diesel car podcast

I created a podcast to discuss the potential of diesel cars in the future of the U.S. transportation mix. Rising fuel costs are leading people to reconsider their choices in vehicles, and I want to know if people would consider diesels. This is important because diesel cars will be coming back to the U.S. market after finally meeting our emission requirements.

I already know what I think about diesel cars (I mean, I drive one), so I created a survey to find out what others think about them. Do you think they're dirty? Clean? Would you buy one? Etc...

What I found out was that the perception of diesels being dirty and slow is still strong. People tend to think of big trucks or old Mercedes Turbo Diesels from the 80's spewing out soot everywhere. This influenced whether people would choose a diesel car, even knowing that it got better fuel economy. But when asked again when a diesel was as clean as a gasoline car, over 83% said they would reconsider the diesel.

This is important because it reinforces another result from the survey, that is: fuel economy and environmental impact are two of the most important aspects of a car. This suggests that diesels might be a promising alternative...but there's a problem. The price of diesel fuel has been significantly higher than gasoline in recent months, so any potential financial savings might be negated by the higher fuel costs.

To determine the savings associated with price increases, I created a basic cost analysis using a diesel fuel cost of $4.19/gal and $3.49/gal for gas. At the current diesel price, gasoline would have to drop to under $2.50/gal for diesel to be uneconomical. Alternatively, at current gas prices, diesel would have to jump to $5.85/gal. It's safe to say for now that gasoline won't drop that low (at least not accompanied by a decrease in diesel as well), or the increase in gasoline costs.

Diesels meet two critical demands for consumers, that is they have potentially lower fuel costs and do this while being as clean as a gasoline car. They also offer great opportunities for biofuels use (non food competing feedstocks, of course) since they require little to no modification. As fuel prices continue to increase and emission standards become stricter, I believe diesels will play a significant role in America.

Look for the podcast on iTunes next week! If you haven't taken the survey, it's still up. Take it here!

where does all the money in energy investments go?

Great breakdown of Energy Information Administration data regarding where federal tax incentives and subsidies go with respect to energy investments. See here. Apparently the Federal Government is spending double the amount on energy subsidies than we did over a decade ago. This shouldn't be surprising since the price of energy is increasing and affecting every facet of our lives.

Interesting to note is the breakdown in renewable and alternative fuels. Tax breaks have shifted more towards renewable sources of energy. The government gave about $4 B in tax breaks for renewable energy producers; unfortunately $3 B of this went to ethanol refiners and blenders. Oops.

Of note is that wind and solar are getting a ton of money, which is good. Even with all the spending on renewable sources, coal still receives the lion's share of federal funding. While funding for coal has dropped, the actual amount is still very large.

It looks like throwing some money at our energy problems has done some good, as the Senate voted to extend the Production Tax Credits for solar installations (both residential and commercial), wind, and biomass continuing to make these options attractive.

I'd be interested to see a breakdown of investment by company, ie: is BP really throwing money at alternatives. Are they really Beyond Petroleum? Ecomagination from GE? It would be informative to see the numbers.

As Jay-Z put it:

We can talk, but money talks so talk mo' bucks

¹ Izzo off of The Blueprint.

rising inflation in oil rich nations

With oil prices hovering around the $100 mark one assumes that the oil bearing nations are rolling in the dough and not worrying about such things as inflation. To the contrary, even with huge profits from oil, many Middle Eastern nations are facing rising inflation and poverty. See here.

The NY Times article mainly focuses on Jordan, where inflation has risen due to a weakened American dollar but also because of the lifting of government subsidies. It almost seems absurd that oil producing nations have trouble providing fuel to their own citizens, but the reality is that as these subsidies are lifted, the prices increase dramatically. From the Times:

…in Jordan, the cost of maintaining fuel subsidies amid the surge in prices forced the government to remove almost all the subsidies this month, sending the price of some fuels up 76 percent overnight. In a devastating domino effect, the cost of basic foods like eggs, potatoes and cucumbers doubled or more.

We’ve seen stuff like this before though. Remember the riots in Iran last year? They’re oil rich but have limited refining capabilities, so while they produce ~4.3 billion barrels/day¹, they’re forced to import gasoline. So while they make money selling crude at high prices, they take a hit from importing gasoline.

In the case of rising inflation, some theories have been thrown out there mainly focusing on corruption within the government. I would suspect that these are part of the problem, but you have to look at the increasing costs of energy on the world market. The problem will only get worse as a lot of these countries don't invest in long term infrastructure (minus the U.A.E.) that will benefit them when the rest of the world isn't dependent on their oil. With that said, I don’t see a shortage of silver plated cars or Saudi Palaces.

¹ For 2006, BP Statistical Review 2007