Midsize Hybrid Cars

Midsize Hybrid Cars on the Market

By Andi Bintang

There are 4 competing midsize hybrid electric vehicles on the market: Honda Accord Hybrid, Toyota Camry, Lexus GS 450h, and the Nissan Altima Hybrid.

Honda Accord Hybrid. Even before the release of the Hybrid, the Honda Accord was the second best selling car in the country. But the Accord Hybrid did not live up to the title "best-seller". After soaring success in 2005, car sales plummeted when its rival the Toyota Camry Hybrid hit the market. In 2007, the hybrid version of the Accord was discontinued.

However, buying an Accord Hybrid will give you a good 30mpg/37mpg fuel rating. Accord is run by a powerful 3.0 L engine that produces 240-hp and 232 lb.-ft at 5000 RPM of torque. The electric motor is 16-hp with 100 lb.-ft at 840 rpm of torque. The sticker price of the Honda Accord Hybrid is approx. $30,000. You cannot buy a brand new Accord Hybrid from Honda but that's not the only place where you can buy a car, right?

Toyota Camry Hybrid. Camry is known for its comfort, safety, and dependability. And surely, these characteristics are carried out with the Toyota Camry Hybrid. Powered by 2.4-liter four-cylinder gasoline engine and 105-kW electric motor and 244-volt battery pack, the Camry can deliver a total of 192 horsepower. It promises to run 33mpg in the city and 34mpg on the highway. The Camry's sticker price is at approx. $25,200. (The second generation Toyota Prius is classified as a midsize car.)

Lexus GS 450h. If you think that a hybrid should have a small engine, then, the Lexus GS 450h will change the way to think. This hybrid has 24-valve, 3.5-liter gasoline engine that produces 297-hp. That's just the half of it. The electric motor-generator produces 197 hp giving the driver of this car the power and sheer adrenaline rush. But don't be fooled, the Lexus GS 450h may perform like a sports car but it definitely has the luxury features you want in a midsize car. And why not? At the price of $55,000, you surely have to set high expectations.

Nissan Altima Hybrid. If you don't like the Toyota Camry and can't afford a Lexus GS 450h, then you can go for the Nissan Altima Hybrid. It is powered by a large 2.5-liter engine that produces 198 horsepower and 162 lb.-ft at 2800 RPM of torque. The Altima is only available in selected states including Vermont, Rhode Island, New York, New Jersey, Massachusetts, Maine, Connecticut, and California. Fuel economy is impressive considering the size of the engine. It is rated at 35mpg/33mpg and priced at approx. $25,100.

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Speculation and Physical Oil Prices

The story above the fold on the front page of this morning's Wall St. Journal suggested that the Commodity Futures Trading Commission (CFTC) is about to issue a report tying last year's oil price spike to speculation by non-industry participants in the oil futures, options and swaps markets. This would reverse the agency's previous finding that speculation had not played an important role in influencing the record-breaking prices we experienced in 2008. Although I plan to assess the report with an open mind, the dissemination of such contradictory conclusions--separated mainly by the handoff from one administration to another--hints that a jaundiced eye might be in order regarding both. More important than any politics that might be involved, however, is the deeper question of whether the futures-market speculation the CFTC has apparently uncovered actually harmed the real economy by spreading its contagion to the markets for physical oil with which consumers interact. The answer to that question has serious implications not just for the justification of stricter regulation of energy markets, but for overarching policies and trends affecting the production and consumption of real energy.

As I noted in a posting last summer, the growth of the futures exchanges over the last two decades has fundamentally changed oil trading. Most oil is now bought and sold on price formulas pegged to the futures prices, or to published market reports strongly influenced by them. What traders are agreeing to when they do a deal is not a fixed price, but a differential above or below a particular futures contract during a set period, usually aligned with the time when the shipment will be loaded or delivered. So while these differentials fluctuate due to a variety of factors, the price that refiners pay for crude oil remains directly tied to the futures price. That means that anything that drives up the futures market, whether a disruption in supply, higher demand, or speculation by a new class of commodity investors, has a direct impact on what we all pay for the products that refineries make.

When I discussed this issue last summer, I was careful to note that if the prices for physical grades of oil moved in lock step with the futures price, that might not by itself absolve speculators from driving up those prices, along with the futures. Other factors could produce a similar result, even if the futures were mainly driven by speculation. However, when I now look at last year's price relationships for two of the most important crude oil streams in the country, I see evidence that goes beyond a neutral result and undermines the notion that anything other than the fundamentals of supply and demand was driving prices in the run-up to oil's peak of $145 per barrel last July.

The chart below tracks the price difference between two important grades of physical oil and the monthly-average NYMEX futures price for West Texas Intermediate, which is the focus of the CFTC's investigation and the principal grade of oil against which most US oil--and indeed much of the world's--is typically priced. I chose Alaskan North Slope crude and West Texas Sour because both are produced in substantial quantities, are representative of the medium-gravity, medium-sulfur crudes that many US refineries turn into gasoline, and cannot be delivered into the NYMEX WTI contract. While there might conceivably be some degree of speculation in these grades, anyone buying them would be required either to take physical delivery themselves or sell to a refiner or other physical buyer before the oil was delivered. If futures market speculation had been driving the prices of these grades of oil last spring and summer, we'd expect to see their discounts either remain steady or widen, indicating that they were being dragged along by frothy futures. Instead, between March and July 2008 we see these grades strengthening relative to WTI--their discounts shrinking--both sequentially and relative to their average discounts since 2004. In other words, in that period the prices of these grades of physical oil appear to have been stronger than the futures market that was thought to be driving them.



Why is that important? First, the argument for stricter regulation of the commodity markets, beyond the very sensible suggestion to increase the transparency of participants' trading positions, depends on a finding that speculators not only influenced the futures markets in which they participated directly, but also the price of the physical oil purchased by refiners and thus the prices of the petroleum products that consumers, trucking companies, school districts, airlines and others purchased, to the detriment of the economy and our trade deficit. If speculation was driving oil futures but not the price of physical oil, the necessity for clamping down on it aggressively begins to resemble a fever remedy that works by banning thermometers that read above 99 degrees.

Of greater significance, I believe, is the psychological effect on our expectation of oil prices in the future. If we convince ourselves that $145 oil and $4 gasoline were mainly the fault of big, bad speculators, and that regulating them will avert such an outcome in the future, we foster a dangerous illusion that supply and demand will somehow always result in prices more congenial to our preferences and lifestyles. That's arrant nonsense, and you don't have to be an ardent believer in Peak Oil to see how unrealistic expectations of low future oil prices can stimulate demand and stifle expensive oil projects, with their long inherent time-lags. That would eventually lead to precisely the outcome we wish to avoid: much higher oil prices.

Since the summer of 2007 I have been arguing that speculation might have been influencing oil prices around the edges, but that with or without it the narrowing gap between growing demand and straining supply was the main factor behind high prices. The sudden inversion of those forces--the sharp drop in oil demand caused by the recession and the growth of inventory and restoration of adequate spare production capacity--equally and fully explains the price collapse that followed, pummeling exposed speculators and index investors. Whatever the CFTC concludes about last year's price spike, it shouldn't distract us from the necessity of investing in expanding oil production and alternative energy sources, while working hard to improve the efficiency with which we use energy, and particularly oil. Blaming it all on Wall St. would be the quickest way to undermine the gathering momentum for improving our real energy security.

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Buying a Hybrid Car

Main Issues You Should Know Before Buying a Hybrid Car

By Andi Bintang

Price. One of the biggest issues of people who want to buy a hybrid car is the price. Buying a hybrid car can cost you several thousand dollars more than its gasoline-engine counterpart. The cheapest hybrid is around $20,000 while the luxury models are well over $100,000. It is predicted that the cost of hybrid vehicles will go down in the coming years as the production cost will decrease and the supply will increase.

Fuel Economy. A hybrid car is known for fuel economy. In fact, if you drive a hybrid, you can save as much as 60% on fuel. A fuel-efficient hybrid car can run from 35 to 50 miles on a gallon. However, high end hybrid models such as Chevrolet Tahoe Hybrid and those from Lexus that are built for performance still offer relatively good fuel economy.

Vehicle Option. Hybrid car models are very limited today. If you can't live by the available options, you can wait a year or two as many manufacturers have announced the release of newer hybrid cars.

Maintenance Cost. With a more complicated internal structure, the common belief is that hybrid cars are more expensive to maintain. The fact is, maintenance cost for hybrid cars is comparable to conventional vehicles. Many also fear that the battery replacement is very expensive. While the cost of battery replacement is said to be between $2,000 and $5,000, there has yet to be a report of a battery needing to be replaced due to defect or malfunction.

Safety. Hybrid cars are in general, as safe as conventional cars but there is a concern that electric shock can happen. This is a possibility but hybrid cars have been around for 10 years and there are no reports of this incident.

Luxury and Convenience. Since the price of a hybrid car is 25% to 50% higher than its gasoline counterparts, most hybrids are upscale and involve the latest gadgetry and luxury amenities.

Interior Space. Hybrid has almost become synonymous with the Toyota Prius and Honda Insight. As a result the word "hybrid" is perceived as cars with small interior space and the use of electric motors and gasoline engines. While the latter is true, the former is not entirely accurate.

Since the first release of the Prius, the market has seen several hybrid cars with more interior space. The Honda has Civic and Accord (discontinued) have a good interior space. So with Toyota's Camry, Highlander (SUV), and second generation Prius (midsize), Ford Escape hybrid, Mercury Mariner Hybrid, and Chevrolet Tahoe Hybrid among others.

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Cooler Cars in California

I was just perusing the month-old press release for the new regulation from California's Air Resources Board requiring car makers and auto repair shops to reduce the amount of infrared light that windshields and other car glazing allow into a car's interior, beginning in 2012. On the surface this seems like an eminently sensible idea and one sure to appeal to drivers in a warm, sunny state who are tired of climbing into hot cars in the summer and waiting for the A/C to catch up. Living in another warm state, I'd be tempted to order this as an option on my next car, too. The problem is that CARB isn't requiring carmakers to offer low-transmittance glass as an option; they're mandating its use, in two successively stricter stages, and consumers must absorb the higher cost, whether they want to or not. Moreover, when the touted emissions reductions are compared to those costs this looks like a very pricey means of achieving them, compared to many other alternatives. Regulating car-window glazing as a way to reduce emissions epitomizes the pitfalls of applying the command-and-control approach from the regulation of local pollution to climate change.

When I couldn't quickly find enough information to unpack the assumptions behind the emissions numbers in the press release, I reverted to examining its implied cost/benefit by applying some very simple assumptions to the figures in the release itself. At a conservative average fuel price of $3 per gallon, CARB's estimate of annual fuel savings of $16 per car from reduced air-conditioner use implies a fuel saving of 5 1/3 gallons per year, resulting in cumulative avoided greenhouse gas emissions of under 0.6 tons of CO2 over 10 years. Applying the $70 per car estimated cost of the 2012 standard, it appears the cost of achieving these reductions comes in at around $120 per ton. That's more than double the expected cost of directly capturing and sequestering CO2 from power plants and ten times the federal government's expected price of emissions allowances under the Waxman-Markey climate bill in its early years--coincidentally beginning in 2012. Using the same logic, the equivalent emissions reduction cost of the tighter 2016 standard exceeds $300/ton of CO2.

I'm also skeptical about the need to apply such a standard to the entire state, ignoring the enormous geographic diversity it encompasses, unless that was simply intended to increase CARB's leverage with carmakers. I grew up on the Central California coast and didn't feel the need to purchase the A/C option until I moved to L.A. While I doubt many cars are sold in my native state without A/C today, the coastal concentration of California's population, particularly north of the Tehachapis, suggests much lower fuel savings and emissions benefits in important portions of the state. If anything, many car owners in cooler regions of the state will need to use their heaters more to compensate for less natural warming of the vehicle interior. That's not a big drain on conventional cars, but it represents a direct energy cost for EVs and plug-in hybrids.

Now, it seems clear that the new regulation would benefit some consumers directly through reduced fuel costs, though I wonder how many of them would find the agency's expected payout of five to twelve years on the required investment especially compelling, if they weren't already sold on the comfort aspects of this feature. Since CARB isn't constrained by cost/benefit analysis of its rules, car window glazing represents just another piece of the puzzle to an agency that is already under the gun to implement the state's AB32 emissions law--even if the contribution of the new regulation toward cutting the state's 480 million tons per year of net emissions looks relatively trivial. There is no disincentive to pursuing such prescriptive solutions, however incremental or inefficient they might be. As a result, CARB doesn't need to ask the more important question of how that $250 per car (after 2015) might better be spent to reduce more emissions. Anyone preferring national regulation of emissions by the EPA to cap and trade--assuming the excesses and distortions of Waxman-Markey can be reined in by the Senate--should consider this a cautionary tale.

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Hybrids Today

Hybrids Today and Tomorrow

By Andi Bintang

Hybrid vehicles have gone through many changes over the years. Ever since the Toyota Prius came out, bigger and more equipped hybrids were released. The Ford Escape hybrid came out in 2004, which jumpstarted the production of luxury hybrid cars. Apart from Toyota, Honda and Ford other automobile companies such as Mazda, Nissan and recently Lexus and Chevrolet have manufactured their own hybrid creations.

Early hybrid vehicles were limited to manual transmissions and air-conditioning. The best thing that they could do at the time of Toyota Prius was add a multiple CD changer. Nowadays customers have more options with Sports Utility Vehicles and luxury car hybrids. Apart from comfort settings and additional accessories, more formidable propulsion management systems are used.

Hybridization in the present and what lies ahead.

Last year luxury sedans and Sport Utility Vehicles were released. These environment friendly cars were also fitted with all the trappings and perks of a luxury vehicle. Apart from having the latest technology from their manufacturers, such as the Hybrid Synergy System from Toyota, they are also decked out with touch navigational systems, surround sound with DVD and VCD supporting stereo systems, ventilation seats, and multiple CD changers on the dashboard.

Hybrid vehicles released last year have V6 engines such as the Lexus GS 450 and V8 such as the Chevrolet Tahoe. Gear-ratio steering, continuous variable transmission, variable suspension, and regenerative breaking are standard among luxury car hybrids.

Hybrids that will be released in 2008 feature the Cadillac Escalade. It is a two mode hybrid with 6 liter V8 engine with two motors. The Saturn Green Line Vue will also be in the line up that promises to 45% improvement in fuel efficiency. Ford will launch its first hybrid sedan with Mercury Milan Hybrid. Mercedes will also release the hybrid version of their S-class sedan. Porsche also plans to launch its four door coupe called the Panamera, using the same technology as the Cayenne SUV.

If your head is getting dizzy with all the prices of the luxury cars Hyundai will release a hybrid available at around $10,000. This will be the first full hybrid under $20,000. Honda will release a smaller and more affordable hybrid to compete with Toyota who dominates the market.

No matter which hybrid vehicle you will choose, expect more hybrids to come. In time as gas prices soar and the demand for higher emissions regulations are implemented, hybrids will eventually dominate the market.

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Hybrid Plug-In Vehicles

Hybrid Plug-In Vehicles

By Andi Bintang

Vehicles are important tools for transportation. Unfortunately they have harmful effects on the environment, health and wallets of the people. The continuing rise of gas prices and campaigns on global warning make you want to ditch that SUV for a bike. Fortunately other power sources and fuels are being developed to serve as an alternative. Hybrid vehicles are a compromise between using a car and caring for the environment.

There are different types of hybrid vehicles. Each of them differs by what type of power source they are using. Although these cars may not run as fast as a conventional car on the highway, it's convenient for the suburban environment where traffic is normal.

Plug and play

Hybrid vehicles can be charged by using an external source. Although this was one of the earlier developments which made it one step ahead of conventional cars, it's not as practical as it sounds. Due to this plug-in hybrids were created. These vehicles have batteries which can be recharged through a standard wall socket.

Important developments weren't made until 2002. Plug-in hybrids were not sold commercially until 2003. The vehicles power source still operates the same way as a conventional hybrid but modified for the owner to be able to recharge it like an iPod.

These vehicles operate in 4 different modes. Charge depleting mode relies exclusively on electricity until the battery reaches a predetermined level. There is a predetermined level that automatically signals the car to stop running on electric power and switch to charge sustaining mode. The variation of this is the blended mode used by cars that cannot run at high speeds by using electric power alone and uses the diesel engine for help.

In charge sustaining mode it uses the combination of a diesel engine and its battery so that the vehicle will not exceed the predetermined level. This type of mode is used by conventional hybrids. In mixed, all of the modes mentioned are used and the vehicle switches between the four during the trip.

The disadvantage of the hybrid is the battery. Battery packs are expensive and can be large and heavy. Customers without garages will not be ale to recharge their cars because of the absence of an electric wall socket. Although emissions are reduced by the car it will be replaced by the plants that produce electricity. On the positive side pollution will be taken away from cities and the suburbs where it has a harmful effect on the health of the general public.

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Big Algae?

In spare moments during the last week I've been mulling over the implications of ExxonMobil's announcement of a very large investment in research and development on producing biofuels from algae, in collaboration with a leading biotech firm, Synthetic Genomics, Inc. While the reported figure of $600 million wouldn't buy much in the way of actual deployment, it could sure pay for a heck of a lot of R&D. The joint conference call about the announcement emphasized that the companies will be pursuing several possible technological pathways, though all appear to be focused on producing biofuel from algae continuously, rather than in a batch mode more analogous to farming. That would certainly increase the attractiveness for Exxon, which after all operates some of the world's biggest continuous production processes, in the form of its oil & gas fields, refineries, and chemical plants. The timing of this announcement is also interesting, coming just a few weeks after the US House of Representatives passed the first cap & trade bill to make it through either chamber of Congress.

The fundamental question I've been pondering is "why"? Why algae, and why ExxonMobil? For all of algae's enormous potential to produce large quantities of useful fuel, skepticism that this could ever be done economically on a useful scale abounds. And until now, Exxon had made a virtue of avoiding investments in renewable energy, generally seeing them as delivering returns well below those of the large oil & gas projects that have earned Exxon a sterling reputation for capital discipline. The answer to both questions likely resides in a word that appears frequently in the press release, in news coverage of the announcement, and in the press conference: scale. Two aspects of scale are relevant, here. First, in order to contribute meaningfully to our energy and climate problems, an alternative energy technology must be capable of being scaled up rapidly to a level comparable to today's oil, gas and coal industries. Current biofuels, solar power and wind still don't come close to matching the energy delivery of conventional sources. Exxon's website indicates potential liquid yields from algae of 2,000 gallons per acre, presumably in the form of the hydrocarbon-based "biocrude" emphasized repeatedly in the press conference. Even that relatively conservative estimate--my own back-of-the-envelope upper-bound estimate was 6,000 gal./acre--is at least ten times the current US yield of corn ethanol, after adjusting for energy content. Simplistically, if the acreage currently devoted to growing corn for ethanol were devoted to oil-excreting algae, it could replace nearly 60% of our gasoline supply from crude oil, rather than the 5% or so we get from ethanol.

Scale is also crucial for a firm of Exxon's size. A report in today's Wall St. Journal caught my eye. Occidental Petroleum announced its discovery of a 200 million barrel onshore oilfield in the middle of one of the most mature oil provinces in the world, in the San Joaquin Valley of California. I know that territory very well from my oil trading days, and it's an exciting development. However, Exxon is so big that it must find the equivalent of 8 such fields every year, just to stay even with its production. When I listen to the way Exxon describes its algae investment, I get the distinct sense that it views this arrangement as analogous to a very large oil exploration project, one that would be material to the results of the largest oil SuperMajor--and perhaps with similar odds of success. Now, it would be meaningless and of no value to Exxon if algae could produce the equivalent of hundreds of thousands of barrels per day of oil, but at a cost of $1,200/bbl. Exxon appears to be convinced that algae can contribute at a price very close to today's hydrocarbons, and probably without subsidies, knowing the firm's distaste for them. That has implications beyond algae.

In the conference call, Exxon's VP of R&D indicated that the company had assessed all of the advanced biofuels technologies and concluded that algae offered the best hope for producing fuels that would compete economically, with acceptable environmental impacts. That says something very worrying about the near-term prospects for cellulosic ethanol and the other "second-generation" biofuels technologies on which companies such as BP, Shell, and many others have pinned their hopes. Indeed, the US Congress pinned the whole country's hopes on the prompt commercialization of these unproven technologies in the remarkably ambitious national Renewable Fuels Standard they enacted in late 2007. If Exxon has concluded correctly that algae--which faces many serious hurdles of its own--is the best bet, then the entire US alternative fuels strategy could be in trouble.

There is also another way to look at this announcement. Exxon has been under enormous pressure to take a big stake in renewable energy. I vividly recall a Congressional hearing last year when committee chairman Ed Markey (D-Mass.) berated and belittled the Exxon representative for doing so little in this area. More recently, an environmental group took out full page ads targeting Exxon's opposition to cap & trade. I can't find the ad on the internet, but it said something like, "Poor Exxon, all alone in opposing Waxman-Markey." That has to get old, even for Exxon.

Could the algae tie-up with Synthetic Genomics, with its impressive expenditures contingent on achieving a series of unspecified milestones, be intended mainly to get this particular monkey off their backs? I doubt it, even though all the other advanced biofuel technologies being touted by their promoters also involve a substantial element of PR, until they actually produce commercial outcomes. If Exxon merely wanted to create some "green cred", it could have taken the same money and bought a dozen bankrupt corn ethanol plants or a few medium-sized wind farms. If the Exxon/Synthetic Genomics collaboration is about making Exxon greener, then it is certainly doing it the Exxon way, investing in something that, if successful, would neatly and profitably slot into their existing business model--and by the way into the hundreds of existing refineries and hundreds of millions of internal combustion engine vehicles globally. It's probably too early to imagine Big Oil becoming Big Algae, but the possibilities have obvious appeal, apparently even for the world's most successful oil company.

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