Monthly Archives: March 2012

Evaluating The Cost of Ownership–Electric v Gasoline Cars.

The New York Times posts an essay titled “The Electric Car, Unplugged” by John Broder, 25 March 2012.  The Hockey Schtick summarized the NYT article this way:

An article in tomorrow’s New York Times proclaims, “The state of the electric car is dismal, the victim of hyped expectations, technological flops, high costs and a hostile political climate.” In typical NYT fashion, the article concludes with the implication that the failure of electric cars is the fault of the fossil-fuel industry.

Because The Hockey Schtick said it so well, you don’t need to read the NYT article, but if you choose to, click here.

I imagine it is hard for some people to put themselves in the shoes of the car buyer.  Most of us are confined within certain boundaries such as amount of money that can be spent on an automobile and what we need to be able to do with that auto.  Gas prices enter the picture but they are not the sole consideration.

My belief is that the people most hurt by higher gasoline prices are typically those having to drive a lot of miles.  Now, while that doesn’t seem like a particularly profound insight, it probably is better than assuming that a person driving a lot of miles would be disposed to buying an EV or a hybrid.  EVs are really not for the high mileage drivers.  The hybrid might seem to be competitive but it’s advantage goes away after just a few miles.

The DOE has a program for comparing different makes and models of cars to determine the cost of ownership.  Using the DOE calculator, the Chevy Cruze is a better buy than the Volt. The DOE program considers operating cost plus initial investment, expected depreciation and cost of maintenance at today’s prices.   The Volt does beat the Cruze when calculating only the cost of fuel.  The DOE uses a 2011 purchase price for the Volt at $40,280 and the Cruze at $18,125.  To use the DOE program to make your own comparisons, click here.

Now some examples: Imputing $4 per gallon gasoline, and 30,000 annual miles into the DOE program, the Honda Fit gives better cost of ownership than the Prius until the 11the year of ownership.  Hardly any autos are still around at the 300,000 miles so data after ten years seems to be of little value.  The Fit cost of ownership advantage gets better at less than 30.000 miles per year.

So where does that leave the EVs and the hybrids?   Seems to me that those go to the people that have a lot of money.  Most of them don’t really worry too much about the price of gasoline anyway.  If you only drive 10 miles to work and 10 back each day, the EV will serve you nicely but the cost of ownership would be very high due to the initial cost and very little to do with the price of gasoline.  If you use the DOE program to compare the Fit versus the Leaf at 20 mile daily commute and 7000 annual miles total with gasoline at $4 per gallon, the Fit is much lower cost of ownership than the Leaf according to the DOE program.

Another factor that is not necessarily rational but has been experienced often in the last 30 years is that gasoline price peaks and then retreats.  New lows may exceed previous lows but at the lower price, the Honda Fit, for example reaffirms the decision to avoid the costly EVs and hybrids.

The reason that EVs and hybrids are not setting sales records is not some nefarious BIG OIL plot, but rather it is rational decision making on the part of the buyer.


Fisker’s Quality SWAT Team?

A recall of up to 600+ Fisker Karmas is underway to replace faulty battery packs.  The batteries are manufactured by A123 Systems.  The problem that the Consumer Reports had with the Karma that failed in testing is believed to be the issue with the batteries to be recalled. The Consumer Reports were told by the Karma dealership that the failure was a:  “…fault was found in the battery and inverter cable. Both were replaced as a unit.”

A123 Systems at its Livonia, Michigan facility, said that the problem could result in “battery underperformance and decreased durability.” Fisker  said that the problem was discovered by Fisker’s “Quality SWAT Team.”

One blog has several postings from owners. It seems that besides the power train,  there are some systems problems.   Several quotes:

“I’ve had zero powertrain/drive issues but certainly did have some software glitches involving infotainment/navigation.”

“The car has some rough edges; there have been some software glitches and quirks that lead to erroneous indicator lights and some challenges with the entertainment/nav/climate command center. Many of these have already been addressed by Fisker in software updates, and I’m confident that the remaining issues will likewise ultimately be resolved.”

It seems that the Quality SWAT Team is behind the curve.

According to the Wilmington (De) News Journal:“….. in October, Fisker pushed back its production schedule for the Karma and the Nina, saying it would not begin high-volume production of its second line of hybrids in Delaware until mid- 2013. Production had been expected to get under way this year. “


Fisker’s Nina To Be Shown At NY Auto Show—“Kinda”

Fisker has informed reporters that at the 3 April 2012 New York Auto Show, they will provide a “business update and a glimpse of the future” when they reveal the Nina.   Well sort of, because it is not likely that they will have an actual operating Nina, but rather a design model.   The power train is still in testing and probably won’t be available for installation in the design model being shown.  What is shown will not be a product of the GM plant in Wilmington, Delaware where the Feds have provided loan monies to bring the plant online to make the Nina.

The Nina will be a hybrid,  battery-powered vehicle with a range extending IC engine.  You may already know that Fisker did not pick a US engine manufacturer to supply the back up but rather has chosen a BMW turbocharged four-cylinder engine.

I have heard that the projected price of the Nina is in the range of half that of the other Fisker auto, the Karma.   The Karma is sells for $109,000 last time I heard a price quoted.

This is the Nina “picture” that the reporters received:




Is This A Prelude To Nationalization Of The US Energy Companies?

On the 16th of March President Obama signed a new Executive Order allowing the President complete control over all US Resources. Click to read the detail.  The rising price of gasoline is considered to be one of the major threats to the reelection of Obama.  He is trying to dodge the blame by pretending that he really wanted the XL pipeline with his sham endorsement today in Oklahoma of the lower portion.   His approval is not needed for this section of the pipeline.  His approval is only required for pipelines that cross the US borders.  He has rejected the upper section of the XL pipeline, which brings in the oil from Canada, because his environmentist campaign fund donors oppose it. His sham of caring about our energy security  is trumped by his need for campaign monies.

So if these tricks don’t fool the public, what is his next act? Read my July 13 2011 posting titled OBAMA PLANS TO NATIONALIZE THE ENERGY COMPANIES.  He will say he is just doing this for our own good.  That he must step in and stop these out-of-control corporate robbers.  His action will be cheered by the media.

If Big Oil is driving up the prices how do they do it?  The American Petroleum Institute (API) listed the 20 Largest Oil and Gas Companies based upon their 2009 oil reserves.  It shows that 72% of the world’s oil reserves are owned by nations (not privately owned companies) such as Iran, Saudi Arabia, Venezuela, and Libya.  The biggest US Company to make the list was Exxon-Mobil at #17.   The Exxon-Mobil reserves as a percent of the world reserves are 0.68%.  Think about this situation where the OPEC type state owned companies have reserves 100 times greater than Exxon-Mobil.  Do you really believe that Exxon-Mobil is able to dictates the price of crude to OPEC?   Of course they can’t do that.

h/t to Steve Glaser



$141M Solar Plant Has 5 Full Time Employees.This is a Success?

The Nevada Copper Mountain Solar 1 plant is being visited today, 21 March by President Obama where he will deliver remarks on his Administration’s focus on diversifying our energy portfolio.   Solar 1 is the US’s largest photovoltaic power plant.  It cost $141 million to build.  According to the Nevada Journal: “Funding included $42 million in federal-government tax credits and $12 million in tax-rebate commitments from the state of Nevada.”  It has 5 full-time employees.  About $10 M of incentives per green job.  Apparently the President considers this a success.

President Obama’s visit to the Solar 1 Facility in Boulder City is the perfect illustration of why the president’s economic policies are such a failure,” said Andy Matthews, president of Nevada Policy Research Institute, (NPRI). “The government has spent over $50 million to ‘create’ five permanent jobs and build a plant producing a product — expensive solar energy — that no one would purchase without a government mandate.

“That’s not a path to a vibrant economy; it’s the road to serfdom. This mindset — of government attempting to pick winners and losers in the economy through subsidies and regulation — is a major reason why the national unemployment rate is at 8.3 percent, Nevada’s unemployment rate is 12.7 percent and the national debt is over $15.5 trillion.”

Kyle Gillis, a reporter for the Nevada Journal, the source of much of this posting, adds: “Solar plants aren’t the only government-funded energy projects in Nevada that haven’t lived up to their proponents’ promises. The Reno Gazette-Journal recently reported that seven local windmills that cost taxpayers $1 million to install have only saved the City of Reno $2,785 in electricity costs over their 18 months of existence”.

The Solar 1 plant is associated with Bolder City, NV but the power generated is being sent to Southern California.  California mandate’s power must be 20% renewable by 2010, 33% renewable by 2020. They did not achieve the 2010 level of 20%.  If the California Utilities supplying the energy do not comply, they risk being fined.  Californians seem to want to drive business from their state with many environmental policies that businesses just can’t afford.  California’s electricity price is 9th highest in the nation only surpassed by Hawaii, and group of Northeastern states such as Connecticut, and New York. By the way, hydroelectric power is not considered renewable under this California mandate.

Obama used his “luddite” and “straw man” speech today. I cannot recall a President in my lifetime that has been so incautious with what he says.   I guess it goes with the territory of being on a constant campaign.  I would think the appropriate name for the President is “fabulist”—and of course I am saying that politely.

I want to leave you with a chart that shows the hill that solar and wind have to climb to reach the heights that the President and his sycophants have set.   As you look at the chart below, think of Matt Ridley’s words: “To the nearest whole number, the percentage of the world’s energy that comes from wind turbines today is: zero.


This chart is from Wikipedia.   The data is 2006 but it things wont have changed much by 2011 in terms of percentages.


What Makes Up The Price Of Gasoline?

Given the interest in the “whys and wherefores” of US gasoline price,  this site welcomes the work done by the Institute For Energy Research (IER).    Their full analysis can be found by clicking here,   but the following is a summary of that analysis:

IER’s analysis provides the following facts about gas prices:

  • 76 percent of the price of gasoline is determined by the price of crude oil.
  • 12 percent of the price of gasoline is determined by federal, state, and local taxes.
  • The federal tax on gasoline accounts for 18.4 cents per gallon, while the volume-weighted average state and local tax is 30.4 cents per gallon.
  • Refining costs account for 6 percent of the price of gasoline.
  • Retail dealer’s costs and profits account for a combined 6 percent of the price of gasoline.
  • Less than 5 percent of gas stations are owned by major oil companies.
  • 60 percent of U.S. oil demand is imported from foreign countries.
  • The world consumed 87.9 million barrels of crude and liquid fuels every day in 2011, the highest consumption rate in history.
  • China is now the world’s second-largest consumer of oil behind the United States.  In 2011, Chinese crude imports were up 8.2 percent over 2010 levels.
  • The U.S. produced an average of 5.67 million barrels of crude oil every day in 2011.
  • Production in the Gulf of Mexico is expected to fall by 90,000 barrels per day due to production declines in existing fields, permitting delays, and the Obama moratorium.
  • Crude oil production in Alaska is projected to fall by 20,000 barrels per day both in 2012 and 2013.
  • When President George W. Bush lifted the executive moratorium on offshore drilling, there was an immediate price decrease in the cost of oil.
  • About 25 percent of U.S. supply of oil comes from OPEC countries, which have agreed to a production ceiling of 30 million barrels per day including Iraq’s production and some overproduction by member countries.

U.S. monetary policy — particularly increases in the money supply through quantitative easing — have coincided with a surge in oil prices.  Recent signals from the Federal Reserve that interest rates would remain at near-zero through 2014 have created a ripe environment for hedge funds that bet on commodity plays.

Obama Administration Is Not Helping The Gasoline User

The Obama administration current 5-year offshore drilling proposal will further block access to drilling on Federal lands.  Lets look available and blocked offshore drilling sites under Bush and under Obama.



Maps and history of the Bush and Obama Administrations regarding offshore oil and gas can be read in more detail here.

Raising Onshore Oil Production Costs

In addition to restrictions, Bureau of Land Management Director Bob Abbey said last week at a Senate Appropriations Committee on Interior hearing that federal regulations applied to oil and gas development simply make it more expensive than producing on state or private land according to a posting on Institute for Energy Research website. Then he remarked that the Administration is currently considering raising onshore production royalty rates from 12.5% to the 18.75% that  is charged for offshore oil; in fact, he said that the Department of Interior’s upcoming budget depends on an assumed 50 percent increase in royalty rates.

More blocking of access and higher rates.  How is this helping the US consumer?

Pres. Obama Says US Only Has 2% Of World Oil. Can That Be Right?

Obama said:  “With only 2% of the world’s reserves, we can’t just drill our way to lower gas prices.  Not when we consume 20% of the world’s oil.”  Addressing the 2% part of his statement, if he meant we have only 2% of the “proven reserves” he is correct. But he uses this figure hoping that you will come to an incorrect conclusion. The US is, by every analysis one of the most energy rich nations in the world.   Others, including the Congressional Research Service, say that the US is the most energy rich nation in the world

The second part –consuming 20% of the world’s oil– is a non sequitur, meaning it does not follow logically from the previous part of his statement.  We will talk about that later.

The basis for the President’s statement came from the DOE’s Energy Information Administration.  The US’s “proven” reserves of 20.6 billion barrels of oil are equivalent to 2% of the worlds proven reserves.

DOE’s Energy Information Admin (EIA) Table of US Reserves (Billions of BBL’s) 10/19/2011

Region Proven Inferred Un-discovered Total TechnicallyRecoverable
Onshore 12.7 50.1 51.1 113.9
Offshore 4.3 10.3 42.7 57.4
Alaska 3.5 2.1 42.0 47.6
Total US 20.6 62.5 135.8 218.9

Interpreting the table, Proven reserves are where oil production is underway and the extent of the fields is well known.  Inferred is the volume by which the estimate of total recovery from a known crude reservoir or aggregation of such reservoirs is expected to increase during the time between discovery and permanent abandonment.  Undiscovered is oil that very likely exists, and can be recovered depending in part on technology and/or the price of oil.

This table understates the reserves.  EAI says of the above table: Resources in areas where drilling is officially prohibited are not included.  Estimates of the resources in the Northern Atlantic, Northern and Central Pacific and within a 50-mile buffer off the Mid and Southern Atlantic OCS are excluded from the technically recoverable volumes.  A case in point is that the reserves in ANWR which according to the USGS may contain 12 billion barrels is not included because the Feds have taken it off the table.   Most of our costal waters are off-limits as well.

This table also excludes the shale oil in the Green River Formation in Colorado, Utah and Wyoming. The Feds control roughly ¾ of the public lands on which fossil fuel resources exist. Wiki says that: “The Green River Formation contains the largest oil shale deposits in the world. The 213 billion tons of oil shale contain an estimated 2.38 × 10¹¹ m³ (1.5 trillion US barrels) of shale oil.

When the proven reserves are stated,  how should you interpret the number?  Here is an example from The Institute for Energy Research:

Proved Oil Reserves Are Not Static

Let’s take a look at history. In 1944, U.S. proven oil reserves were 20 billion barrels — about the same as they are today. Yet, between 1945 and 2010, the United States produced 167 billion barrels of oil. In other words, the United States produced over 8 times more oil than the amount of proven oil reserves it had in 1944.  How can that be? The answer is that proven oil reserves are not stagnant because people keep looking for oil. Proven oil reserves keep changing, are officially recorded every year, tallied country by country, and published in the Oil and Gas Journal, among other publications. And due to U.S. entrepreneurship and ingenuity, more reserves are found and proven each year.

What Does More Recent Data Look Like?

So, is this an historic anomaly? No. Let’s look at more recent data. In 1980, according to the Energy Information Administration, the United States had 31.3 billion barrels of proven oil reserves. However, between 1980 and 2010, the United States produced 77.8 billion barrels of oil and still had 20.7 billion barrels of oil reserves left. In other words, between 1980 and 2010, the United States produced 2.5 times the amount of oil as it has proven oil reserves in 1980.

The preceding illustrates that comparing the proven reserves to oil consumption is at least faulty and perhaps intended to misinform.

The President said that we can’t drill our way to lower prices when we  are the largest consumer.   Now I know that OPEC is the major force in setting the price of crude.   Even so, they are not immune to the laws of supply and demand.  They know that  a substantial excess of supply over demand will cause them to either curtail production within the Cartel  to rebalance supply and demand or the price will drop.  They also know that if they see widespread drilling being undertaken,  lowering the price of crude can cause some marginal production capacity to shutdown.

Every country that has shale oil, will be out there trying to achieve some piece of national security brought about by having their own oil.  So the over supply is likely to happen.  Ask the natural gas suppliers how well their prices have held up in recent years now that the shale natural gas is becoming oversupplied.   It will happen to OPEC too.  And the sooner the better.


Fisker Has A New Problem

The Securities and Exchange Commissions (SEC) issued Wells Notices to the brokers (Advanced Equities, Inc) who raised most of the private financing for taxpayer-backed Fisker Automotive in connection with a private offering in 2009.  A Wells Notices tells the recipients that charges may be brought against them. According to,  “Receiving a Wells Notice is hardly a positive event, as it signifies that you are the subject of an investigation and that enforcement proceedings are going to be commenced against you”.

There is speculation that this action by the SEC followed the filing of a lawsuit against Fisker and Advanced Equities by investor, Daniel Wray, for their alleged failure to perform fiduciary duties and for fraud, according to a posting by the National Legal and Policy Center.   This may be why the Energy Department (DOE) is holding up further distribution of a loan set aside for Fisker.  As noted in previous postings DOE said Fisker had not met the required “milestones”.

The National Legal and Policy Center posting, written by Paul Chesser, does some editorializing that is pretty much on the mark.

“It seems every week taxpayers learn something new about the clean energy “bets” the Obama administration has demanded they finance – especially Fisker. So far, before the loan was halted, $193 million in public money poured into the maker of an EV that only rich people can afford, who also get a $7,500 tax credit (plus whatever California is handing out lately) per vehicle purchase to boot. Beyond that the taxpayer support for Fisker enhanced the stock of its political allies like Kleiner Perkins (where Gore is a senior partner), and also helped pay for connected lobbyists to get the loan, while crony lawyers got paid to work inside DOE to see the loan to completion.

And now we discover The Chicago Way may have been behind Fisker’s private fundraising, and the SEC plans to find out more. This dog has a lot of fleas.

Last week,  the President announced that he wants  to up the rebate for the purchase of a hybrid or an EV. Currently the buyer can to receive up to a $7500 tax credit.  Obama  now wants to give the buyer a $10,000 check at the time of purchase.


Fisker Karma Dies During Consumer Report Prep For Tests

Consumer Reports was doing speedometer calibration on the Fisker Karma before undertaking the road testing when the car quit operating during  . The Dealer was called and hauled it away.  Consumer Reports said: “We buy about 80 cars a year and this is the first time in memory that we have had a car that is undriveable before it has finished our check-in process”.

Fisker says the vehicle is operating at the Dealership

Consumer Reports said: “We encountered other problems with a Karma press car that visited the track for a few hours, and we have heard of problems at press events. In addition, we see that some owners are experiencing a variety of issues, as evidenced by forums such as

When we get the car back, we’ll film a First Drive video with our more traditional initial impressions. But so far, Fisker ownership is proving to be a bumpy ride”.

To see a more detailed account of this situation click here.