Month: January 2009

Is Oil and Gasoline Demand Rising Again?

The media is filled with reports that Americans are driving less, and that gasoline demand and oil demand continue to drop. What’s the reality of the situation? Is demand continuing to drop, has it leveled off, or is it rising again? The graphs below tell the story:

Figure 1: US gasoline demand dropped off in 2008. US Gasoline demand is highly cyclical, and figure 2 corrects for this.

2007 vs 2008 Gasoline Consumption

Figure 2: To eliminate seasonality, 2007 demand is subtracted from 2008 demand to measure the difference week by week. This shows that demand crashed in September and October, but has subsequently begun to recover. Low gas prices may be responsible for the demand rebound.

2008 Second Half US Oil Consumption

Figure 3: US oil demand also dropped sharply during September and October, but has since recovered to mid-2008 levels. In addition to rising gasoline consumption, residual fuel oil demand is rising since oil is now price-competitive with natural gas.

Figure 4: The long term EIA graph shows that demand growth has leveled off, and that after a sharp drop in late 2008, demand is recovering.

Gasoline and crude oil demand seem to have recovered from the levels experienced during the heart of the financial market meltdown. Intuitively, gasoline demand should rebound a bit, since gasoline price deflation over the past year makes driving a very inexpensive activity for consumers. With the recession curtailing further oil exploration, we may be in for a price shock when economic growth returns!

Note: All data used in the graphs can be found by clicking on the EIA graphs, which link to the appropriate EIA data pages.

Posted on by praveenghanta 2

Electric vs Gasoline – Which is more cost effective?

Last summer gas prices spiked and the media was awash in stories about the electric car, whether from major automakers or startups. Just a few months later, gasoline is at $1.50 and SUV sales have begun to rise again. Environmental and foreign policy benefits notwithstanding, electric vehicles are perceived to be more expensive than gasoline vehicles. At what gasoline price are electric vehicles more cost effective?

In Theory, Electric Vehicles are More Efficient

Electric motors are very efficient, converting over 90% of electrical power supplied into motion, while gasoline engines manage only 20% efficiency. On a full life cycle basis including power plants and oil wells, electric vehicles manage about 34% efficiency versus only 14% for gasoline vehicles [1]. In theory electric vehicles are much more efficient.

But how does it work in practice? Let’s take a look at two real-world examples, the Tesla electric sports car, and the Hymotion plugin-hybrid modification for the Toyota Prius.

Hymotion Toyota Prius and Tesla Examples

Hymotion is now selling a plugin hybrid modification for the Toyota Prius which enables it to travel roughly 40 miles with minimal gasoline usage. Hymotion states that independent testers have verified the Hymotion-modified Prius capable of receiving a 150mpg EPA city rating.

The Hymotion modification uses 5 Kwh of electricity, worth about 50 cents, to help power it through a 40 mile trip, while using the gas engine about 20% of the time. At $1.50 a gallon the total fuel cost for a 40 mile trip is about 30 cents, resulting in a total trip cost of 80 cents. The average American vehicle gets 20 mpg, so it would use 2 gallons for the trip, or $3.

Tesla provides a good life cycle energy usage comparison between its electric sports car and other automobiles on its website. The Tesla uses 177 watt-hours of energy per mile traveled, which costs 1.7 cents on average. Based on Tesla’s numbers, a 40 mile trip would cost 68 cents in a Tesla versus $3 for gasoline in a typical vehicle.

Even at $1.50 gas or $1 gas, electric and plugin-hybrid vehicles are significantly cheaper to operate than gasoline vehicles. But electric and hybrid vehicles are significantly more expensive than comparable gasoline vehicles today, which motivates the primary question:

At What Gasoline Price are Hybrid or Electric Vehicles Competitive?

For the Hymotion-modified Toyota Prius, the breakeven price of gas is around $3 a gallon. The Hymotion modification for the Toyota Prius costs $10,000, and the Prius itself costs roughly $5000 more than a similar non-hybrid vehicle. At $3 a gallon, a driver that drives 12,000 miles per year would save about $1500 per year, just recouping his initial investment over a 10 year timeframe.

Batteries represent the primary factor in the additional cost of hybrid vehicles, and battery price-performance is improving at a rate of about 8% per year. At this rate, the breakeven price will probably be $2 a gallon in 2013.

Plugin hybrids and electric vehicles provide one additional savings: time. The average driver fills up almost every week, losing a total of 8 hours a year. For busy professionals, 8 hours of time could be worth $500 to $1000 or more, making plugin-hybrids the cost-effective choice today!

Footnotes:

[1] Electrical energy is created by burning fossil fuels in a power plant at 40% efficiency, followed by transmitting it to your house at 93% efficiency, and using it in an electric vehicle at 92% efficiency, providing a total efficiency of around 34% for an electric vehicle. Crude oil refineries operate at 75% efficiency, and gasoline distribution might cause another 6% energy loss. Since internal combustion engines are only 20% efficient, total efficiency would be around 14%. Assuming that the natural gas and oil to power our vehicles comes from the same well, we can directly compare these efficiencies, and thus conclude that electric vehicles are significantly more efficient.

Posted on by praveenghanta 31