National Commentary

The Peak Oil Crisis: Cars – Redux

I hate to keep coming back to cars, but in the last hundred years they have come to be one of the most significant facets of civilization – yet their future is in doubt.

Here in America they are clearly the fundamental implement of life for most of us. Their manufacture, financing, care and feeding provides employment for millions. They bring us to work, food, entertainment, shopping, education, love, friendship. In short. nearly all of American life is intimately involved in unrestricted access to our cars. This, of course, is why we have some 250 million of them running around our country and some 900 million running around the world.

Cars have been much in the news lately. New ones have not been selling too well in recent months and their manufacturers, at least in the U.S., are bankrupt. For the next few weeks, the companies will live off government handouts until the new President and Congress decide just how to let them die. GM just announced that for the first quarter of 2009 it plans to produce 420,000 vehicles. This is 180,000 fewer vehicles than it planned to produce just two weeks ago and is down 53 percent from the first quarter of 2007. With numbers like these, it is clear that the end is coming soon.

Unless you are employed in the automobile industry or indirectly make a living from the manufacture or sale of motor vehicles, the demise of Detroit-as-we-know-it will probably not make too much difference to our mobility. Our inventory of about 250 million registered passenger vehicles is about 50 million more vehicles than we have licensed drivers. We can obviously stop adding to the fleet, jack up vehicle maintenance a bit, cut annual mileage, and get along for decades without seriously impairing the important aspects of the nation’s mobility.

Shortly, the problem, of course, will not be the cars, but the gasoline and diesel to power them. At the minute, gasoline prices are hovering around an all-time inflation adjusted low; however, this situation is reversing again. OPEC is in the midst of cutting its production by 4.2 million barrels a day (b/d) and U.S. gasoline consumption seems to be inching up again despite increasingly severe economic problems. Within a year or two we could be back over $100 a barrel again and given the likely condition of the economy by then, demand for motor fuel will fall.

The future of the car has become the subject of much debate. It seems likely that most large gas-guzzlers will be out of production within a year or so. Nearly all automobile manufacturers around the world are working on all-electric or plug-in hybrid electric cars that are due to start coming on the market in two or three years. If it were possible to replace the world’s light vehicle fleet quickly with cars that ran at least partially on electricity or got over 100 miles per gallon, then there is a chance that the demand for liquid fuels would fall faster than depletion and the problem could be put off for several decades.

For many observers, the notion of replacing our current fleet of cars with some form of electric ones is absurd. Their argument is that there will simply not be enough resources to make the transition. There will not be enough lithium for the batteries; global warming carbon caps will limit industrial production; and consumers impoverished by the continuing financial meltdown will not be able to afford what are likely to be expensive replacements for our current cars. If as seems likely, much of the world’s capacity to produce automobiles is going to be shut down in the next couple of years, the likelihood of gearing up and replacing hundreds of millions of cars before sizeable declines in the world’s oil production sets in is remote.

Plug-in electric cars of various stripes, of course, will come onto the market and it is likely that millions will be produced and sold in coming decades, but this will only make a minor dent in the U.S. fleet of 250 million passenger vehicles, not to mention the 900 million or more that will be running around the world. So what is likely to happen?

With increasing gasoline prices and falling family incomes, unlimited use of private cars that nearly all in America now enjoy will start moving back up the socio-economic tree. The fortunate, who can afford the new generations of ultra high-mileage plug-in cars, will not have to worry about increasing gasoline prices, shortages or rationing. For the rest, use of the aging fleet of our current car inventory will gradually be reduced. Car pools and public transit are likely to become far more prevalent. Efficient cars will become more desirable as gasoline approaches unaffordable prices.

The very nature of the car will likely evolve to a smaller more utilitarian device to compensate for declining incomes and high gas prices. Consumer perceptions about what constitutes a desirable car that grew up in last 50 years will no longer matter. Various forms of government intervention into the automobile and oil industries – ranging from tax policies to ownership — will have a major influence in the evolution of cars during the coming decades. In Europe, 30 years of high liquid fuel taxes have resulted in a civilization that uses about half the oil per capita that we use in America. There are already calls in the U.S. for much higher, possibly varying, gasoline taxes to stem roller coaster gasoline prices.

This situation cries out for Presidential leadership if the mobility and freedom and economic benefits of the ubiquitous personal car are going to last much longer. With the U.S. automobile industry in a death spiral and with neither the America’s consumer nor the industry leadership basing decisions on much more than wishful thinking, the new President will have to set a new sustainable course and soon. The objective of course would be to start producing a passenger car fleet that will run on a fraction of the current energy and be affordable in the troubled times ahead.