First, let's hear OPEC:
Opec raises price target to $50 a barrel
The Organisation of the Petroleum Exporting Countries unofficially raised its price target on Wednesday to more than $50 a barrel, citing firm demand growth, refining bottlenecks and lack of economic damage from high oil prices.
(...)
Sheikh Ahmad Fahad Al-Sabah, Opec president and Kuwait's oil minister, said the new Opec basket of export crudes would have to remain above $50 a barrel for at least seven days before Opec ministers would start discussing any increase in the quota.
The new basket, which comes into effect on Thursday, is about $48 a barrel.
For the new basket to increase above $50 a barrel, this would translate to US and European benchmark crudes of about $57-$58 a barrel or near the record nominal levels reached in April.
"The prices are not going to be lower," said Rafael Ramirez, the Venezuelan oil minister.
(...)
With most Opec countries producing at or very close to full capacity, any increase in supply is expected to come from Saudi Arabia, the world's largest exporter of oil. (...) Saudi Arabia claims it has another 1.5m b/d in production capacity on top of its current output of 9.5m b/d, but it has not sustainably produced more than 10m b/d since the early 1980s.
Get that:
- OPEC will not increase its quotas until oil prices are above the record high they reached earlier this year.
- they can't do it anyway, because they don't have the capacity.
Now let's hear Toyota:
Toyota says hybrid cars face US fuel barrier
The low price of petrol means there is no financial justification for buying fuel-efficient hybrid petrol-electric cars in the US, according to Toyota, maker of the hybrid market leader, the Prius.
Kazuo Okamoto, who takes over as head of research and development at Toyota next month, said the extra costs of hybrid cars more than wiped out any financial gains of lower fuel consumption. Buyers in the US would have to want to help the environment, not just save money. In Japan and Europe, the extra costs were approximately balanced by fuel savings.
(...)
Another Toyota executive was more blunt in his analysis: "Buying a hybrid is about political correctness, it is not about the money," he said.
(...)
A study by Edmonds.com, the US research service, this month calculated the cost of buying and running a hybrid at up to $5,283 more over five years than buying a standard petrol-driven car.
Buyers of the hybrid version of the Ford Escape off-roader would have to drive 37,000 miles a year to justify the extra costs. Drivers of the Prius would have to do 66,500 miles a year, or see petrol prices quintuple to $10 a gallon, before it justified the extra cost compared with a similarly-sized Toyota Corolla.
(...)
Toyota had set a target of reducing the extra cost of the hybrid to a level where it could compete on value with ordinary cars by 2010 at the current US petrol price of just over $2 a gallon.
So:
- you need something like 6-10$/gal gasoline to make hybrids a viable alternative (6$/gal is the current average in Europe, the requirement stated by Toyota, 10$/gal is the requirement according to Edmonds.com);
- Toyota is taking advantage of its first-mover advantage to capture the "politically motivated" market and use that base to pay for the required R&D to be really competitive in 5 years' time.
Meanwhile, US car makers are years behind, and will be even more so in a few years time, and US consumers are about to transfer on a permanent basis 600 million dollars per day (12 mb/d of imports @50$/b) - more than 200 billion dollars per year - to "friendly" regimes in the Middle East, Russia or Latin America and Western Africa - to which you must of course add all the military spending associated with these regions.
This is a very real tax on US consumers, one that:
- makes it possible for US manufacturers to remain criminally complacent as they have no incentive to offer fuel efficient vehicles, while Japanese and European competitors take the market and control the new technologies (whether hybrid or new generation diesel);
- allows waste of a finite resource and pollution on a grand scale;
- encourages an adventurist and aggressive foreign policy;
- will make the transition to the post-cheap oil all the more difficult.
The choice is not between taxing and not taxing, it is between taxing now (with the money going to the US treasury) or paying later ever-increasing amounts to Arab oil sheiks while the economy, unprepared for rapidly rising energy prices, suffers badly.
I know that many of you here are already doing the right thing and buying "uneconomic" Priuses, using bikes, and other such "civic" behaviors, and that you will have the last laugh when prices do get higher and others suffer with their Hummers and SUVs, but that pain will be felt throughout the economy anyway, and is likely to lead only to more protectionist, jingoistic and bellicose policies.
It is vital to focus political discourse on energy issues NOW when there is still time to anticipate somewhat the switch to more expensive energy, because the consequences of not doing anything are going to be really bad.
We will not be able to say that we were not warned.
Comments are closed on this story.