$300 Oil & The Alternative Fuel Vehicle

By Dian L. Chu on August 31, 2009

It is amazing sometimes just by browsing the news you can piece together a totally different picture from the original news. Here are three of them I came across in the past few days.
Pickens: Oil Will Reach $300 a Barrel
“Oil legend T. Boone Pickens, now CEO of BP Capital, says oil prices will continue to rise… So, 10 years from now, the price of oil could well be $300.”
DOE to Spend $300 Million on Alternative Vehicles
“The U.S. Department of Energy..will allocate nearly $300 million from the American Recovery and Reinvestment Act to help fund the development of alternative fuel and energy efficient vehicles displacing approximately 38 million gallons of petroleum per year.”
**Note: To put it in perspective, based on the US EIA data, dometic gasoline consumption is estimated at 378 million gallons PER DAY.
U.S. Automakers’ Small-Car Output May Outstrip Demand
“General Motors Co. (GRM), Ford Motor Co. (F) and Chrysler Group LLC (DCX) plan a 63% boost in small-car production capacity by 2015 that may outstrip demand since consumers may not be ready for that many small autos. The small-car push is being driven in part by the U.S. requirement that auto fuel efficiency rise about 40% to an average of 35 miles per gallon by 2016. Automakers also are tapping sources such as the Energy Department’s $25 billion loan program to develop more fuel- efficient vehicles.”

Related Thoughts
Unlike other commodities, oil has a long, complex and global chain of supply going from offshore platforms, pipelines, tankers, ports all the way into storage, refineries and ultimately, gas stations. This is one of the reasons that oil is probably the most volatile commodity attracting the most speculators.Demand, mostly from exploding emerging economies, had outstripped supplies over the past 5 years. Speculators further exacerbated the market fundamentals and drove oil prices to historical highs last year.

Now, high oil/gasoline prices, the economic crisis and concerns over global warming have been three of the major factors leading to an increasing interest in alternative fuels and vehicles. The battery powered electric vehicle market is slowly developing while the hybrid electric vehicle market, including plug-in hybrid electric vehicles (PHEV), and electrical vehicles (EV) could move ahead more rapidly. Fuel cell vehicles, however, are in the prototype state and most likely will be late to fully participate in the big new green transportation game.
Meanwhile, natural gas vehicles (NGVs) and hydrogen as alternative fuels for vehicles have their own infrastructure and storage challenges.