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Why Gas Prices Are Rising: Economics Of Oil

OR EVEN ABOUT SQUEEZING a few more miles out of each precious tankful. But among the special-edition Ferraris, bizarre Cadillac studies, and a whole new crop of gas-guzzling SUVs, not all that many people were talking about cheaper and cleaner ways of getting around. The section of the show dedicated to ‘New Energies’ was a tiny corner on the second floor of Hall 2, behind the stands of the insurance companies. There were exactly two exhibits. The lull is deceiving. Never have so many automakers put as much money and effort into building a greener car. Not entirely without some prodding, mind you. Facing clean-fleet laws in the U.S. and “voluntary” restrictions in Europe, the industry is committing to cut emissions of its gasoline and diesel-powered cars. Gridlocked Italian cities like Rome and Milan may ban conventional cars altogether from their historic centers.

In Tokyo, putting 30,000 natural-gas-powered taxis in the streets has already helped clean up the air. But most of all, carmakers have been whipped into action by California’s Zero Emissions Mandate that requires ten percent of all cars sold in the state to be pollution-free by 2003. Mention green cars and most people think of some battery-powered buggy that the average driver wouldn’t be caught dead in. Electric cars have been around for decades and never caught on. Their problem: batteries aren’t very powerful, so the car’s speed, range, and weight remain strictly limited. The typical result is Ford’s new TH!NK, already on the market in Scandinavia and about to hit a few dozen American dealers as well. The TH! NK is a tiny two-seater with a grubby-looking plastic shell that can go about 50 miles between recharges, at a top speed of 50 mph. A full charge takes eight hours but costs only 50 cents. With a sticker price of $15,000, the car will win a small market niche at best.

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If you’re not willing to put up with the performance of a glorified golf cart, there are always standard cars powered by alternative fuels like propane, ethanol, or liquified natural gas. Also around for decades, these cars have actually begun to catch on. There are 4 million cars in the world today running on a propane/butane mix, including 1.2 million in Italy alone. Many gas stations offer this cleaner fuel as well, so chances are you don’t have to drive very far for a fillup. GM’s U.K.-based Vauxhall unit alone offers about 100 different model variants in a propane/butane version; otherwise, a mechanic can upgrade your car starting at about $1,500. The fuel isn’t taxed as heavily as gasoline, so the extra cost quickly pays for itself. Most drivers aren’t even aware of the slight differences in acceleration rates or engine power. But propane and butane are still petroleum products, so they don’t cut dependence on oil, nor are they anywhere near pollution-free when they burn.

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The latter also applies to the million or so cars that run on liquified natural gas today. They won’t meet California’s tough emissions standard. Nor will the new Honda Insight, rolled out for its European debut at the Paris show. Already on sale in Japan and the U.S., this model is a so-called hybrid: it has both a conventional engine and an electric motor. The motor’s battery gets charged automatically with energy recouped every time the car brakes. When the car accelerates or goes up a hill, the electric motor kicks in; that gives power peaks without extra gas use. The gas is turned off completely when the car coasts or stands still; the motor jumps into power the car’s other functions. The Insight gets around 80 miles per gallon and spews out only a quarter as much CO2 as, say, a Honda Civic. It sells for $18,800 Toyota offers a hybrid 4-seater called the Prius for about $22,000. The Ford Prodigy and GM Precept were still concept cars when they appeared at the Detroit show in January.

Ford also says it will introduce the world’s first hybrid SUV, the Escape HEV (marketed as “Maverick” in Europe) by 2003. These hybrid cars’ tremendous advantage is that they involve no recharging stops and no special fuels. But for California, that’s not enough. That’s why the big money is betting on entirely new technology. Over the last decade, automakers, equipment manufacturers, and even oil companies have plowed billions into developing hydrogen fuel cells. That technology is sexy because hydrogen needs only combine with the oxygen in the air to produce energy and nothing but plain water as a by-product. (Space rockets already get their power this way.) Opel’s HydroGen 1 prototype was the pace car at Sydney’s Olympic marathon. Mercedes-Benz is testing a fuel-cell-powered A-Class and just announced plans to start commercial production in 2004. Ford’s P2000 prototype, a five-passenger mid-size, has a performance similar to that of a modern family sedan. A 280-Volt electric motor accelerates the car from 0 to 60 mph in about 10 seconds; the car’s top speed is 80 mph.

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Ford is delivering test cars to California regulators this year and plans a rollout in 2004 as well. BMW has even produced a test fleet of 15 hydrogen-powered 7-Series. No golf carts, they. But for all the frantic work, the technology is nowhere near ready for a rollout. For one, there is only one public hydrogen filling station in the world today, located in a remote corner of Munich’s airport. In Germany alone, equipping the country’s 12,000 filling stations with hydrogen pumps would cost at least $10 billion. A limitless supply of hydrogen is available in the world’s water; it can be extracted using clean solar energy. But using present technology, that would cost about $32 per gallon of hydrogen. Carmakers say they still face safety problems – hydrogen is a gas and needs to be compressed at tremendous pressure to be transportable. If hydrogen is released accidentally, it needs only mix with air to explode; remember the Hindenburg? DaimlerChrysler, which is cooperating with Ford and Canada’s Ballard Power Systems on fuel cell technologies, dropped its experiments with liquid hydrogen in favor of methanol, which is simpler to transport and releases hydrogen fairly easily.

Trouble is, methanol leaves toxic byproducts that need to be disposed of. BMW uses a different technology, burning hydrogen in a conventional combustion engine. Clean steam comes out of the exhaust pipe. As with any other technology, there’s a fierce battle for the standards that will define our hydrogen fuel-cell future. So while hydrogen may be what Daimler Chrysler CEO Juergen Schrempp calls “the great big alternative,” it’ll be a while yet before this technology is mature enough to replace gasoline-powered cars on a grand scale. The first models will roll out in a few years, but they’ll be expensive and hard to find a filling station for. But industry analysts predict that by 2010, the market will be ready; another ten years and half the cars sold in the world could run on hydrogen. “Everyone is buying a ticket to the lottery because we all know that whoever wins will win big time,” says Paul Everitt, chief economist at the Society of Motor Manufacturers and Traders. If he’s right, greener cars will start to be a much hotter category at the auto show.

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Why Gas Prices Are Rising: Economics Of Oil. (2021, Mar 15). Retrieved August 19, 2022, from