Hybrid v. Suv sales remind me of Chicken Little. Gas prices go up, chicken little clammers for hybrids. Gas prices go down, chicken little wants to go 4-wheeling...

Mike -

all the links to the large versions of the illustrations appear to be broken.

Mark -

consumers tend to base their estimates regarding fuel prices on past experience. Historically, whenever there was a period of very high oil prices, the oil industry responded by expanding production capacity which usually resulted in a global glut and an extended period of relatively low prices. This is why many are still lured by the siren call of deeply discounted SUVs, hoping that the average price of gas will stay well below $3 for the foreseeable future.

Unfortunately, high prices in the last few years are due mostly to rapidly rising demand from not just the OECD countries but also China, India, Eastern Europe etc. The US may yet suffer an economic downturn as a result of its housing glut and the weakening dollar - ultimately, a result of excessive borrowing - but there is nothing to suggest a massive reduction in global demand for oil.

On the supply side, the oil industry has allowed global production reserves to shrink substantially precisely because it had been burnt so badly by excessive production capacity growth following the 1980-81 price shock. Saudi Arabia still has some spare capacity, but no longer enough to effectively manage world oil prices. Iraq is now a semi-permanent disaster zone and Iran remains a potential threat to stability in the region. Untapped oil fields still exist outside the Persian Gulf, e.g. in very deep water in the Gulf of Mexico. However, bringing them on-stream takes several years and massive investment. This is profitable only if prices for benchmark crudes can reasonably be expected to remain above e.g. $40 a barrel for decades to come (cp. biofuels). In addition, NIMBYism continues to constrain US refinery capacity.

The upshot of all this is that those chicken little's are probably wrong: the US will likely see high average gasoline prices for at least 3-5 more years and quite possibly beyond that. Seasonal variations in demand result in fluctuations of $0.30-$0.50 per gallon either way, which is why the current price of ~$2.30 is deceptively low. See also the DOE data. (Hint: click on history 1993-2006 and choose annual view)

q -

Prius sales aren't stalled (as in falling) but they are stabilizing. I suspect this is partly due to incipient saturation of the hybrid market in its vehicle class but more so because the hybrid tax credit only applies to the first 60,000 units of any given model. As a result, Toyota currently has an incentive to push the Camry over the Prius.

Stalled as not increasing or decreasing. I wouldn't call it stabilization either, but potential for gradual stagnation.
As posted, US tax credit is being removed. Here in Canda there was none to begin with. Its price is the same as Camry Hybrid and higher than many other vehicles. In particular I priced a reasonably equiped Smart (diesel engine) around $17K (CAD) as opposed to Prius base MSRP of around $31K. Their fuel efficiency is very close. While Prius is much bigger and the comparison is not fair, most of us are looking at an efficient commuter car which generally needs no more than 2 seats. For a family car I would prefer Camry Hybrid if I have to pay $30K+

So Prius is too expensive.

d:

Yes, it is rather unfair to compare the Toyota Prius with the Smart diesel. They are not in the same size category.

What would be the mph of a mini-Prius (less than 2000 lbs)? It could be surprisingly higher than the Smart, specially with a larger 9 +/- Kwh battery pack.

I overheard that the Prius III (late 2008??) will have a much larger (improved) battery pack + improved electronics + more rugged electric traction and genset system and may be Toyota's first (limited) PHEV.
Unfortunately, it may not reach North America before 2010. Toyota likes to play it safe and will test the product on the local market for at least 2 years.

Will this technology be used in their smaller + larger cars and SUV's? Certainly, it is only a matter of time. By 2010/12 it will be available in most of their vehicles. Toyota is going to be the leader in PHEVs (and EVs) as they were/are with hybrids. Others will follow. Watch out for Chinese and Korean PHEVs and EVs.

GM and Ford will have to run much faster to catch up.

Instead of writing a letter to Congress/Senate to extend the hybrid credits, we can write a letter to Toyota to reduce the extras and the price and it
will automatically push the sales of hybrids higher.

If Altima-Hybrid comes under 25K tag, Accord-Hybrid sales may suffer further. Sad that GM does not publish Saturn-Vue sales. GM is in a club of its own.

I guess Honda has sold the last few units of Insight, since its sales have declined from 50 + to around 19 last month and 2 this month. Goodbye Insight.

BTW, tax reductions as incentives to adopt new technology work just the same as tax increases. The tax dollars diverted by alternative energy technology can be considered dollars no longer available to the industrial complexes.

As federal tax credits phase out, perhaps the insurance industry can step in with a "hybrid premium deduction". One firm, Farmer's Insurance, is already rolling out such a discount.

Cervus,
From your link: "Biofuels may account for 7 percent of global transportation energy by 2030, provided governments implement International Energy Agency policies to promote alternatives to oil, the Paris-based adviser to oil-consuming nations said in its World Energy Outlook 2006 report."

Reality check: in 2005 the US produced enough ethanol to replace 1% of its oil consumption. Next year it may be what? 2.5%? Are you telling me that a 2.5% replacement of oil with ethanol is going cause oil prices to drop below $40/bbl?

7% by 2030? That will have OPEC shaking in its boots! LOL!

Oil may well drop below $40/bbl (who knows what the future holds?), but biofuels will not be the reason.

I find the following much more significant: "Prices for corn, used to make ethanol, have risen 47 percent in Chicago this year."

How much higher does the price of corn need to go to kill ethanol? My prediction:
1. Corn prices spike thanks to the large number of ethanol plants being built. Most food prices follow suit, although not as rapid or steep.
2. Ethanol producers everywhere start going bankrupt.
3. Calls on congress to bail out this important industry, that supplies us with locally produced fuel, etc. etc. Add BS of your own flavor.
4. Corn prices take a dive when ethanol producers cut back their buying.
5. Calls on congress to bail out this important industry (agriculture), that supplies us with locally produced food, etc. etc. Add BS of your own flavor.
6. Congress, spineless, clueless and unprincipled as they tend to be, showers money on the mid-west (as always).
7. Big Oil gets blamed for all of the above.
8. Big Oil continues to supply the bulk of the country's transportation energy.
9. Congress, spineless, clueless and unprincipled as they tend to be, showers money on Big Oil (as always).
10. Somehow, there is no federal funds for researching promising technologies, such as waste->fuel.
11. Private companies start developing profitable waste->fuel technologies, such as CWT's TDP, Choren's G/F-T, etc.
12. Big Oil begins to buy out those technologies that actually prove workable and (of course) profitable.
13. Big Oil starts building large waste->fuel plants in locations that make sense (NYC, LA, etc.).
14. Big Oil optimizes waste->fuel and makes it cheaper than fossil oil.
15. Oil imports to the US start a gradual decline.
16. Oil prices start a gradual decline.
17. Hardship, civil unrest, etc. in the middle East due to lost income.
18. Hugo Chavez visits the US to plead for investment in his country.
19. Chavez and others lose power, due to #16.
20. Keep on dreaming...!

Engineer:

CWT, GreenFuel, GreenShift, Altairnano... lots of #11s out there.

I read somewhere that corn prices would need to rise over $2.50 a bushel before farmers would plant more. They may do so now that they've gone way up. At the moment, prices for both corn and wheat have risen so much that our exporters are having trouble finding buyers.

As for the rest, you're as cynical about politics as I am. :)

Cervus,
CWT, GreenFuel, GreenShift, Altairnano... lots of #11s out there.
Mine was not meant to be an exhaustive list, more an illustration that without (in spite of?) government action, waste->fuel technologies are making their way to the market. That said, CWT has an operating 500 bbl/d plant, while Choren is busy constructing a 4,500 bbl/d plant. That put them in the lead, as far as my knowledge goes. Am I missing something?

I read somewhere that corn prices would need to rise over $2.50 a bushel before farmers would plant more. They may do so now that they've gone way up. At the moment, prices for both corn and wheat have risen so much that our exporters are having trouble finding buyers.
The extra corn demand caused by all those new ethanol plants will have a number of (unforeseen) consequences. Will farmers be able (or as you point out, interested) in planting enough corn to match demand? Unlikely, IMHO.

My larger point remains: food->fuel is incredibly stupid, short-sighted, unproductive, etc. etc. A serious energy debate would reach this conclusion in short order. Serious energy policy would take this into account.

In the interim, corn ethanol is huge from the corn (and entire agricultural) industry's point of view. So, no surprise to see where the excitement is coming from. From an energy industry point of view, it is hardly worth mentioning. But try explaining that to a politician...

As for the rest, you're as cynical about politics as I am. :)
I believe the Founding Fathers saw government as part of the problem, at least potentially. Hence the unique principle behind the US constitution: protect citizens from their government.

I believe the proper role for government is to be umpire/referee and to amend the rulebook, as necessary. Other than that, government should stay of the field of play. Government as a player is always a bad idea.

Nice try, NBK!
6. Someone eventually invents a viable cellulostic process[a] / waste to oil process[b] / battery electric car[c]. Demand for corn ethanol for fuel drops. Farmers switch to planting switchgrass or go back to collecting agriculture support subsidies (like before ethanol drove up corn prices). Distillery owners go bankrupt / enter the vodka business / refit their plants to operate as cellulostic producers or whatnot.
That's a very long shot! [a] is possible, but highly unlikely. As both Cervus and I have pointed out that [b] is already happening. [c] has been in the works forever, and the results do no seem to be forthcoming.

There are two basic flaws in your thinking:
1. It will be ethanol. Actually, I believe it won't. Ethanol introduces a host of issues: special requirements for transportation and storage, changes to vehicles to make them flex-fuel, etc. Note that both Choren and TDP produces a hydrocarbon fuel that can be refined into the same diesel and gasoline we are all famaliar with: No need to make changes to anything and you can blend the renewable with the fossil at any convenient ratio.
2. The farmers will produce the energy crop. Not in the short term, and quite possibly, never. The simple reason is that the farmers can't do it cheap enough (and support themselves). Besides, we need them to produce food. To put it another way: Why pay a farmer for corn/switchgrass, when you can get paid to take waste? Why set-up in distant farmland, when you can set-up at a large city, take their waste and sell them fuel?

7. The ethanol fuel tax credit never goes away, because it is a political sacred cow. Oxygenate rule continues to drive summer demand for ethanol, because clean air is a political sacred cow. Federal government does little else to muck around in this sector, beyond paying for some cellulostic R&D.
Neither the fuel tax credit, nor the oxygenate rule can save ethanol. The coming corn shortage takes ethanol prices to where the tax credit cannot help them. Ethanol is not the only oxygenate. You can use Choren's process to produce a number of different oxygenates, including ethanol.

8. U.S. fails to reduce greenhouse gas emissions because anti-government and anti-tax sentiment prevents it from taking actions in other areas needed to make progress on this issue. CAFE is never adjusted or revamped. Gas taxes are never increased to price in the social costs of oil production and global warming. Car-centric and low-density urban development policies continue as before.
Here's my advice: Don't wait for the government. Our elected "leaders" obviously can't or won't make the tough calls. But watch the market. Waste->fuel will eventually undercut oil. As a nice side benefit, it also reduce GHG emissions, and saves the planet, free of charge.

1. Corn prices go up due to increasing ethanol demand. Food price go up a very small amount because the price of raw corn makes up a very small fraction of the price of finished food.
I doubt it. Ever noticed how high fructose corn syrup seems to be used in everything? (On a side note: ever wonder why everybody is so overweight?) Expensive corn prices will affect a host of foods: it is not only what we eat, but also what our food (think cattle) eat. We will find out soon enough...

2. Farmers may plant more corn to increase supply, causing prices to level off.
We are talking about some pretty substantial increases in supply, 25 to 50%. Your faith in the farmers' ability to just crank up production overnight is touching. I'm not so sure.

3. If farmers cannot or do not produce more corn, some ethanol companies go bankrupt. Others, owned by the farmers themselves, do not, as the farmers sell the corn at a price that allows their own ethanol plant to just break even, or divert some of their windfall proftis from extra-high corn prices to keeping their plants non-bankrupt.
Farmers are going to sell corn at a loss (to the ethanol plant) to keep it running? And then sell ethanol at loss? Remember, if ethanol gets more expensive than gasoline (after including the subsidy), the buyers will just turn to gasoline. Possible, but unlikely. It would be far easier (and less risky) to sell the corn to the highest bidder and mothball the ethanol plant. Use the windfall profits to cover the cost of mothballing.