A short post on why Hybrids are moot...

sjippyjc, despite my finishing up an MBA, I'm sure I lack the breadth and depth of your economics and business background (although I think I do have the capability of courteous response to people who disagree which you seem to lack).

However, there is a paragraph in one of your posts with which I much take issue:

Why does supply and demand work differently for oil? Because there are no substitutes (currently adequate substitutes)....

But there are substitutes: less discretionary driving, car-pooling, and telecommuting are three that both my company and I are involved in.

With oil we do not have choices, the vendors dictate the rules, not the consumer. The oil industry is one of the only industries that can operate this way. And as long as energy is dependant at all on oil, supply and demand are moot.

I must disagree again. One of the biggest choices we have vis-a-vis oil is where and how we choose to acquire it. For example, politico-economic issues with oil can be lessened (although admittedly not eliminated) simply by permitting companies to drill for oil in envirnomentally sensitive parts of the United States, by the government subsidizing exploration and recovery operations, and by invading countries which have a lot of oil and taking it by force.

Needless to say, I do not recommend any of these as the best alternative; nonetheless, I believe the United States has a lot more flexibility, either by changing our standard of living or our domestic/foreign policies, than you might think.

Where am I going with this? The increased use of hybrids will only fuel (pun intended) increases in gasoline costs

Incorrect. Gasoline prices, unlike most commodities obey the market law of supply and demand, have largely been inflating due to huge demand, not a scarcity of oil. The recent bump ala katrina is perhaps a result of it being in lower supply, however even there there are these investor concerns and panics. Gas is expensive now because of the market and the large demand and inefficiency of the vehicles on the road, not because of a scarcity in supply. Switching over to hybrids, and using, say, half as much gas as an individual, will result in you buying half as much gas, and not result in gas prices doubling.

Originally posted by kozmo
on COMMODITIES. A little Econ101 on the laws of supply and demand wouldn't hurt either. Sorry but if demand on gasoline decreases so does it's cost.

Nope, it doesnt, and hasnt, and will continue to never decrease.

Thank you for sharing, skippy.

We can all relax now that you have instructed us, in your kind and gentle way, that everything we learned in basic economics is wrong.

However, it is indeed fortunate that the train trip on the IGG&Y Rail-road for which I have purchased your ticket will probably not run out of fuel for quite a while.

Have a great trip, and don't forget to write! Toot-toot!!

Find me one substitute that’s adequate enough to give the people of the world a REAL choice of fuels that can be in effect TODAY. You cannot.

I will go back to my premise: There is no, and never will be, a financial benefit to driving a hybrid vehicle over a gas vehicle, ever. And you guys can quote business 101 all you would like, it won’t change reality.

Just to enlighten a bit: I do logistics and replenishment for a multi billion dollar company. Although I do not deal with gasoline directly on a daily basis, my company operates fuel stations across the east coast as one of their businesses. As a logistics analyst and I get a fair bit of exposure to the intricate details of this business and I deal with commodities all day long. My opinion is informed.

And in defense of my tone, I was challenged first and I am simply defending my position.

Originally posted by skippytjc
Find me one substitute that’s adequate enough to give the people of the world a REAL choice of fuels that can be in effect TODAY. You cannot.

They have a choice of which company to guy their gas from.

The gas companies don't have a cartel where they all get together and set the price of gas do they?

If Texaco sets a price of $3 dollars per gallon and Shell can sell at a $2.50 and still make a profit, why wouldn't Shell undercut Texaco's prices to get their business?

If all of the big companies all decided to charge a price that was very high they're would be nothing to stop a new competitor from entering the market at a lower prices.

[edit on 1-9-2005 by AceOfBase]

I agree with skippy....kinda.

If the supply (which is dwindling) were to cease, the cost would sky rocket. But since we still have about 20-50 years of oil left, they'll only steadily increase. But they will never go down, only go up slower in some cases.

But, less demand of a product does increase price (for a while), so as to cover the production costs. If demand stops, that company goes under and sales everything it can at whatever price. But I can't see this happening with oil. oil is used for everything, their will always be damend for it. If everyone drove a hybrid car tomorrow, I doubt it would severely change the cost, since everything else will still need oil (machines, trcuks, pumps, grease for bearings, etc., etc. , etc.).

Also, I think the oil companies will be the leaders in the next fuel we use. That's where they get they're money. They'll milk the cost of oil until they're ready to expose the next fuel of choice. And you can bet they have the money to buy the patents of the next fuel invention.

Just my $0.02,
Fallen One

[edit on 1/9/2005 by FallenOne]

Originally posted by AceOfBase
They have a choice of which company to guy their gas from.

Ace, we don’t have a choice. The profit at the pump level is literally pennies per gallon, I know this as fact. The only choice we have is which gas station gets the couple of pennies per gallon profit, let me repeat that: We only have control over which INDEPENDANT gas station owner gets that profit. The people who sell him the gas all sell for about the same price. My company writes orders for gas BEFORE we even know what the price is going to be, just to put things into perspective: Costs on orders written today for delivery tomorrow may change 2-3 times before the gas is even delivered.

So I agree there is an organized cartel, sort of, but the gas industry is heavily regulated, both by government AND the companies themselves. Google OPEC if you don’t believe me.

So when you see Crazy Eddies Gas Emporium selling gas $.05 less per gallon that Guss's Gas Stop, its Crazy Eddy that’s taking the hit, not the people he franchises from or buys his gas from, trust me on this.


I’m not talking about 15 or 30 years from now. But today there is nothing you or I can do that would decrease the price of fuel. If some ultra genius creates cold fusion from lettuce and beer cans tomorrow in his basement, then things would change. But until then the cost of gas is not up to us.

For all you who think I am an idiot, whatever. But do your self a favor: Write down the price of gas today at your favorite station, and then update that figure once every 4 months. I guarantee you will never even once, even with the deluge of hybrids coming next year, record a decrease in gas price.

Gas will increase until its been replaced nearly 100%

skippyjc thesis: if consumption goes down then the monpolistic oil companies will keep their profits up by cartel action.

My Q: why didn't they do that in the mid 90's when oil plummeted from the early 90's (Gulf War I)? Surely they'd have wanted to keep their profits up then in actual reality as opposed to a hybrid theoretical future.

And if they want big profits now, why not even bigger? If they have the capacity and such cartel power to do what you say, why not $8 a gallon, tomorrow? Why not $80?

Then why did oil increase so much over 3 years if it wasn't demand?

Higher mileage vehicles being sold now will only slightly influence the actual on-the-road efficiency of vehicles. Since a significant fraction of fuel is used by truckers, and diesel is already more efficient and there is little value for hybridizing long-haul trucks, hybrids will only very slightly change fuel consumption.

I agree that fuel prices will not decline, but not because of monpolistic behavior, but because of increasing global demand and static supply.

The purpose of a hybrid is so that eventually you end up with more money at the end of the month than you would if you were to buy a regular car or truck, and less money is sent to people who want to kill us.

BTW the next fuel is already here, and it's boring.

It will be compressed natural gas imported as liquid natural gas. Peak natural gas is a few decades after Peak Oil.

Skippy:

Ya, I do agree about the absurdity of quoting Bus 101. You are refreshing in that you appear to have experience backing up your claims. Too many times do I come across posts that are incredibly dogmatic. It is hard to find people with experience here. And I agree. Right now is a great time to make money off of hybrid cars. To add to it, lets say the average hybrid car costs an extra $8000. Well, someone in this thread calculated, at a steady gas price, that one could save about $2000 in gas per year. Lets then say that the average person drives the same car for some 5 years. The car would only start paying for itself after 4 years, the last year into it. And I am sure, as it would be out of warranty, that repairs would be needed and be more costly. However, hybrids will likely save a bit more than 2 G's per year, since gas I am sure will rise steadily over the average 5 year span of its life. So perhaps it will pay for itself in three years, but you still have the increased costs of repairs, and, how long do the batteries last? Also, I am also quite certain that investing $8000 could make you some money as well.

A great example of manufacturing a quick market - get in and get out. And I also speculate that the oil industry tycoons are setting up the next fuel of choice. They will milk their oil, then introduce an alternative. Hybrids were to be taken more seriously about 3 years ago, when gas was down, but now everything is changing.

nygdan its true that higher demand does make gas go up. the point is that once gas goes up it wont go back down. this is because we cant reduce consumption by half. a reduction in consumption will stop it from going up much higher , but gas companies can still make it go higher to comphensate because there is a point to which we can limit gas consumption.

Some more to prove my point:

BP is reporting a 34% increase in profit today, but yet the cost of my gas is still $2.60+ per gallon, $.60+ more than it was when all this started. So the gas companies are making a killing off us, and the cost of gas is still way inflated.

I will repeat my original stance: Hybrids financially will always be moot, as the price of gas will INCREASE continually to off set any savings through their conservation, regardless of the advances of the technology and ignoring the principals of supply and demand entirely.

Link to BP's wonderfull profit news at our expense:
www.breitbart.com...

And meanwhile in the real world, events like the Tokyo auto show are being dominated by new model and concept Hybrids and Hydrogen cars.

www.worldchanging.com...

The Tokyo Motor Show opened this week, with a heavy emphasis on hybrids and hydrogen. Among the many reveals was the flagship Lexus LF-Sh luxury hybrid, combining a V8 with the hybrid drive.

The former bane of the environmentalist community the SUV is going to quickly become the sweetheart.

Also from my link.

The Farmers Insurance Group of Companies announced a 5% discount to customers in California who own a hybrid or alternative fuel vehicle. This is the first such insurance discount offered to hybrid and altfuel owners in the US. (GCC)

Seems like the real world disagree's with you skippy

LOL, the "real world", thats cute.


You understand the hybrids cost 25%+ MORE than their gas counterparts right? Whats the average time a person own a car? 5 years or so? So basically, you have about 5 years, or 50-80k miles to save enough money from driving your hybrid to make up for the initial expense. All the while the price of gas is climbing, even though the consumption stays the same or is reduced from that very hybrid use.

You understand the significance of BP's report and my theory right? Even though our supply is "low" (they claim), causing massive price inflation (supply and demand), they are still managing to have historic profit gains. How is that possible? If they were passing the actual cost they are incurring due to supply issues (gauging is illegal), and nothing more, why and how would their comp profit percentage increase? Wouldnt it be flat? We arent talking about dollars here, we are talking about percentage increase in profit.

Thats simply not possible unless they are taking some of the extra money from the inflated prices. What does that mean? It means they have inflated the price more than it needs to be, 34% more to be exact, regardles of supply. PROVING my point that supply and demand has nothing (or very little) to do with our current gas prices.

You guys will see the light soon. The price of oil and gas is controlled and what we see at the pump has little to do with supply and demand. And the price of gas will only increase as we increase our use of hybrids.

There will NEVER be a financial gain by using hyrbids, not to you and me anyways.



[edit on 25-10-2005 by skippytjc]

[edit on 25-10-2005 by skippytjc]

Never see a price drop?

I'm not disagreeing as far as a dramatic drop, but two weeks ago gas down the street was 2.89 a gallon, now its at 2.56.

Looks like you might want to rephrase that.

[edit on 25-10-2005 by LeftBehind]

Over here in the UK I was under the impression that the purpose of owning a hybrid car was not souly to reap an immediate financial reward but to try and help the environment. Also that hybrid cars were never meant to be anything but a helpful evolutionary stop gap between petrol and and a more 'friendly' fuel.

Originally posted by LeftBehind
Never see a price drop?

I'm not disagreeing as far as a dramatic drop, but two weeks ago gas down the street was 2.89 a gallon, now its at 2.56.

Looks like you might want to rephrase that.

[edit on 25-10-2005 by LeftBehind]

No I dont. You simply dont understand how this works.

When this "inflation" started my gas was under $2.00 a gallon. It spiked to well over $3.30. Now its dropped to $2.50 or so and you think its back to normal and my logic is wrong? Gas will never get much lower than what we see right now. It will certainly never be what it was before it started. They do this every 5-7 years or so, they inflate gas so high until we scream uncle, then they lower is just a bit until we are satisfied, but never back to where it was. Not even close.

I explained the BP thing better on another post, ill quote myself:

This is a comp percentage increase in profit, not affected by sales volume, or overall dollars. This number pertains only to increased profit from selling the same volume of gas.

Most companies shoot for a 7 or so percent comp gain per year, 3+ is acceptable. With gouging being closely monitored in our current oil situation, BP should be posting a relitively flat percentage gain (i.e they shouldnt be profitting from the inflated prices), to post a 34% gain in profit can only mean they are profiting from the inflated gas prices. If you understand how they are measuring to get that 34%, there is simply no way to earn that increase without it coming from the inflation.

For those who dont know what "comp" means, it means comparable sales. They are only measuring sales volume vs the same last year, new business or income outlets with less than a years sales history is ignored (until it has comparable sales). This is important so you understand new business and expansion is EXCLUDED from this number. So that 34% gain is a gain over basically the same volume as last year. Meaning that BP made 34% MORE this year for the same amount of gas we bought last year. Get it?

Our gas goes up a $1 a gallon due to "supply and demand", but the oil companies post a 1/3 gain in profits? Come again?

The basic principles of supply and demand mean nothing in regards to the oil industry, although they use it as an excuse, but now we know the truth.

What does this mean? It means that the gas company's can charge whatever they want regardless of supply and demand. Because we depend on gas as much as we do, we have no choice and BP is just one example of the industry controlling what we spend.

Hybrids will never be as economical as gas powered cars. They are only cleaner, not cheaper.



[edit on 26-10-2005 by skippytjc]

Hey, what do you know, ConocoPhillips reporting a 80%+ increase in PROFITS. Funny how that works.

news.yahoo.com...


You guys will learn. You will see the light soon. The more hybrids we buy and the less gas we use, the more it will cost. Supply and demand be damned!

Some of the older Civics and small cars were allready getting 40+ miles per gallon.

Troy