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When the Price of Oil Soars… Again

Jeff Siegel | Tuesday September 28th, 2010 | 0 Comments

Back in 1989 or 1990 — I can’t remember when, exactly — I saw an advertisement that read:

It wasn’t the Exxon Valdez captain’s driving that caused the Alaskan oil spill. It was yours.

I always liked that because it really got at the root of the problem: consumer behavior.

Sure, we all talk a good game about ending our dependence on foreign oil. But when it’s time to step up to the plate, as a nation, we tend to strike out an awful lot…

For instance, I have plenty of environmentalist friends who could rattle off a three-hour diatribe on how carbon emissions from SUVs are damaging the planet — yet they still jump in their cars to drive the half mile to the local Whole Foods Market to get an organic burrito.

As my father always said, “Hey, it won’t kill you to walk!”

I also have plenty of friends who come off as outspoken patriots, displaying Gadsden flags on their porches and baseball caps… Yet they constantly criticize the development of electric vehicles — you know, those things that could actually allow us to drastically reduce our reliance on oil from the Middle East!

Some call themselves environmentalists, some call themselves patriots. But only when oil prices head north do we ever see any meaningful change in consumer behavior… Only when gas prices rise do we see action.

It’s the economics, stupid!

Back in April — after the Deepwater Horizon oil rig exploded and set off one of the worst environmental disasters in U.S. history — a lot of folks thought the country would finally rally to support alternatives to oil. I argued that such a response was unlikely, and that the only catalyst for such support would be economic. In other words, unless the disaster resulted in higher gasoline prices across the country, nothing would really change. And I don’t say this to criticize; rather, simply to offer a meaningful observation. After we learned how much oil was really gushing into the Gulf, we didn’t see any indication that consumer behavior was changing.

Gas prices remained relatively stable. And unless you lived in the Gulf region, the daily routines of consumers had not really been affected. However, think back to what happened when oil hit $140 a barrel, and 87 Octane was running consumers more than $4.00 a gallon…

Mass transit ridership picked up, bike sales jumped, and folks were walking into Toyota dealerships offering to pay above sticker price to get a Prius. This didn’t happen because everyone woke up one morning and decided decades of internal combustion had made our air dirty and our water polluted…

This was really nothing more than a reaction to soaring oil prices — an economic disruption that proved too great for consumers to ignore.

I’ve made this point at least a dozen times in the past, and I maintain that it is the reality of higher oil prices — which will materialize as a result of peak oil — that continues to fuel electric vehicle development.

The automakers know that oil prices are not going to stay this low for much longer. And they all need to have something to sell consumers when the fit hits the shan…

When the price of oil soars again

Toyota was clearly mopping the floor with the competition when oil hit $140 a barrel. And for the laggard automakers that were too arrogant to offer anything more than complacency, a very valuable lesson was learned. Why else do you think every major car maker in the world now has both conventional hybrids and electric cars in development? Interestingly, Toyota recently announced that by 2012, it will have a total of 20 hybrid models and two new electric cars. One will be a plug-in version of the Prius, and the other will be a battery-powered RAV4 crossover. That vehicle will be using battery packs supplied by Tesla Motors.

Also worth noting is Renault’s recently reaffirmed commitment to offering four affordable electric vehicles in Europe by 2012. The company says it intends to offer these vehicles at the same prices as diesel-powered vehicles of equivalent sizes. Automotive Electric Supply Corporation will be supplying Renault with their lithium-ion batteries. It’ll be interesting to see how these vehicles sell in Europe, where the cost of gasoline and diesel is significantly more than what we pay here.

In fact I was in Zurich last week, where diesel was going for about $1.68 a liter — the equivalent of $6.36 a gallon.

Something to think about the next time we hear folks complaining about the high cost of gas!


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