for IBM (though they've mostly come back), but Microsoft's similar monopoly tactics (which they learned from IBM) are still prevailing. So far Apple has succeeded with this strategy through great design and speed (their market capitalization is higher than Microsoft!!) - we can only hope GM is as effective and lucky with their pricing strategy. It's not the strategy I'd have chosen: the car market is more competitive than the software and smartphone markets.

5th, external costs are real, even if they're not currently included in the price in the US. These include direct military costs (100's of billions per year) as well as the indirect cost of living with permanent guerrilla warfare; the cost of oil-shock induced recessions (much of our current financial crisis stems from our oil trade deficit, and that those costs are in the tens of trillions); environmental costs such as spills, CO2, particulates (esp diesel soot-20k deaths/yr , other), and other miscellaneous costs such as liability caps (offshore) , tax subsidies, etc. At the moment some of these costs are offset by the $7,500 tax credit. Personally, I'd make gasoline $7 per gallon to capture these costs, and rebate the revenues via a flat per-capita income tax refund: that would make HEV/EV/EREVs competitive pretty darn fast.

Sione said at August 5, 2010 12:46 AM:

Hi Nick

"The majority of car owners have a plug at home. Eventually public plugs will be needed, but that's not a very large investment - the wires are there already."

Consider what occurs when people get home after the evening commute and plug in all their hybrids. At 110V you are looking at substanial current running into your house to feed up your batteries. Warm wires! Mate, I'd definately be rewiring if I were you! Then there is the problem that when many, many, many people are doing the same thing the demand on the local supply is going to be really substantial.

Consider the old straw analogy. What you have going into your home is a narrow straw. That's all you've ever needed (until now). What feeds the neighborhood is a larger straw. What feeds an entire suburb is a small pipe. What feeds the district is a biggish pipe. What feeds the city is a bigger still. Now it may be correct that you or I could get whan we need for our hybrids through the small straw in our homes if we are prepared to wait long enough for the process and assuming not a lot of other people are doing the same thing locally. The trouble starts to occur when lots of small straws are sucking at the same time. Lots of demand. The problems are encountered upstream. Then those bigger straws just aint large enough. Neither are many of the pipes. Don't underestimate the costs and difficulties of replacing them.

"...not a very large investment..." You know it never seems large until you have to raise the funds yourself. That's the trouble with billions of dollars of other people's money. As was well said, a few bill here and a few there, some more hidden 'round the corner and a few under the mat, soon them debts, they trillions!

Here is an exercise to try. My domestic electrical supplies are all at 240V. The supply is single phase. Let's try to improve the supply a little. In order to hook up to three phase, how much do you think I would need to pay? Another building I have is within 500 meters of a 15kV supply. I could have it hooked up to the 15kV. How much do you reckon I'd need to pay for that? What about the equipment to make it useable? Notice that while either of these options increases the capacity of supply (the diameter of the straw) neither of them resolves up-stream supply problems encountered when all the neighbours start charging-up same as me. Note that we haven't examined power factor correction, generator capacity, switch yards or a myriad of othe matters requiring resolution. It all needs much consideration by specialists. Think many $$$$$$$$ (specialists are always hungry and need to be fed plenty $ to do anything). So, someone is going to have to pay for all of that new infrastructure and that is the issue. Right now cash raising in the USA is not exactly..... easy.

There is this other issue as well. There are line rental fees to pay. For single line at single phase they are around $40 per month. Count on paying an additional $90 per month for going three phase. Building insurance goes up some as well. Expense for 15kV, more still.

Anyway, the point is that even apparently simple stuff can be surprisingly expensive when a realistic totting up of all the actual costs are done.

"Nah. The hidden costs of oil are much more expensive: $2T oil wars, multi-trillion recessions to which oil-shocks contribute, pollution including diesel soot, NO2,CO2, etc."

The costs you outline here are solely results of previous and present government action, regulation and legislation. They are not going to go away just because some of us run hybrids or even full electrics.

"Toyota has sold 1.5M hybrids - I think they've pretty much amortized their original R&D. GM has spend $1B on R&D for the Volt - that's nothing, in the larger scheme of things."

It's not a matter of what you think they have pretty much done. According to Nomura, Toyota lost money on Prius and have been cross subsidising them with the intention of eventualy making their hybridisation system a design feature right across Toyota product. It's a good strategy to differentiate their product with a different drive system than anyone else. Another example, Porsche build rear-engine cars. Aside from Smart, no-one else does. It's a strong brand differentiator. Now, Toyota's hybrid layout is unique. Their patents outline the system and are worth reading if you are interested. Although they do not go into all the reasons for their design choices in the patents, careful analysis reveals the whys as well as the real cleverness with their particular approach. They deserve to do well but there is a long way to go yet.


Re Taxis
Localy they are mostly diesel, conventional gasoline, LPG or CNG. Some hybrids have appeared, but they are in the minority. It'll be interesting to see how they work out. I'll ask around.


Re GM Volt: "It's really not that hard to cost-estimate what it should cost (in large volumes)."

While it is possible to cost estimate what its life-cycle costs SHOULD be, what it DOES cost is presently unknown. If the car turns out to be inadequate or have teething problems (a not unknown issue for GM in Nth America) then the costs will be very different from the rosey estimates presently being touted. I hope it is a good car, but a hope is nothing more than a hope. Reality will be the final arbiter.

"If GM doesn't do it well, someone else will."

More than likely they will.

BTW there is a really fabulous hybrid coming from Porsche. Just wait.


Cheers


Sione

Engineer-Poet said at August 5, 2010 6:02 AM:

Sione's still a hoot.  Somehow a household with a Volt, or even two, is going to need a 15 kV 3φ line to the house?  (Around here the line would be 13.2 kV line voltage, 7600 V phase-ground.  There are both in use within 50 yards.)

Level 1 charging is 110 VAC 12 A continuous (15 A peak).  Plugging in 2 cars takes 6% average of a typical 200 A service.  Not a problem.  Charging them at night after the major daily loads have slacked off isn't a problem either.

If you could wave a magic wand and make a million Volt-class PHEVs a year starting today, by 2020 they would represent a max continuous load of 13.2 GW.  US generation capacity in peaking plants is hundreds of GW.

Nick G said at August 5, 2010 10:29 AM:

Sione,

I agre with E-P: US driver only drives 30 miles per day, on average. At .25kWh/mile (including all losses), that's only 7.5kWh per day, or roughly 1kW for 8 hours during the night on a simple 115V 15A household line. Given that most charging will be at night, that's awfully easy for both household wiring and the grid (both local and larger) to handle. Some people might choose to install a 220V 30A line, but that's very common and not expensive, and doesn't change the average demand. Heck, that would only help the grid, as charging would be concentrated in the 3-4 hours during the night when power is cheapest (that would help both wind and nuclear, by providing demand for power for which there is almost no demand right now).

How is pollution (soot, CO2, etc) caused by government action? Why wouldn't eliminating oil imports reduce the likelihood of oil wars like the Iraq war?

According to Nomura, Toyota lost money on Prius and have been cross subsidising them

Do you have a link for that? Toyota says they stopped losing money on the Prius more than 5 years ago, so Nomura is calling them a liar (which certainly isn't impossible, but it needs strong evidence). Hybrids account for about 10% of their lineup, so it's a little hard to believe that they're still losing money - everyone else in the car industry would like to lose money like that.

Among the cows in Iowa said at August 6, 2010 1:57 PM:

A 220 volt 30 amp line would charge a Volt in an hour and a half.

Mom, Dad and 3 kids could each have one. Charge them one at a time starting at 10 PM and they would all be done before 6 AM.

th said at August 9, 2010 4:09 PM:

poet quoteth, "The Leaf is selling for roughly the Volt's first announced price, before GM jacked it up to capture the incentives Washington decided to give out."

Typical leftist conspiracy flake who sees big oil at the center of everything but has no idea what 61% ownership by the US Treasury means.

th said at August 9, 2010 4:48 PM:

"US generation capacity in peaking plants is hundreds of GW." I thought all that texas wind combined with the smart grid nighttime rates was the solution, you mean this crap doesn't even exist, never will, and its now peaking units? Wow, we owe so much to our sixties poets in their seventies for this confused mess don't we?

Sione said at August 9, 2010 9:35 PM:

Nick

You should be careful of E-P's opinion about anything at all. He's a deluded fantasist addicted to making up fibs about matters he knows little about.

Take as example his silly comments regarding gold. In the last decade, gold’s gone from $239/oz to a mere $1200/oz- somehow that’s a serious dive of value against fiat currency. Some “inventory leakage”! Reckon things is headed the other way from how E-P tells it. Seems like he sees the World front-arse-backwards. Seriously though, he’s about as intellectually rigorous as the rear port of a monkey's alimentary canal after a night of bad ale, rot-gut wine, festered sardines and curdled viper curry.


-

Re Charging the electric car.

Sure, you or I might well be OK slow charging at home, so long as we remain in the strict minority and are prepared to wait 8 - 12 hours or more every single time for a charge. Now, while enthusiasts and some technology sympathetic early adopters might accept such a loss of vehicle utility, it is unlikely the majority of people will be as understanding, certainly not over the longer run. Electric car designers and manufacturers are well aware of this. Indeed, many electric cars are configured to accept a far faster charging rate than the leisurely rate 8 – 12 hours implies. A realistic analysis requires most charge-ups taking place in under one hour.

In considering a notional commuter, don’t forget to address the remainder of the notional commuter's life, context and requirements.

There will be more than one car in the household. In this household there are four cars in daily use. Most households around here have three cars. Importantly, people don't restrict their travel to a mere once-each-way daily commute. More often than not there are other activities to attend to during the day and also in the evening and at night. For many, there are morning (before work) activities as well. For example, Ratu, my neighbor, goes to the gym with his older son (he drops the other one off at swimming) each morning before driving the children to school for morning prep. Then he travels in the opposite direction to his work. His wife is on shift at the bakery so she doesn’t get home until later. Sometimes she takes one of the boys to music lessons or the girls to net-ball later in the day. Ratu’s family activities are not unusual. Anyway, it looks like Ratu is going to need his car to be charged while it’s parked at work. Fair enough, but will the boss agree? Is he going to want to add Ratu and then the other employee’s electric loads to his? Is he prepared to install the infrastructure to suit them all? Hell, he doesn’t even provide parking for them right now. However this gets worked out, we are dealing with additional charging load during the day and at peak hours as well. Pipes is looking chocka!

Next up. There are many trips for are non-scheduled tasks to be considered. That is, they result in trips that are not planned well in advance. An example would be coming home from work, eating dinner and then heading off to the pub for some good times with friends or relatives. Maybe it’s a vocational or professional training course that needs attendence or perhaps a call out to do babysitting for a friend. Whatever the case, the car is on charge for an hour or perhaps two (right at peak time) and then off again. Being required to completely review each trip (in the light of whether enough battery range remains) and completely alter life activities in order to accommodate the limitations of slow charge rates is not realistic for ordinary people- not unless they are prepared to restrict their lives and daily experiences severely. It’s all definitely going to lead to demand for a better standard of charging performance (as well as range) to regain the lost utility. Forget about 8 hours or more… Better build those pipes!

BTW and as an aside, the range of an electric car is very dependent upon loads other than those placed on the battery by the drive. There are heating and air-conditioning, payload, power steering, state of tyres (including inflation), state of the batteries (temperature, age, wear and tear, number of partial and full cycles experienced, history of use) and the like. For an ICE vehicle none of this matters all that much. For an electric it is of vital importance.

Then there is the dirty little secret that automotive engineers don’t like to discuss much. It is this. The manner in which you drive an electric has a disproportionate effect on performance, especially range. It is very easy to reduce a 200km range to as little as 70km (I have personal experience of that and I really wasn’t driving the car very hard at all). Imagine what you end up with if you start with range of 50km… You need to stop and get as much more juice aboard as you can right now, immediately, today… RIGHT FAST. That all requires far faster charge rates than 8 – 12 hours, else you can write the rest of the day off.

Going back to the house- household loads continue as at present. So there is the air-conditioning, washer, dishwasher, drier, lighting (often operated during the night- not unusual). All these need to be factored into that general analysis. Electric demand is going well up. At some point soon this demands new installation of pipe. Perhaps not yet for your particular house, but it is going to have to happen all about you, certainly upstream from you.

In the end it isn’t difficult to appreciate that 8-hours charge time is going to be unacceptable for many if not most people. People are used to taking on a load of fuel in mere minutes at a gas station and then going on to undertake a little casual shopping at the same location. This, fueling up represents little or no loss of vehicle utility for them. They only do it once a week or so, not every night and not every trip. Aside from that they do not need to consider range, sate of fuel quantity etc. There will be considerable resistance to an expensive new product with utility so restricted that it can't be used for significant periods of time because it is the equivalent to being "out of gas" every single day. Changing lifestyle and restricting activities is a wash. Planning life around the availability of charge is a wash. So, that means far faster charge up is necessary (recall most of the electric cars so far are designed to accept faster charge rates) in order to minimize the compromise of going electric. That, in turn, means bigger straws and bigger pipes, none of which are free or even cheap.

-


As far as generating capacity is concerned, you have nowhere near enough- despite what fantasists might like to pretend. Hell, in the USA it isn’t even possible to guarantee continuity of supply of clean power for 24/7. Read the power supplier contract. See how hard the supplier wriggles out of responsibility for the consequences of outages? It wasn't even so long ago that there were rolling black-outs in CA. It is still the case that much of the North East grid is unstable. They’re having trouble maintaining supply for existing loads, let alone new ones.

Running equipment at or near capacity 24/7 forever is not possible. For example, one of my clients operates a 330MW single machine. Longest they've operated at peak was a little over 200 days. Maintenance shuts need weeks of specialist work. That's a resource that is in scarce supply- specialists. But wait, there’s more. For each power station there is a logistics chain that stretches back a ways. You have to arrange for the supply of more consumables, coal, gas, oil, personnel and the all of it, more than ever before. As you need more of them you are going to be bidding up each of the factors of electricity production and that in turn bids up the cost of resources required to expand their availability. The pipes go back a long way!

Much of the machinery and infrastructure necessary to distribute electricity is lifed. They can only handle a certain amount of power for a certain amount of time. Increase the load or the duration of time you put it to load and the remaining life reduces dramatically (often non-linearly). The reduction in TBO is directly related to how closely you approach peak rating, for how long you do it and how often. A lot of equipment, including many supply lines and transformers etc, relies on the off-peak periods at night to cool down. If all the heat can’t be lost, the life cycle is going to be significantly curtailed. A lot of electrical infrastructure in North America is old and you are going to encounter problems if you attempt to run all this stuff at higher duties. It’s difficult enough dealing with present demands, let alone asking old gear to deal with heavier and heavier duty cycles. It may cope for a while, but not indefinitely. Replacement or expansion is necessary. Nothing free in this life.

Then there is this. Electricity producers use cheap generators first. They give those a hiding as they are most profitable (and usually are the newest plants). As peaks climb and base loads become greater it is necessary to fall back on more expensive to operate plants. While it is so very easy to calculate the total installed capacity in North America. The reality of the situation is that not all of that is available at any given time and some of it isn’t going to be made available- not unless the prices climb significantly.

Recently there have been several reports and in-depth analysis issued regarding the problems of electrical infrastructure in North America, as well as the results of increased demand for electricity. Bloomberg business services are a handy source for some of these. You should be able to uplift some good ones from a sound financial analyst. In the meantime note that the Federal Government has promised to find US$825-million as a first step towards improving (patching-up) the electricity grid in the USA. Their press releases express concern at the state of the present system. Now assuming they actually fess up with the US$825-million, and that’s a whole heap of dosh they aint actually got, they’ll have to either borrow it or monetize it (inflate). Either way, it’s only a first step and it isn’t cheap.

Conclusion: No matter how much anyone wishes it were not so, the fact is electric car loads require much expensive new infrastructure to cope. That will have to be paid for.

E-P's over-simplified casual calculation is nowhere near a sensible analysis. If it was anyone could be a multi-millionaire in mere months. Life is not like that, not even for self-proclaimed engineer- poets with pencils and bits of paper to make their potty back-of-envelope scratchings. Dealing with reality requires a far more sensible and in-depth analysis of a project BEFORE you commit your own hard earned money, let alone anyone else’s.

-

The exercise I put to you was to price up some simple rewiring (an increase of capacity to your home or building). The two options I used are readily available presently and the costing exercise is clearly illustrative. Try doing the exercise and see what you end up with. Make sure you allow for consents and license application fees, insurance etc… Always remember to relate back to you personally being required to spend your own money.

OK. Now multiply your cost result by a population. You can soon see that costs soon mount up to achieve impressive totals.

-

Firstly, CO2 isn't a pollutant. Best not to mis-identify it as such.

Turning to actual pollution, what you are referring to is property damage. In your country private property rights are not consistently upheld. As a consequence some organisations and individuals may damage the property of others with govt granted legal impunity. For example, it is allowable for some to pollute ground water and water-tables even though that damages the property of others, even though the other property owners were present first. The way to avoid the problem is to make each individual strictly liable for the proven damages his proven actions cause to others- no grants of immunity or special privilege.

-

Nomura! It's not linked. I subscribe to several economic analysis services. They cost me a great deal. I get the reports regularly and read them all. Then I do what any good analyst should do. I phone people up, I meet up with people, speak to them and ask questions, dig for information, mine it, seek cause and effect, try to discover what is really going on (or is about to).

Toyota is wealthy. They have only made one annualised loss I am aware of. They have enough reserves available that they could purchase GM and Chrysler (at pre-crash stock value!) and still continue their own forward model program without change.

Something else about the car industry you might like. Some models lose money right through their life cycle. They get subsidised by the rest of the product range. Car makers take these on losses for several reasons- some good, some not so. For example, they may consider it important to maintain a presence in a particular niche, or a particular model is a halo car and is thought to help generate sales elsewhere in the range. For obvious resaons car makers are careful not to spread this information about too much, if at all.

Cheers

Sione

Sione said at August 9, 2010 11:53 PM:

Engineer (!) - Poet

You really should refrain from making up fibs, let alone commenting when you lack comprehension.

Re gold.
People have valued it and traded it for a very long time. They traded it before you were around, they’ll keep trading it despite your irrational sentiments and they’ll keep trading it long after you’re dead and gone. Its attributes and physical properties make it an almost ideal store of value.

Now, here is something interesting to ponder. Had you considered what happens if you have coloured bits of fiat paper that other people lose respect for and don’t value very highly? Funny thing is, each time that happens people are more than happy to trade with….. gold! Fancy that!

Gold gained well over US$900 since I started trading it- so much for it taking a dive against fiat money. The “inventory leakage” you boasted of is headed in the opposite direction to what your fantasy had you pretending. God help any poor fool taking advice from the likes of you.

Reckon your problem is that you’re looking at the horse from the wrong end. Message to E-P:- put the head at the front, the tail goes at the back.

- -

Re electrical supply and infrastructure costs

Did I indicate that a Chev Volt needs a 15kV, 3-phase supply?

Did I write that it had?

No.

I didn’t.

Never indicated that.

Nope.

Didn’t claim that.

Not at all.

You made that piece of dishonesty up all by yourself.


What I presented was an interesting and illustrative exercise: calculating the actual costs of increasing supply capacity to a house or building by employing some presently available options. I pointed out that such costs can be surprisingly expensive. I also indicated that improving supply capacity at my place does not address up-stream supply problems when the neighbours start charging-up same as me. Above and beyond the level of the individual electric vehicle user, it is going to be necessary to deal with power distribution and generation issues. These cost and the costs are and remain non-trivial, despite your naive back-of-envelope scratching.

Your dishonest cherry picking is noted.

- -

In the end, it is difficult to consider you seriously as a practicing engineer. The casual lunacy and trivial carelessness you demonstrate are suggestive of a low to mid-level functionary with restricted range of action and severely limited decision making responsibilities. With few notable exceptions, such are usually not allowed independent control of significant resources or finances. The expectation must be that you aren’t an exception.

Sione

Sione said at August 10, 2010 12:04 AM:

Randall

There are other reasons to purchase a hybrid other than the financial. In an analysis it is sometimes forgotten that purchasers buy for reasons such as:

the driving experience

the status or social signal their choice of vehicle conveys to others

interest in the technology of the vehicle

enthusiasm for the brand/marque/vehicle type/vehicle class etc.

identification with the designer of the vehicle

the styling or look of the vehicle


And there are probably all sorts of others. One thing for sure, the car manufacturers look at all of them and agonise over analysis!

Sione

Engineer-Poet said at August 10, 2010 6:05 AM:

Sione, since you've got such high confidence in your claims, would you care to bet on them?

(now watch Sione take a vacation just like th did.)

Sione said at August 14, 2010 3:25 PM:

Is that a dog howling?

Seriously, EP you've been exposed and received a right good spanking. Best if you quit with the shrillness and learn from the experience. You are not going to be able to wriggle your way out and you can't slime your way out either- you're not much good at rorting, let alone fibbing. Better if you don't continue embarrassing yourself.

Here is some friendly advice. Betting is a bad addiction. I do not partake in it. Neither should you. It proves nothing of value, save that a man may pretend to fool himself by random belief in his "luck" coming in or that he may dissipate his wealth, time and productivity for no better than "entertainment" and emotionalism.

Don't go about, as you have been prone to doing, pretending the world is subject to the fantasies and prejdices you self-generate inside your own head. You are not that "lucky". Instead, do seek information direct from primary sources (not the media, not gossip columnists, not from propagandists etc), get all you can find (ask for more detail- don't ever be afraid of digging down into detail for that's where opportunity lurks), analyse everything you recieve, test it exhaustively, check its veracity, compare and contrast, then ensure that your conclusions along with the content of your mind, corresponds with reality. Test and test again. Do that and you'll be in a strong position. You certainly are not in good shape at the present time.

"The best way to predict the future is to invent it."- Alan Kay

The World is a fascinating place. It is full of the most magnificent opportunities. They can be exploited to receive the pleasure of justly deserved reward. If you are really interested in new technologies such as hybrid cars or pure electric cars, then approach an organisation or group of like minded individuals and work to make the technology relevant to other people (such that they'll purchase it voluntarily). Don't talk about it, go do it. Invest your own time, money and resource. Seek employment in the field, or start up a company, or become an authority and set up as a consultant. Set up a distribution and logistics or other service organisation relevant to the technology you like. Produce something useful for other people. Basically, what you need to do is get committed and act to invent the future. Pontificating, planning what you want others to do to make you "happy", whining, demanding your dreams come true, fibbing, rorting, wishing for other people to be forced to behave as your fantasies would have them etc. will get you very little. It's up to you now. Do you want to be social ballast, yet another example of a useful idiot, or a productive person?.

Final point. Engineers are meant to be doers, not squawkers. So, for goodness sake, GROW UP and get on with it!

Sione



Engineer-Poet said at August 14, 2010 5:00 PM:

I'm a happy "doer", including taking money from exemplars of the Dunning-Kruger effect.  You are the one who won't put money behind your empty words.  Everyone can see that you don't believe what you're saying.

If you want to get serious instead of just trolling, I'm up for it.

Sione said at August 15, 2010 11:09 PM:

Yup, it's a dog howling!

E-P, you realise that you repeatedly demonstrate yourself to be the perfect example of a sufferer of DK effect don't you? Let's see; trivial carelessness with false statements, delivering imbecilities about topics of which you have little or no knowledge (your "economics" was outstanding in this regard), inability to acknowledge severe intellectual limitation, bluster when caught out, reckless incompetance in regards to dealing with difficult facts or unknowns... The evidence is clear. It is all there! Think about it.

Your latest post demonstrates your own DK affliction once again. Consider this. Let's humour you and assume your implication that I suffer from the DK effect. If that were indeed so, then I would be bound to believe the conclusions I presented. DK forbids the cognitive abilty for me to behave otherwise, to recognise a potential or an actual error. Fair enough. Yet, you go on to contradict yourself by writing, "Everyone can see that you don't believe what you're saying." Well, putting aside the self-generated fantasy army of "everyone" that your wee mind conjured up for ego reinforcement, were I not to believe what I'd presented, then I couldn't suffer from DK. You can't have it both ways, little man. You have been carelessly illogical with your reasoning. Bad news for an engineer, surely? You should attend to this intellectual incompetence promptly since it is vital for engineers to think and communicate logically. Engineers DO need to be logical. As demonstrated several times now, that you surely aint.

As far as taking money from other people is concerned (especially those you believe to be your intellectual inferior), hadn't you considered that it is better policy to offer to other people that which they'll voluntarily purchase from you? You know, trade value for value- stuff like goods, services, resources, advice, time, assets, labour etc. Taking, whether by sophistry, rortery, fraud, theft, trickery, word-play, puffery, fibbing, dark knavery and the like is destructive, not productive. Anyway, here you are puffing and blustering, trying to wriggle and slime away from admitting that you were caught out, exposed in a hierarchy of error, mistake after mistake, fib on fib. Hardly happy. Hardly the life a man, let alone an engineer, should be leading.

Are you up for anything serious and real in this life? If so, abandon bluster. Cease with the fibbing. If so, then get out of the house and start building the future. Live life in reality, not in a fantasy within your head. Go build that electric car infrastructure. Make it happen by your productive efforts. You don't have to do it alone. Help people. Hell, why don't you go purchase a Volt right away? Use your own time and money and resources. Persuade by example. Set up a business. Invent the future, as Alan Kay suggested. The opportunities await. Are you up to it or are you just too small?

Sione

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