Oil Prices and the Pace of Auto Innovation

By · September 15, 2008

The price of oil dropped below the psychological barrier of $100 a barrel today—despite hurricane-damaged oil rigs in the Gulf, rebel groups declaring an “oil war” in the Niger Delta, and a barrage of negative news from Wall Street that previously led speculators to drive up the cost of petroleum. The current drop in oil prices—more than $50 off the record high price of $147.27 a barrel on July 11—raises questions about how soon auto companies will deliver on exciting plans for “game-changing” alternative vehicles.

Buyers beware: Any time you see the term “game-changer” applied to a single vehicle or a single technology, pause for a moment to think about how fast or slow the game will really change. That’s what Joseph White considered in today’s Wall Street Journal article, “Why the Gasoline Engine Isn't Going Away Any Time Soon.” As White outlines:

  • Gasoline and diesel are easily transported and easily stored…Even now, gasoline in the US is cheaper by the gallon than many brands of bottled water.
  • Engineering and tooling to produce a new vehicle takes three to five years—and that's without adding the challenge of major new technology. The best new models will be relatively expensive, and will take several years to become big sellers.
  • By 2020, many mainstream cars could be labeled "hybrids." But most of these hybrids will use relatively low-cost "micro hybrid" systems to shut the car off automatically at a stoplight, and then restart it to accelerate.
  • “Moon-shot efforts” like GM’s Chevrolet Volt get a lot of attention, but the most effective ways to use less energy may have less to do with changing technology than with changing habits.

White points to “glitzy ads, media chatter and Internet buzz” about plug-in hybrids, electric cars, and hydrogen—and writes that it's easy to get lulled into thinking “auto makers can quickly execute a revolutionary transition from oil to electricity.” But, he says, “the revolution will take years to pull off—and that's assuming it isn't derailed by a return to cheap oil.” The genuine desire for alternatives—from outside and within the auto industry—shouldn’t cloud our thinking about the real pace of a green car revolution.

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