What Will It Take?

[srivendel]

From Slate:

Why don't we ratchet down more when fuel prices go up? The rule of thumb in economics is that people react to price increases only when they can turn to substitutes. Raise the price of Ford trucks and sales go way down because you can buy your truck from Chrysler or GM or Toyota instead. Raise the price of gasoline and what are the alternatives? As a New York Times article pointed out on Sunday, people can't change the type of fuel they put in their cars, and they can't stop going to work. They might take one less driving vacation or check their tire pressure more often when they fill up. But that hardly makes a dent in the total numbers.

Practically speaking, the only hope of changing America's driving habits is a hefty price increase that lasts. For, oh, five years. The data show that after that long, even the response of American drivers to higher prices can be pretty sizable. Five years gives people the time to come up with substitutes. Higher commuting costs over that many years could induce you to buy a smaller car, move closer to work, find a car pool for your kids. Of course, that's why Hurricane Katrina is not likely to have a lasting impact on gasoline use. It's a big blip, but only a transitory one. Which means it's exactly what consumers don't change their behavior for.

Think about the choice between the hybrid and gasoline versions of the Toyota Highlander SUV. At the moment, the hybrid costs about $9,000 more. Optimistically it could double your gas mileage from 17 to 34 miles per gallon (if you only drove in the city, say). A family driving the average of 12,000 miles per year would use about 29 fewer gallons per month with the hybrid. Even if the hurricane drove the price of gas to $5 a gallon for three months, the hybrid would only save them about $441 total over that time. The savings just don't add up in the short or medium run. For the average family to justify the hybrid at its current price based on fuel savings, gas prices would have to stay at $5 per gallon for several years. Or, if prices stay where they are, the savings would eventually add up if you kept driving your hybrid for a few decades.

With time horizons like this, it's no wonder that few people change their behavior when gas prices spike temporarily. Even the oil crisis of 1979, the biggest ever, did not have much lasting impact on America's intensive use of energy. Within five years, prices had fallen dramatically and people took off their Jimmy Carter cardigans and went back to their energy-happy ways. One of the oldest lessons economists have for thinking about what changes consumer demand is that moral exhortation doesn't change people's behavior. Prices do. Except that for a commodity like gasoline, even prices don't do an impressive job.

I basically agree with this thesis. My wife and I were talking about this the other day. All the dingleberries who are rushing out to trade their Suburbans on Priuses miss the point. It doesn't make any sense to take a huge depreciation hit by prematurely trading in your current car just to save a couple of gallons in gas every month. I personally think that some people who are doing this just want a shiny new car, and are using gas prices to justify getting one.

Now, if your current car has reached the natural end of its service life with you, then getting something more fuel efficient the next time around make a lot of sense, and I expect that many people will be doing just that.

S.

[sammm]

My wife and I were talking about this the other day. All the dingleberries who are rushing out to trade their Suburbans on Priuses miss the point.

My wife and I have had similiar discussions. One thing that came up is this - maybe some people are buying hybrids for the betterment of the environment and to lessen their demand for oil/gas.

[tailchaser]

I think environmental responsibility is a much better argument than saving $$$. Payback on the hybrids is painfully long - usually 5-6 years for the "average" driver.

I bought my Jetta Wagon in diesel trim - not necessarily to save $$$, but because I didn't want the 2.0 (anemic) or the 1.8T (a bit high strung). The diesel motor was in between the price points of the other two options. It made competent power, and life of vehicle emissions aren't too bad compared to others. So, diesel was an option, and bio-diesel may be a viable option in north Texas before too much longer. Right now, I'm limited to one station in Fort Worth, Carl's Corner or Saturdays in Denton. Bio is >$ than petro-diesel, but it makes my vehicle more environmentally friendly, quieter, and keeps the fuel system clean. Given sufficient production, bio-diesel may eventually provide a $ choice as well as an enviro-choice, particularly if petroluem prices continue to surge northward.

Most modern gas powered vehicles will run on Methanol without incurring problems. It would make a great gasoline alternative if it were at the pumps for people to buy. Works with existing vehicles and provides choice.

The current crop of hybrids would impress me more if they had more battery capacity. If electricity is cheaper per kW than gasoline, charge the car at the house more often. If gasoline is cheaper, don't charge at the house. It's a choice that allows consumers to vote with their $. Of course, > battery capacity would probably boost the prices of these hybrids disproportianately higher than their current ridiculous prices.

[srivendel]

Hey TC, are you talking about Bio Willie?



I've been arguing for more American diesels for a long time. I understand that the cleaner "reformulated" diesel that's coming our way in 2006 could make that a reality. Honestly, I think something like Ford's diesel European Focus would sell well here.



Even better (for Americans) sell diesel CR-Vs, RAV-4s, and Escapes. People would snap those up by the boatload, as Jeep is finding with its (not that efficient) diesel Liberty.

$5-9,000 extra for a hybrid is tough to justify. $1,000 extra for a diesel is easy.

S.

[Billy Blaze]

Personal Opinion on>
I think that the Media which in my opinion is run by Uncle Sam, tries very hard to keep our attention on what our cars are doing to the atmosphere and ecosystems so that we don't pay much attention to the fact that there are huge smoke stacks billowing tons of crap into the air 24/7.
Not to mention all the Chem-Trails that are spraying God knows what on us every single day non-stop, I have yet to see one news report about this.
Personal Opinion off<.

I Dont think I will ever own a hybrid unless they make one that really suits all of my needs and wants, and I dont see one yet that does that.

[altiain]

Even better (for Americans) sell diesel CR-Vs, RAV-4s, and Escapes. People would snap those up by the boatload, as Jeep is finding with its (not that efficient) diesel Liberty.

$5-9,000 extra for a hybrid is tough to justify. $1,000 extra for a diesel is easy.

S.

If Honda had offered a diesel CRV in this country, I would have bought one without hesitation.

As for the Liberty, if you measure it's efficiency based on vehicle size, it's relatively efficient, posting better fuel economy numbers than its typical 4-cylinder competition (like the CRV). However, if you measure its fuel efficiency by other metrics - like towing capacity - it's downright impressive. Find me another vehicle that will get ~30mpg highway (unladen) and can tow up to 5000 pounds.

I sincerely hope that the advent of low-sulfur diesel will lead to more diesel options in this country. I'd love a mid-sized or smaller SUV that got decent mileage and still had the capacity to tow the Miata.

[RX7-2nr]

From Slate:

[I]Think about the choice between the hybrid and gasoline versions of the Toyota Highlander SUV. At the moment, the hybrid costs about $9,000 more. Optimistically it could double your gas mileage from 17 to 34 miles per gallon (if you only drove in the city, say). A family driving the average of 12,000 miles per year would use about 29 fewer gallons per month with the hybrid. Even if the hurricane drove the price of gas to $5 a gallon for three months, the hybrid would only save them about $441 total over that time. The savings just don't add up in the short or medium run. For the average family to justify the hybrid at its current price based on fuel savings, gas prices would have to stay at $5 per gallon for several years. Or, if prices stay where they are, the savings would eventually add up if you kept driving your hybrid for a few decades.

S.

i was thinking the same thing today driving to work. i heard a radio commercial from a VW dealership, dont rememeber which one. they said that the mileage of the new jetta could almost pay the car off in savings over a car that gets 12mpg.

i couldnt remember how many mpg the jetta got so i substituted 32.

12000 miles a year / 32 mpg= 375 gallons a year in a new jetta.
12000 miles a year / 12 mpg= 1000 gallons a year in a random guzzling SUV.
635 gallons saved by buying a Jetta
$1743.75: cost of gasoline saved at $2.79 a gallon.
$19,000: cost of a base model Jetta +TTL *estimate*
19000/1743.75= 10.89

A base model Jetta will pay for itself in gasoline savings over a 12mpg vehicle in 11 years.

I originally did all of these calculations on my cell phone when i was driving to work, (stuck in traffic)

[Kestrel]

All the dingleberries who are rushing out to trade their Suburbans on Priuses miss the point.

I don't care what makes people get out of those huge SUVs and Trucks and into smaller vehicles, just so long as they do*. Remember, these dingleberries you are referring to are the same dingleberries who are commuting 30 miles every day alone in their vehicle and bought a Suburban/Excretion/Lumber in the first place! Not the sharpest tacks in the box.


* Well, as long as this isn't a federal regulation thing. I much prefer it when people act in a free-market situation, with self-interest at heart. Get the government "do-gooders" involved, and we're all doomed...

[altiain]

I don't care what makes people get out of those huge SUVs and Trucks and into smaller vehicles, just so long as they do*. Remember, these dingleberries you are referring to are the same dingleberries who are commuting 30 miles every day alone in their vehicle and bought a Suburban/Excretion/Lumber in the first place! Not the sharpest tacks in the box.

So what happens to those huge SUVs and trucks when the dingleberries trade them in for smaller, more fuel efficient cars? They just disappear off the road forever, right? We recycle them into beer cans?

Uh... no.

The reality is that those huge SUVs and trucks will sit on used car lots until the price meets the needs and wants of some new dingleberry. At that point, these huge SUVs and trucks re-enter the traffic population... except now they're being piloted - typically - by someone of lower socio-economic status, someone who couldn't afford the new hybrid Gottahaveit at the local new car showroom. Guess what? That person of lower socio-economic status will:

• Take less care of that huge SUV or truck, so that it will pollute more per mile, on average.
• Drive more miles in it, on average, because they will typically live further from their employer than those in higher socioeconomic classes.

So, more miles per unit time at a higher rate of pollution per mile. More net pollution, higher net fuel usage. Its a lose/lose proposition.

If huge SUVs and trucks really did disappear (and were magically 100% recycled) when the first owners got rid of them, that's would be great. Unfortunately, here in the real world that doesn't happen. Those vehicles are passed along to the next owner, who will continue to use the vehicle as long as it suits their needs. When they're done with it, it will go back out into the free marketplace and another will come along, until the vehicle is destroyed or reaches the end of its typical lifespan.

[POS Racing]

If huge SUVs and trucks really did disappear (and were magically 100% recycled) when the first owners got rid of them, that's would be great. Unfortunately, here in the real world that doesn't happen. Those vehicles are passed along to the next owner, who will continue to use the vehicle as long as it suits their needs. When they're done with it, it will go back out into the free marketplace and another will come along, until the vehicle is destroyed or reaches the end of its typical lifespan.

You kids do realize that large SUV were not the first of the “Gas Hogs”, take a look back in recent history and many large sedans, pickups, and muscle cars got the same or worse mileage than today's SUV's.

Yes today’s large SUV's get worse mileage than a Hybrid, but what will the ecological impact of these hybrids be on the environment long term? Will a battery fairy come and make all the bad chemicals in the battery just go away??

How often do you have to change out the batteries in a Hybrid, what will this cost, what happens to the old batteries?

I can’t help but notice the mainstream press isn’t addressing the possibility of long-term consequences of Hybrid technology. I guess only time will tell. It would seem Diesel has the upper hand in presenting a smaller environment impact on our planet that these new hybrids offer.

[Kestrel]

So what happens to those huge SUVs and trucks when the dingleberries trade them in for smaller, more fuel efficient cars? They just disappear off the road forever, right? We recycle them into beer cans?

Uh... no.

Uh... yes. Eventually. Sure, they will hang around for a couple of years, but 5 years from now, many will be in Mexico or in a junk yard somewhere, and 10 years from now the largest thing on the road could be your CRV.

I'm not a "greenie" here, and I am absolutely not interested in the government regulating anything like "allowable car size", so please don't expand my comments into some far-fetched theoretical/political dissertation. I want people to buy what makes sense for them. Some folks need an Excretion. Some folks need a "mini" van. And you know what? Some folks just want a Hummer. Fine with me.

But if current economic forces -- like higher gasoline prices -- get a few people to change their mind about how badly they want that Suburban for their lonely 30 mile daily commute, then I think that's excellent. Heck, if there were just 10% fewer monsters on the road, I think that would be a good thing. At least I'd have a clearer view of what's in front of me... besides the bumper of that Escalade.

[Kestrel]

...but what will the ecological impact of these hybrids be on the environment long term? Will a battery fairy come and make all the bad chemicals in the battery just go away??

<snip>

I can’t help but notice the mainstream press isn’t addressing the possibility of long-term consequences of Hybrid technology.

Yep, I agree with you here. Let's just say I'm not an "early adopter" of this Hybrid idea; not willing to jump on that bandwagon just yet.

[Dave04]

Heck, if there were just 10% fewer monsters on the road, I think that would be a good thing. At least I'd have a clearer view of what's in front of me... besides the bumper of that Escalade.

On this note... the high gas prices have pushed me in to embracing mass transit. My company finally arranged for a shuttle bus down from McKinney to the Parker Road DART station. I'll be the first to admit, it's not the most convenient, but... my usual 50 mile round trip commute is down to a 4 mile drive. I last filled up the Miata a little over a week ago and I still have over half a tank. I usually have to fill it every 4 days or so...

Do I miss having the car at my beck and call? Absolutely! But that extra 20 minutes of sleep on the bus in the morning and complete lack of stress due to driving completely makes up for it.

While my car isn't a monster SUV... it IS spending a lot less time on the road.

[Titus]

Uh... yes. Eventually. Sure, they will hang around for a couple of years, but 5 years from now, many will be in Mexico or in a junk yard somewhere, and 10 years from now the largest thing on the road could be your CRV.

I'm not a "greenie" here, and I am absolutely not interested in the government regulating anything like "allowable car size", so please don't expand my comments into some far-fetched theoretical/political dissertation. I want people to buy what makes sense for them. Some folks need an Excretion. Some folks need a "mini" van. And you know what? Some folks just want a Hummer. Fine with me.

But if current economic forces -- like higher gasoline prices -- get a few people to change their mind about how badly they want that Suburban for their lonely 30 mile daily commute, then I think that's excellent. Heck, if there were just 10% fewer monsters on the road, I think that would be a good thing. At least I'd have a clearer view of what's in front of me... besides the bumper of that Escalade.

Good point!

[black roadster]

Call me vindictive but I just laugh when I see Hummers now and think of all the $$$ they have to spend on gas for their "fashion statement".

BTW, A Hummer is not a necessity. It is a fashion statement only. It doesn't do anything many other vehicles can do and most of those vehicles can do them better. (I'm referring to the popular H2 and H3) I'd say 99% of the drivers also never use these things as they were designed but merely use them to commute.

I honestly feel it is a very selfish vehicle too. The MPG isn't even rated because they way 3-4 tons. Although I'd guess somewhere between 8-12 mpg. Their weight deteriorates our roads more quickly too. All this to look "cool".

Sure my Miata is a selfish vehicle being a two seater but with 25 mpg and a curb weight just over a ton it does little environmental damage compared to most other cars on the road.

[srivendel]

Call me vindictive but I just laugh when I see Hummers now and think of all the $$$ they have to spend on gas for their "fashion statement".

BTW, A Hummer is not a necessity. It is a fashion statement only. It doesn't do anything many other vehicles can do and most of those vehicles can do them better. (I'm referring to the popular H2 and H3) I'd say 99% of the drivers also never use these things as they were designed but merely use them to commute.

I honestly feel it is a very selfish vehicle too. The MPG isn't even rated because they way 3-4 tons. Although I'd guess somewhere between 8-12 mpg. Their weight deteriorates our roads more quickly too. All this to look "cool".

Not fair to lump the H3 in with the H2. The H3 uses an I-5. It's pretty underpowered, and the gas mileage ain't great (17-19 on average), but it's in the same ballpark as a Grand Cherokee.

S.

[black roadster]

Not fair to lump the H3 in with the H2. The H3 uses an I-5. It's pretty underpowered, and the gas mileage ain't great (17-19 on average), but it's in the same ballpark as a Grand Cherokee.

S.

Fair enough...

[channelmaniac]

The MPG isn't even rated because they way 3-4 tons. Although I'd guess somewhere between 8-12 mpg.

One of my resellers had one... He just got rid of it & got an Infiniti due to the gas prices. He got 9mpg.