Oil Pricing And How Soon We Are Going To Run Out Of It

I heard a really interesting news story on the radio this morning. They were talking about oil pricing and why even though US demand is down overall the price at the pump remains high. Typically when demand goes down the price should be going down as well. For the time of year (gas is usually cheaper in the winter time) gasoline and diesel are are historically high national averages. 

Lower Demand


So it turns out that the demand for oil is down in the US because of two main factors. The first is that the economy is still bad and many folks are still unemployed. Because there are many fewer people driving back and forth to work every day we are buying less gas. Also because people have less money in their pocket because of the bad economy they are thinking twice about spending at the pump. The other main factor is that, on average, the cars on the road in the US are getting more and more fuel efficient. Pruis, Volt, and Leaf and others are major contributors to this reduced need for gas. But all newer cars in general are getting better and better gas mileage which is having a real effect on the amount of gas we are all buying.

Why is the price saying so high then?


Well it turns out that the oil refiners here in the states started to realize they were ending up with a surplus. They also realized that the emerging nations are needing more and more gas and diesel, so our refiners are actually exporting it to other nations. This is a time when the overall economy being so global is bad for us. Normally give the existing conditions and reduced demand we would see a nice drop in the price at the pump. But because US oil refiners have found a market to still be able to sell that surplus the price is staying as high as ever. Ouch.

Craziness!

So let's think about this. Oil is pumped out of the ground in the Middle East. It is them put in oil tankers and shipped across oceans to the US. US oil refiners in NJ, Louisiana, and other coastal states then refine this oil into it's elements (gasoline, diesel, etc). Most of that is then trucked in tanker trucks to the gas stations all over the US for us to buy. But increasingly some of that gasoline and diesel is being put back into oil tankers and shipped back over oceans to developing countries where demand for oil products is increasing rapidly. The inefficiency of that whole process just boggles my mind!! The energy that it takes to create oil which we use to create energy is staggering!

When are we going to run out?


So just in case you never thought about it before, oil is a finite resource. That means there is an exact amount of it underground on Earth and no more. Once it's gone it's gone. It's been so plentiful for so many years that for a long time nobody put any thought into running out of it. But it is indeed going to happen and really is all ready happening.

The key really isn't so much when we suck the last drop out of the ground, because we are never as a planet ever going to see the last drop extracted at all. The key is when it becomes too expensive to pull oil out of the ground to make it worth doing. This is oversimplified but basically once you take out half of the oil in a given reserve it becomes harder and therefore more expensive to get the remaining half (peak oil). It increases exponentially as you get past the halfway point. So each year past the midway point of removing oil from the ground you are going to end up getting less then the year before and it will cost you more. As we reach that midway point as a planet (which many argue we just recently did or are just about to) oil is going to become more and more expensive. This is why sites that were historically not worth bothering with are becoming financially viable, like oil tar sands. Many of these new sites seem to take more energy to get the oil then that oil can produce. But because oil is become scarce it is becoming financially viable so it's being done.

The trick is that yes it seems that because of some key factors (the economy and better fuel efficiency in automobiles) the US is reducing it's over all oil demand. However many emerging countries are just hitting their stride like we in the US did as we industrialized. These are countries like China and India which have much larger populations then we do here in the US. Because these countries have such large populations they have the potential to dwarf our oil demand in future years. So if we aren't all ready at the midpoint of oil then we are racing there VERY quickly!

Affordable Short Range Electric Vehicle

From Ecogeek.com

Yet another really interesting article on Ecogeek this week. There is going to be a new short range electric vehicle on the market soon that sells for less the $7,000! Wow. Now that is really something. I mean $7,000 is quite affordable for anyone, especially if you were to put it on a 5 year auto loan! There are a few less exciting details but over all it's still a great concept!

Batteries


The $7,000 doesn't include the batteries which would have to be leased separately. Its a cool idea that the batteries are going to be a lease. I mean you know they are going to go bad and start taking less of a charge, so why not lease them and get new ones right away when it's time. The proof however is in the pudding. The question as to how cool the idea of leasing the batteries is how much they are going to cost! Time will tell at this point.

Short Range


So apparently for this vehicle, short range is going to mean 25 miles. Now depending on how far your daily work commute is this could really be great for you. If you are within 25 miles round trip (or one way if you can plug in at work) then you are now going to be able to buy a brand new electric vehicle for under $7,000 and it could really be your main car.

For me my daily round trip is more like 30 miles. That's more then the max even when the batteries are brand new. Since I don't have the option of plugging in at work this it's not going to work for my daily commute. I'm trying to think if I make enough around town trips to justify a $7,000 investment. I mean there are certainly trips to the store, or to friends houses that are within the 25 miles, I just am thinking there I don't do enough of that to make the $7,000 worth it. However, for $7,000 it might be cool enough and cheap enough to buy as a toy.

Top Speed


I've seen short range electric vehicles in the past and they seemed more like glorified golf carts. Their top speed was like 30 mph and you had to keep them on the back roads and away from highways. The great thing about this new short range vehicle is that has a realistic top speed. They are talking 74 mph! So you can go no the highway without any worry of getting run over by and 18 wheeler!

That makes the short daily work commute even more realistic. Lots of folks have short commutes, let's say 10 miles or less, but that does include a short trip on the highway. Which means unless you can get safely get up to 65 mph or more, it still isn't viable. But at 74 mph you are in business.

Chevy Volt vs. Nissan Leaf

I admit there are many other competitions out there when it comes to green vehicles (namely the Prius) but these are the two that I'm really thinking about when it comes time for my next new car. They both have the advantages and disadvantages. 

Nissan Leaf


The Leaf a a true electric vehicle. There is no gas or other fuel that you put in it other then electricity which is stored in batteries. This is a great. I mean, just like any other electric vehicle, how green it is really depends on where you get the electricity from. Ideally you have solar panels or wind turbines and it's totally zero emissions. But if you plug it in you wall then coal or natural gas (maybe nuclear) is being burned to get those batteries filled. It is still going to cost you much less per mile then gas though.

The trick is that depending on the weather it sounds like the Leaf can go 80-120 miles per charge on new batteries. For most people in America this will definitely take care of their daily commute which is great. You can plug in every night and just run off the batteries to get to work and back and you are set. The trick is if you want to take it on vacation you are not going to make it. You are still going to need a back up gas car for something like that, unless you have a series of friends 100 miles apart along your route to the beach that will allow you to plug your car in overnight!

Chevy Volt


The Volt is also an electric car but it can burn gas as well. The difference between the Volt and the Prius model though is that the gas is used to generate electricity to run the electric motor, which the Prius is a true Hybrid of gas engines and electric motors. Basically the Volt will go about 40 miles on a full charge and then switch over to the gas and give you average gas mileage. It's range is shorter then the Leaf mainly because it has the added weight of the gas engine. It's a give and a take.

Even the 40 miles is enough for many American's round trip commute. Even if it isn't most people will only use a very little bit of gas for the end of their trip each day. The other perk is that you can take the Volt on long road trips if you like. You'll drive the first 40 miles on the battery charge and then change over to gas. Then it's just like a gas engine vehicle for the rest of your long road trip. But you have the option of long trips and don't need a back up vehicle with the Volt.

So it's a give and take depending on how long your daily commute is and if you need to use it as your only car and would be stuck having to rent a car if you wanted to go on a long trip. I'm really torn and don't know which I'll choose. My wife and I both need a car so we would have the option of buying a Leaf and having the other car be a gas engine which we'd take on long trips. I also don't have solar panels or a wind turbine at the rental home we have now so that is a concern for me as well. But realistically if you compare the coal/natural gas electricity to the gas from the pump the impact is still bad. At least with the electric car we've have the option of finding a zero emission source where with gas there is no such thing. In a couple years when we buy a new home I am planning to incorporate solar panels so hopefully it'll be a non issue then.

I'm excited with either option really but I'm really torn. As I think of it maybe I would go with the Leaf first, and then when it's time for the 2nd car to be replaced go with the Volt. Then which ever of us that has the shorter commute could drive the Volt and the Leaf would go for the longer commutes (either way the Leaf would be enough for either of out daily commutes). Then when we want to drive on a longer trip for vacation or work we would just take the Volt.