Feb 3, 2007 (From the CalCars-News archive)
"Future Energy: How the New Oil Industry Will Change People, Politics, and Portfolios," is a just-published book that places plug-in hybrids right in the middle of its projections for how the energy and transportation industries will change. It provides a fresh and unusual look at subjects that may have become overly familiar.
Bill Paul, its author is described on the jacket as "a noted journalist with over 30 years' experience writing and reporting on energy and the environment and the economic and political impacts of both. he was a Wall Street Journal staff reporter from 1970 to 1990, based in Europe and the United States. Paul was also CNBC's special energy correspondent."
Here are excerpts from the book announcement:
A new book due out at the end of January describes how an energy technology revolution the equal of the information revolution of the 1990s is about to transform the global energy industry and can free the United States from its deadly dependence on foreign oil within 5 to 10 years.
Future Energy: How the New Oil Industry Will Change People, Politics, and Portfolios (John Wiley & Sons) describes how a combination of high prices, national insecurity and environmental anxiety is causing the world to move away from a politically and economically vulnerable single-source (crude oil) transportation system to a multi-source system which, in addition to providing energy security for every nation, should benefit the global economy and environment - a win-win-win.
Future Energy features a detailed list of "100 companies to watch," including many that make this not your father's oil industry.
The book stresses the need for Washington (hopefully in partnership with Beijing) to accelerate the first major technological restructuring of the oil industry in over 100 years through a Manhattan Project-style program. The book argues that such a program should more than pay for itself by saving the U.S. billions of dollars currently spent on insuring that America's imported oil reaches its destination. (Translation: there's no need to raise gasoline taxes.)
Among the book's predictions: garbage will be turned into liquid transportation fuel (think Back to the Future); wireless providers will provide the communications backbone of a new method of wealth creation that utilizes energy efficiency to put money in the average Joe's pocket. Big Oil will still rule the energy world (but in a brand new way). #
We were impressed at how up-to-date the book is -- the author picked trends accurately when he submitted the manuscript some months ago. I may have helped that he got insights from experts we often quote in CalCars-News: Brad Berman (HybridCars.com), Michael Millikin (GreenCarCongress.com) and Philip Reed (Edmunds.com). We also can't help being partial to the book because he highlights CalCars. The author went a bit overboard in his section where he picked "The Complete List of 100 Companies to Watch." He told us that though he knew we were non-profit, we still belonged in the category of Consumer Information Providers and Hands-on Companies. This will surely be the only time CalCars appears in a list with Alternative Energy Store, Google, Home Depot and Lowe's!
Here's less than 25% of Chapter 5, "The Power of Efficiency".
It is important to draw a very clear distinction between the advantages of plug-in and non-plug-in hybrid vehicles.
Both enable a vehicle to go farther between liquid fill-ups. Both help reduce the emissions a vehicle generates. But while a non-plug-in vehicle is still at the mercy of whatever liquid fuel is being sold at the corner gas station, plug-in capability frees that vehicle from its involuntary servitude.
Basically, plug-in capability makes it possible for America's transportation system to tap into virtually all of America's domestic energy resources by utilizing the full range of energy sources that are used to make electricity.
Remember what I said in Chapter 1 about how the revolutions in mobile and stationary energy consumption will increasingly be seen as two sides of the same coin? Plug-in hybrids are the main reason why. Plug-in capability is the connector, the bridge between our two energy universes, the one we inhabit when we are moving and the one we inhabit when we are standing still.
With plug-in capability, it becomes possible to keep a vehicle fueled by:
- Coal, both indirectly in the form of electricity and directly in the form of synthetic gasoline.
- Natural gas, again both indirectly and directly.
- Solar power.
- Wind power.
- Geothermal power.
- Nuclear power.
- Garbage power.
- Synthetic gasoline made from tar sands or oil shale.
- Gasoline made the conventional way from crude oil.
Just as diversity through electricity was the key to America's industrial sector being able to increase productivity without increasing oil consumption, so too is it one of two keys (the other being diversity through biofuel) to fueling the growing number of vehicles expected on global highways without adding to the strain on global oil supplies and without everyone choking on their own exhaust.
If that doesn't sound like advantage enough, consider this: By exchanging a single-source (oil) transportation system for a multisource system that makes greater use of the nation's domestically obtainable fuel sources, America automatically enhances its national security, which in turn reduces the financial burden of having to defend America's sources of imported oil, which in turn frees up billions of tax dollars for more worthy endeavors.
Now that's a sweet spot.
Certainly, non-plug-in hybrids have their own sweet spot that makes them a worthy addition to a nation's fleet of cars and trucks. Still, while one of non-plug-in hybrids' celebrated selling points is their environmental friendliness, a case can be made that plug-in hybrids are even friendlier in the sense that the fuel one puts into his car or truck can be the "green" power one makes himself at home. More specifically, it can be the electricity one generates by putting solar panels or solar roofing shingles on top of his house, or by installing a geothermal heat pump or wind turbine in the backyard. (Before long, another option may be small wind turbines that go on top of a house like a weathervane.) Indeed, a case can be made that plug-in hybrids will accelerate peoples' use of environmentally friendly green power sources, which at present are catching on thanks to the revolution in stationary energy.
Depending on who you asked, in 2006 plug-in hybrid technology either was ready to go right now, close to a breakthrough that would make it ready, or still in need of considerable development.
For supporters like Felix Kramer, the technology was ready to go. Existing batteries were "good enough," he told me, and "can only get better." President Bush, in his Earth Day speech and in another speech to the National Association of Manufacturers, basically said we are close to a breakthrough. (The president talked about plug-in vehicles providing 40 miles of all-electric power without looking like a golf cart.) But there was more than one automotive engineer who publicly said that plug-in technology was still years away.
There was, however, a common thread here, namely, that plug-in hybrids are coming.
Think about it. In 2006 oil markets resembled a roller-coaster. Prices surged to nearly $80 a barrel, then plunged to below $60 a barrel, during a time when there was no oil shortage, just fear of a possible shortage caused by a natural or manmade disaster. There is every reason to believe that this unprecedented volatility in prices will become a permanent feature of global energy markets. As more of America's critical energy infrastructure-both oil and natural gas-gets concentrated in the hurricane-exposed Gulf of Mexico, and with the memory of Hurricane Katrina unlikely to fade anytime soon, fear of a weather-related energy catastrophe should worsen. With Osama bin Laden and the legion of terrorists he has spawned well-known for their patience in planning an attack, fear of another terrorist attack-this time maybe on U.S. soil-will not abate.
Enter plug-in hybrid vehicles, which, as the president indicated, have the potential to make it possible for people to not use gasoline (negaoil).
How many vehicles are we talking about? How many people are likely to make the switch and for what reasons? What are the most likely cities, states, and regions of the United States to feel the impact of plug-in technology? How might this impact oil companies' imbedded infrastructure? What could be the impact of that prediction made by the author of the Reason Foundation study on traffic congestion that over the next 25 years the number of cities where congestion causes peak-hour traffic trips to be delayed by more than 50 percent will grow from 4 to 34?
While it isn't known when plug-in hybrids will arrive, it could be before 2012, even without a Manhattan Project-style program. Will the United States be prepared? Will there be a sitting government panel or task force made up of the best minds in energy, transportation, national security, agriculture, and so on? Will that panel have had time to analyze the mega policy issues that plug-in capability (and also biofuel) raise?
Or will there instead be a hodgepodge of competing interests trying to spin the public and the politicians? In the absence of a clear and coherent government policy for incorporating plug-ins (and biofuel) into America's transportation system, there could be more frequent oil price gyrations as traders face the new uncertainty of trying to predict how much gasoline Americans are going to consume in their cars and trucks versus how much electricity and how much cellulose and grains. This planning must extend to global commodities markets, for in the new oil industry there will be unprecedented linkage between agricultural and energy commodities. Perhaps it is time for the White House to merge the departments of energy, agriculture, and transportation. (Don't forget about coal as a jet fuel.) It definitely is time for financial markets to have more reliable energy and agricultural statistics from China, India, Russia, and so on.
As energy analyst Glenn Wattley put it, this stuff is too complicated for Adam Smith.
To be sure, plug-ins may arrive in China without all this planning. When I asked Goldman Sachs vice chairman and China business expert Bob Hormats if he thought China was keen on plug-in hybrids, he said he had not seen any sign of it yet, and then added that if the Chinese government wants to go that way, it will just go ahead and install external wall outlets in convenient places.
China might want to first think things through, lest it wind up roiling global energy markets.
An extremely upbeat forecast specifically of hybrid technology's overall potential was offered in a June 2006 research report from AllianceBernstein L.P., the global investment banking firm. The firm predicted that the world is "on the cusp of a major transition to hybrid-power vehicles," basically because of hybrids' fundamental superiority over gasoline-powered vehicles. The report described hybrids as a game-changing technology that will significantly reduce oil demand by making electricity the primary energy source for transportation. The report went so far as to say the advent of plug-ins could reshape the foreign policies of the United States, China, Japan, and other major oil-consuming countries.
Importantly for investors, the report concluded that technology and utility companies will gain the most from hybrid technology, oil-related companies will lose the most, and leadership in the auto industry will depend on leadership in hybrid technology. While the report concluded that all automakers will produce hybrids, it echoed others' feelings toward Toyota and Honda, noting that the other car companies "will have to act fast since Toyota and Honda will soon be on their third-generation hybrid systems."
The report said that plug-ins will become popular on the heels of development of batteries that offer significant electric driving range. It also broke down the investment potential along sector lines, not surprisingly finding that the sector with the best combined near-, medium-, and long-term prospects is hybrid battery manufacturers. Importantly, the report concluded that electric utilities also have excellent long-term prospects, as do electronic automotive suppliers and power-semiconductor suppliers.