With oil prices sinking, America's enduring love affair with big, thirsty cars is unlikely to end any time soon.
Carlos Ghosn, the "cost killing" CEO of Nissan and Renault, says that 10 per cent of automobiles sold by 2020 will be fully electrically powered. At the North American International Auto Show in Detroit, a virtual who's who of automakers - from China's BYD to nearly bankrupt Chrysler - showed off a spate of battery-fuelled vehicles, all designed to wean North America off its addiction to petrol. And Better Place, the California-based venture-backed start-up whose stated goal is to completely replace the North American fossil-fuel infrastructure with electric car recharging stations and battery-swap depots, have set up shop in one of North America's car manufacturing heartlands of Ontario, Canada, as well as Oregon, California and Israel.
All this talk of conservation is enough to make even the most stalwart oil exploration engineer a little nervous. What if American consumers are really serious this time about reducing their dependence on foreign oil? And, if the US is ready to trade in its gas guzzlers for efficient electric cars and reduce its fossil-fuel addiction, what will it mean to nations whose GDP depends on healthy oil exports?
Indeed, America's struggle to reduce its carbon footprint should trouble any oil producer. The United States is, after all, the world's greatest consumption machine. Before this latest economic crisis, the US accounted for approximately 21 per cent of all the world's oil imports. And, unlike other developed nations, the vast preponderance - 45 per cent - of all the oil the US consumes is used for transportation (EU nations, for instance, use more for heating and industrial uses). More importantly, though they represent just five per cent of the global population, Americans consume almost 45 per cent of the world's petrol. Americans own more cars per capita than any other nation and consume, by far, more petrol per person than any other nation (the only other country in the running is America's neighbour to the north, Canada). The raw numbers would seem to suggest that any serious North American conversion to environmentalism would have serious long-term repercussions in the world's oil fields.
Of course, like most things "green," the reality isn't quite so rosy (or, bleak, if you make your money selling oil). First off, America is extremely unlikely to embrace the electric car with any fervour. Americans are, after all, rightfully labelled the most spoilt people on the planet, literally addicted to motoring in comfort, convenience and with complete freedom. Purely battery-powered vehicles offer none of the above.
Their range, for instance, is still extremely limited. Two hundred and forty kilometres per charge would seem to be about the maximum range for the near future. And all those figures are based on ideal circumstances - slow, steady cruising and minimal use of accessories. More daunting, however, remains the problem of replenishing electrons. Once drained, those huge batteries take up to eight hours to recharge, unless you have a US$10,000 (Dh36,750) charging station. Even then, it requires about a half an hour for a 50 per cent charge. Neither is as convenient nor as quick as filling your petrol tank with premium unleaded.
Ah, but the solution, says Better Place, is a system that swaps the car's batteries for a freshly-charged ones. Indeed, Shai Agassi, the company's founder and CEO, paints an enticing picture of completely convenient emissions-free motoring that is but a few brave governmental edicts away. Besides a chain of battery-swapping depots, Agassi sees a vast array of charging stations arranged anywhere from car parks to municipal facilities that would supplement the electrons cars would ingest at home.
The conversion to this oil-free society, however, is fraught with obstacles. For any such battery-swapping scheme to have a glimmer of success, for instance, there will have to be conformity in design. The alternative - inventorying (and charging) a different battery for every make of car on the road - is simply untenable. The problem, of course, is that every car maker is pursuing different battery technology and each is notoriously intransigent about sharing proprietary research. As well, Honda recently professed scepticism about General Motors' ability to develop its lithium-ion batteries in time for the Chevrolet Volt's proposed 2010 introduction. The possibility of standardised technology is remote and, without it, the proliferation of battery-swapping stations doomed.
Agassi counters with the initial success of the Better Place's programme in Israel, where the company's first recharging station was opened in December in Pi Glilot. Of course, one can drive across Israel in about an hour and a half, and there are only 1.8 million motor vehicles in the whole country. North America has hundreds of millions of cars driving across vast, empty heartlands covered by almost two million miles of road.
Considering that the typical electric car's range is under a half that of the typical petrol-fuelled car, for Better Places' infrastructure to be truly universal, it would require even more battery-swapping depots than the 117,000 petrol stations in the US. Replicating that infrastructure would take years and cost hundreds of billions of dollars, money and time that might be better spent on fuel cell cars and a hydrogen refuelling network. Factor in further inconveniences like reduced range in cold weather (heaters and rear window defrosters drain a significant amount of electricity) and there are serious impediments to Mr Agassi's vision of oil-free motoring, as well as Mr Ghosn's contention that 1.6 million Americans will buy an electric car annually by the end of the next decade.
Indeed, as an early indicator of the American public's unwillingness to adopt more environmentally friendly motoring, consider the sales of the much-hyped hybrid vehicle. Though they garner widespread headlines, hybrids account for just two per cent of vehicle sales after ten years on the market. And, as hybrids - like the Toyota Prius and the Honda Insight - suffer no compromises other than price, it would seem that any scheme to get Americans to replace their petrol-powered vehicles with electric cars would have a very faint hope.
Nor does the American media's love of hybrids seem a long-term affair. The recent dramatic drop in petrol prices has seen their sales plummet (in December, Prius sales were down by 45 per cent, 36 per cent more than the overall car market was down), ending any argument that Americans have become environmentally conscious. Indeed, in recent months, as the price of petrol has fallen below $2.00 (Dh7.50) a gallon, the market share for pickups and large SUVs has once again surged past 50 per cent, indicating that America's so-called love of the hybrid is not, in fact, influenced by "green" but by greenbacks.
Besides, the hybrid's fuel economy savings are grossly overrated. Based on its Environmental Protection Agency (EPA) rated fuel economy and the $1.66 (Dh6) a gallon the US government's energy guide estimates petrol will cost in 2009, a Toyota Camry hybrid will save its owner only $264 (Dh970) compared with the base model over the typical American's 24,000-km annual commute. As the hybrid version of the venerable Camry costs $4,500 (Dh1,225) more than the comparably equipped LE trim, that's a 17-year payback. And even those modest savings may be illusory, as hybrids driven by typical consumers have trouble replicating their EPA fuel economy rating.
Perhaps more important from an oil marketer's point of view, America's dominance of petrol consumption can only tail off. The untold story of the recent economic crisis is that Americans have bought so many cars in recent years that the market is saturated. And with one registered car for virtually every licensed driver, relatively few of the 16 million cars they (used to) buy every year represents an additional car on the road.
China and India, on the other hand, have far less than 50 registered passenger cars per 1,000 people. And even though China's explosive rate of growth has slackened and car sales have slowed, the majority of the 9.38 million cars sold in the world's most populous nation in 2008 represents a new driver consuming even more petrol. Factor in new, more financially-accessible vehicles like Tata's Nano and there's no reason to believe that sales will diminish for anything other than the short term. Indeed, while worldwide light duty vehicle sales forecasts for the near future are set to wind down another six per cent, there's no reason to believe that forecasts made before the current economic crisis predicting light vehicle sales of 74 million units by 2025 will change. Interestingly, that would represent about a nine million unit increase over IHS Global Insight's predicted total vehicle sales for 2009, about the same number of vehicles that Mr. Ghosn predicts for electric cars. Even in the most optimistic light, the adoption of electrically powered cars is unlikely to diminish the number of conventionally fuelled cars on the road.
Laudable as it may be, America's desire to pollute less and reduce fuel consumption is unlikely to reduce its dependence on imported oil. The only thing, it seems, that moderates Americans' consumption of petrol are tough economic times. And when these financial doldrums end, the ensuring prosperity will surely see greater demand for petrol and, with it, a return to higher crude oil prices.