MB’s post on the rising price of gasoline made me wonder about the economics of improving fuel efficiency. A little bit of Googling turned up this Christian Science Monitor story.
According to the story, current technology could substantially increase fuel efficiency:
The average car on America's roads could be 30 percent more fuel efficient using today's technology. Instead of getting 27.5 miles per gallon of gasoline, it could hit 40 m.p.g….The technology itself is hardly exotic. In a 2001 report, the National Academy of Sciences listed several types of technologies available today that could improve fuel economy, including hybrid drivetrains, more efficient engines and transmissions, lightweight materials, and improved aerodynamics.
In January, Lexus debuted its 400H hybrid version of the all-wheel-drive RX330 sport utility vehicle. The 400H will offer 40 more horsepower than the RX330 and a continuously variable transmission.
MB’s post notes that the average price per gallon for gas is now $1.74 and she expects that price to go to $2.00. One article linked by MB predicts $2.50 per gallon this summer.
How many miles would you have to drive to break even after spending $4,000 on fuel efficiency? Lets ignore the time value of money issue and assume that the car could be financed over its useful life at 0% interest. That is an unreasonable assumption but it has the benefit of making my calculations easier.
If I have done the numbers right, if gas is $1.74 per gallon, to break even on an increased purchase price of $4000, you would have to drive about 203,000 miles (at 27.5 m.pg. for 203,000 miles you would consume 7381 gallons; at 40 m.p.g. you would consume 5075 gallon; the difference of 2306 gallons, at $1.74 per gallon is about $4,000).
At a gas price of $2.00 per gallon, the break even point is at 176,000 miles. At $2.50 per gallon, the break even point is 140,000 miles.
Looked at a different way, the price of gas would have to go to about $3.50 per gallon for the break even point to be reached at 100,000 miles.
Given those numbers, I suspect that use of the fuel efficiency technologies will become widespread only when the price of gas skyrockets, the price of the technology drops significantly or when consumer preferences change.
For the sake of expanding the data pool: My mother bought a Honda Insight hybrid vehicle at the end of 2001. It cost $17,000 (new). It has a 9 gallon fuel tank and gets 50 mpg (yes, this is city driving. It gets approximately 53 mpg on the highway). It seats 2, and as a Super Low Emission Vehicle, emissions testing is not required by the state (AZ, in this case). My mother has a ~40 mile (one-way) commute to work, and the car (to my knowledge) has never required repairs aside from the recommended maintenance.
Posted by: Thrackamazog at March 9, 2004 02:27 PMfyi, prices in the Valley of the Sun are already at 1.999 for regular (up from about $1.54 back in mid-December), and are expected to be close to $3 by summer.
You have a good point about the increase in fuel prices being the undoing of Bush's (re?)-election hopes. With everyone's middle class budget being stressed by no real rise in income while heathcare, other insurance costs, and local taxes continue their meteroic rise, I expect any additional hits to the family budget to be as welcome as a boot in the family jewels.
On the other hand, maybe the energy cabal -- realizing that Bush is a cause already lost -- is making maximal hay before their greedy self-serving sun sets.
Posted by: James Emerson at March 9, 2004 04:33 PMWe're already paying $2.15 and more for 87 octane regular in Northern California. I'm starting to hear major grumbling from drivers of big vehicles. Idle murmurings of "leave the beast at home".
The other thing that fuel efficiency does (especially when you combine it with the hybrid technology) is reduce the green house gases. If this is the most serious problem facing mankind (and many very knowledgeable people say it is), then the "payback" is more than just the fueling cost. It's too bad we don't have a way to include the cost to the environment when we use fossil fuels as part of the expense. (The other thing, of course, is the expense of keeping our empire's military garrisons throughout the world to make sure America doesn't lose control of cheap oil.)
Posted by: Mary at March 10, 2004 11:52 PM