High Gas Prices and High Hopes

By · April 15, 2008

Oil surged to a new height today, almost reaching $114 a barrel. Retail gas prices rose to a new record of $3.38 per gallon. Diesel jumped to $4.19. And AAA is warning that these prices will continue to rise. The first reaction might be to panic, or make a mad dash toward a single technology solution. But a recent talk by John German, manager of environmental and energy analyses at American Honda Motor Company, suggested that we remain calm.

Speaking at last month’s Auto FutureTech conference in Vancouver, British Columbia, German first cautioned the audience about overreacting to today’s high gas prices. He said, “Right now, we have the highest fuel prices we’ve ever had, but that’s not the real story.” German demonstrated how the cost per mile of driving today, when adjusted for inflation and for average fuel efficiency, is slightly less than it was in the 1970s.

“Our standard of living has gone up. The cost of driving a car for 1,000 miles in the 1970s—as part of disposable per capita income—was 6 to 7 percent. Last year, it was about 4 percent.” He said that gasoline would have to reach $4.50 per gallon before it took the same chunk out your pocketbook as it did in the good old days before the first oil crisis. “Not to minimize the impact, but don’t expect high gas prices to produce a game-changer.”

Then, German warned against the very notion of scrambling to find any single “game-changer.” He outlined a long list of “technology du jour” choices starting with methanol 25 years ago; electric vehicles 15 years ago; hybrids 10 years ago; fuel cell vehicles five years ago; ethanol two years ago; and plug-in hybrids today. “This kind of changing, building up a technology and when it doesn’t meet expectations, moving on to the next, is very disruptive. It’s something that, if at all possible, we need to avoid.”

German believes that plug-in hybrids are indeed coming, and that they are a genuine part of a long-term solution. He also confirmed that Honda is working on plug-in hybrid research, especially in the area of batteries. And he pointing to electric vehicles, powered by batteries or hydrogen fuel cells, as a way to solve our environmental and energy problems in the long run. But he added, “I have my doubts that lithium ion batteries will ever have enough energy storage to support a mass market plug-in.” Instead, he is more hopeful that—in the near-term—new lithium ion battery chemistries will help bring conventional hybrids to wide market acceptance by reducing the cost of batteries, and bringing down the so-called "hybrid payback period" to less than three years. “It’s going to take some time to finish battery development, prove them out, and be able to ramp up production—but once it happens, you’ll see hybrids go mainstream.”

Given the sharp rise in fuel costs, it's hard to patiently work toward long-term solutions, but that's what Honda's John German is advising. He called for more government-funded research for batteries and hydrogen storage—as two avenues toward an electric vehicle future—and for government to set performance objectives and requirements, while letting competitive forces determine which technology is best. “There are no silver bullets. We need to avoid the trap of single solutions. We need everything.”

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