Q and A about crude oil and gas prices

Q: Do you think governments are allowing oil fields to decline? What alternatives are there to the government’s action/inaction.

A: How would the government prevent oil fields from declining? The presence of oil is due to geological processes not political will.

Oil fields are not like tanks that can be easily emptied. They are more like sponges. (Picture using a straw to extract all the water from a sponge!) Extracting oil depends on pressure inside the field forcing the oil out. This works well enough at the start, but as pressure decreases, less oil comes out. Sometimes pressure can be maintained by injecting seawater or carbon dioxide. However, you can never extract all the oil from a field. There always comes a point when more effort is put into extracting the oil than is economically justifiable.

Q: Aren't we discovering more oil fields all the time?

A: Yes, but not enough to keep up with what we're using. Worldwide discovery peaked in 1964. Every year after that, we have discovered less than the year before. Right now we discover 1 barrel of oil for every five barrels of oil we use.

Q: What is per capita oil production and what significance does it have?
A: The amount of oil produced per person. Per capita oil production began declining in the late 1970s. If world population had remained constant, we would now have more oil available per person. But because the world population is rapidly increasing, there is less oil available per person than there was in the 1970s.

Q: The U.S. has 200 years of coal left, so why can't we just replace the oil with coal?

A: If coal were to replace oil then it would last closer to 50 years than 200. Also, while coal can be used for some applications that oil is currently used for, oil is the best fuel for transportation. It would be impractical to power cars with coal.

Neighbourhood Electric Vehicle Tax Credit

You might be able to get a tax credit for having a Neighbourhood Electric Vehicle. A golf cart could even qualify.

Cash for Clunkers Results Analysis

So what was the final result of the Cash for Clunkers program? Here is an analysis.

Comparison of Fuel Economy Standards

All of the developed industrial nations of the world have government mandated fuel economy standards. These standards force automakers to produce vehicles with a certain minimum efficiency. In the United States, the relevant legislation is called CAFE or Corporate Average Fuel Economy. Detroit has long grumbled about CAFE and there is a body lobbyists who have tried (and are trying) to weaken the required efficiency. Looking around at the other nations, it is quickly seen that the US has very weak fuel economy standards. The report Comparison of Passenger Vehicle Fuel Economy and GHG Emission Standards Around the World in fact shows that the US has the weakest requirements of all. The chart above, taken from the report, shows that European, Japanese and Chinese vehicles are required to be considerably more fuel efficient than US cars.

This has permitted Detroit to fill the garages of the nation with gas guzzlers. This was not a large problem in the past era of cheap gasoline. But it has not prepared us at all for the dawning future of permanently high gasoline prices.

Dutch Big Brother Saving on Gas

The Dutch government is planning on installing GPS devices on all cars in their country. The idea is to measure exactly how far each car drives and charge a distance based tax. The idea is that you pay as you go instead of paying a car sales tax or ownership tax. That would have the effect of directly rewarding people for driving fewer miles thus helping to save on gas. The motivation given is environmental. Reducing greenhouse gas emissions is the goal. It is also expected to help out with congestion.

The tax will go into effect in 2012 if the Dutch legislature passes the bill, which has already been written and tabled by the government. The tax will be 7 cents per mile in US terms to start and will increase over time reaching 16 cents per mile in 2018. Certain vehicles, such as taxis and buses will not have to pay.

While the motive is good (reducing emissions can only be good for the climate) and the idea of a tax that you pay as you go is fair, I hope we never see something like this in the US. Giving the government power to monitor exactly where every car is at all times is just too much into the world of Big Brother. It always starts out benign. "We will only use this data to calculate the mileage tax." But then after a decade or so it will be routinely used by law enforcement agencies "in the public good." And a decade after that, when the government has decided that the public good includes (for example) suppressing certain social movements the data will be used to track down, break up and arrest the people in them. Never forget that the US government is the very same government that invented the term "extraordinary rendition". Do you want a government that arranges for the kidnapping and torture of its own citizens to know exactly where every car is at all times? I know I don't.

Take this as a warning. If we the people can't control our own gas use and we start seeing extremely high gas prices and resulting social unrest, the government could use that to impose a copy of the Dutch GPS monitoring system "to encourage lower fuel consumption". One more reason to save on gas.

Diesel Energy Tax Credit

Under the right circumstances, the IRS can help you save on gas. The Feds have been offering tax incentives to increase fuel economy. One of the incentive programs is the Advanced Lean Burn Technology Vehicles credit. Here you will find a list of qualifying vehicles. So far they are all diesels from model year 2009. So if you have been considering buying a diesel car this could be you chance to do so and get a tax credit at the same time.

The IRS will only give out the money if you are the original buyer of the vehicle, so no buying used. Also the vehicle must be for your personal use and not for resale. The amount of the credit depends on the model you choose. Also the credit amount decreases as the automaker sells more and more of the vehicle. It drops to zero after the sale of 60,000 vehicles. So if you want a larger tax credit, it helps to buy sooner rather than later.

Why the "Lean Burn" in the tax credit title? It means that the engine operates with more air in the cylinder than is necessary to burn all the gas. There is extra air. This allows for higher compression ratios and lower airflow friction losses (or pumping loss) but produces NO_x pollutants. However, modern catalytic converter systems are capable of treating these. Perhaps in the next post we will talk about lean burn technology for saving on gas.

How to Measure Electric Car Energy Consumption

As the world begins a move to electric vehicles, we are working out how to quote their fuel economy. Remember when GM announced their new electric Chevy Volt was going to get 230 MPG? What they did was consider a trip of a certain length (set by the EPA fuel economy driving cycle test) and only count the gas used. Because the first part of the trip could use electricity from the battery, the first miles were "free" from the point of view of the gas tank. Of course that is very misleading, because the battery is still providing energy.

It looks like the EPA is going to regulate how automakers must report electric car fuel efficiency. I see that we are going to need it ... the automakers have already shown they are not responsible enough to manage this on their own. They have let the marketing department take the driver's seat and publish information that is not useful to consumers.

It seems that the EPA is still thinking about the best way to present electric car fuel economy data. One suggestion is to report two numbers: one giving the gas (normal internal combustion engine) fuel economy, and the other the energy use of the electric engine. At the root, I think this shows us that we should move away from thinking about gallons and towards thinking about Joules, the physical unit for raw energy. The most useful number would be energy used per distance traveled. In modern international scientific units this probably would be expressed in Joules per meter. It could be given as millions of Joules per 100 miles or something else a little more familiar to the American public.

At the end of the day what is being spent to move the vehicle is energy. In most circumstances the distance we want to go is the fixed given information. The natural measure combining these two is energy per distance traveled. Simple and it works for all types of vehicles: electric, hydrogen fuel cell or regular gasoline.

Gas Guzzler Tax

Cars in the US that do not get at least 22.5 miles per gallon have to pay a Gas Guzzler Tax. This tax is the Fed's way of incentivizing the automakers to improve fuel economy. The tax was established in the Energy Tax Act in 1978. It only effects cars. SUVs, pickup trucks and minivans are exempt. You do not have to pay this tax. The automaker (or importer, in the case of foreign vehicles) normally pays the IRS directly. The fuel economy sticker on the window of new vehicles will show the amount of the tax, in case you are interested. The image included with this post demonstrates the Gas Guzzler Tax in the sticker. It is the number located in the lower left.