Oil Usage Drops in Developed Nations in 2006

Thank you to the millions that used less oil in 2006. For the first time in 20 years, the International Energy Agency show oil consumption in the 30 member countries of the Organization for Economic Cooperation and Development fell 0.6% in 2006. The drop was slight, but most encouraging to all who seek energy independence, averting a climate crisis, and healing an economy “addicted to oil.”

Yes, global oil demand did grow in 2006, but only by 0.9% in 2006, compared to 3.9% growth in 2004 and 1.5% in 2005. Oil demand may be moderating for a number of reasons including these:

1. When oil prices rose, demand shifted to more energy efficiency.
2. Some vehicles have become more fuel efficient by reducing vehicle weight, air and road resistance, and by using hybrid technology.
3. Less heating oil was needed due to global warming.
4. The Kyoto Protocol is starting to work.
5. Biofuels are increasingly used to substitute for fuels refined from oil.
6. Clean distributed energy and more reliable grids reduced the usage of diesel generators, propane and butane.
7. The ratio of people living in cities increased relative to suburbs. Oil demand per person is less in cities due to effective public transit and closer proximity of home and work. The U.N. forecasts that 80% of people will live in cities by 2050.
8. More people are riding together with car pooling and public transit.
9. Trucks and buses are reducing the wasteful idling that keeps engines running up to 40% more than is necessary. Use of auxiliary power units are increasing.
10. People spend more time working and shopping at home, using broadband Internet services.

Neal Dikeman commented on the OECD drop, “That really is huge news. Supply and demand economics does work after all, despite what some people may think. Historically, new supply discoveries drove price declines (in the 1st half of the century). Since OPEC however, supply shocks and constraints have driven major price increases, and overestimated demand / negative demand shocks have driven declines.” Mr. Dikeman is a merchant banker, originally from Houston, Texas, and now a partner with Jane Capital.

Moderation of oil usage is timely. Next week, the first phase of the Intergovernmental Panel on Climate Change will be released. This will be a major update from the respected 2001 report that involved hundreds of leading scientists globally. “The smoking gun is definitely lying on the table as we speak,” said top U.S. climate scientist Jerry Mahlman, who reviewed all 1,600 pages of the first segment of a giant four-part report. “The evidence … is compelling.” CNN Report

As the oil reduction numbers are analyzed a picture may emerge about how to continue our path to a brighter future. To all of you who conserved – Thank You!

Will the Electric Car Kill General Motors?

Will the Electric Car Kill General Motors?

e-cooter

By John Addison (December 29, 2006)

A recent movie and several books asked the question “Who killed the electric car?” then answered GM. Indeed, the major auto makers successfully defeated California’s attempt to mandate that 10% of car sales be electric vehicles (EV). GM retrieved the EV1 at the end of their lease periods and crushed almost all. Yet, GM and other auto makers have continued to pour billions into electric motors, advanced batteries, hybrid-electric propulsion, and electric vehicles where hydrogen fuel cells supply electricity to electric motors.

The more relevant question is this, “Will electric vehicles kill General Motors?” Most people on the planet cannot afford gasoline powered cars. Increasingly they can save $200 for an electric scooter. Over 30 million people drive electric vehicles.Jonathan Weinert reports on the exploding popularity of e-bikes in China.

As incomes increase, early adopters in China, India and other emerging nations will upgrade to new generations of light electric vehicles (LEV). Most of these vehicles will have 3 or 4 wheels and carry increasing numbers of passengers and loads. One is the three-wheeler made by Shandong Jindalu Vehicle Company in a joint venture with U.S. Zap Motors. The Xebra can reach 40 mph with a range of 40 miles. One model includes a solar panel roof for recharging the batteries. The small car is a four door sedan. Because of its drivetrain in the U.S. it is classified as a 3-wheel motorcycle.

Another of these vehicles is a new Chinese 4kW electric all terrain vehicle (ATV) that Zap will distribute in the U.S. The vehicle will have two electric wheel motors. China is developing several EVs that will be far less expensive than anything GM builds in the USA. China’s research and development group has developed a hydrogen fuel cell vehicle named Spring Light 3 with a go to market target price of $5,000.

In the U.S., there is slow development of a network of hydrogen fueling stations. There is a massive investment in gasoline stations. The oil industry exerts tremendous political power in the United States. China, however, does not have a massive investment in gasoline stations. China does have a significant network of natural gas stations where onsite reformation of hydrogen can be added. In fact, China will transport millions of 2008 Olympic visitors in buses and taxis running on hydrogen blended with natural gas.

Established market leaders commonly ignore or sarcastically dismiss low-cost and under-powered alternatives to their market leading products. The low cost 3-wheel Xebra appears to be a zero threat to the luxury Cadillac’s that General Motors executives drive. Initially, downloaded music in MP3 players had poor sound quality and was illegal. Now the music industry is transformed as people listen to high-quality music downloaded to their iPods and smartphones.

IBM was so dominant with mainframe computers that it suffered years of anti-trust litigation. Digital Computers sold far less powerful, but cheaper, mini-computers to labs. IBM ignored the threat of the mini-computer until the information technology industry had shifted to networked minis. Continual innovation and dropping prices of chips and networking brought another revolution with PCs replacing mini-computers. Digital did not learn from its own disruptive success and dismissed PCs as useless. Digital was later bought by Compaq, the very company that disrupted the minicomputer success. PCs are now under attack by the Internet. Microsoft is watching Google very carefully.

Just as a body’s immune system will try to reject a newly transplanted heart, successful organizations reject disruptive change. The phenomenon is so common that business schools now require the reading of Clayton Christensen’s The Innovator’s Dilemma and Geoffrey Moore’s Crossing the Chasm. Let us hope that the executives of GM are re-reading these classics. Reading my book Revenue Rocket is also recommended.

The interiors of vehicles are becoming electronic in everything from displays to entertainment systems to GPS guidance. Under the hood, it is the same story. Mechanical parts are being replaced by electronic components. In hybrid vehicles, electric motors are doing more; the companion gasoline engines are getting smaller. In the future vehicles will be primarily electronic. Internal combustion engines will be retired. Small vehicles not requiring long-range will get their power from the electric grid. Vehicles requiring more range or carrying heavier loads will be electric vehicles with hydrogen fuel cells.

Some at GM get this. GM’s CEO Rick Wagoner has stated plans to lead in plug-in hybrids, when battery technology meets its quality standards. The vehicle will use a big 3.6L engine.

GM is currently putting 100 hydrogen fuel cell Equinoxes on the road. A couple of weeks ago, I drove this exciting vehicle on surface streets and on the freeway. It is a powerful car that many would want to own. The R&D people at GM have an exciting vision that includes advanced batteries; regenerative braking; a thin “skateboard” platform common to multiple vehicles; drive-by-wire replacement of mechanical links to pedals and steering wheel; and electric motors. GM plans to start selling its next generation fuel cell vehicle by 2011.

GM is also involved in successful joint ventures in China. GM has done well in China in its joint venture with Shanghai Automotive Industry Corp. These joint ventures also have the risk of developing future competitors as seen when Shanghai Automotive recently unveiled its own brand luxury car. GM has a Chinese fuel cell vehicle development. Will the heart transplant take? Or will the patient’s antibodies reject the needed organ? In 2005, GM reported a loss of over $10 billion. Its global market share has shrunk to 13%. Thanks to its pension obligations, labor contracts and overhead, it cannot make a small car at a profit. It focuses on large SUVs and large trucks with gas guzzling engines in hopes of making money. The bulk of the corporate momentum is not in future electric vehicles but in big vehicles with engines.

While major GM competitors may not be planning on a low cost EV for the global market, they are planning on small fuel-efficient low cost vehicles. Toyota will be building a small car in China for the global market including the United States. DaimlerChrysler has signed a letter of intent with China’s Chery Automobile Co. that will allow the auto maker to build small cars in China to be sold throughout the world, including the U.S.

Toyota, riding on the success of hybrids and more fuel-efficient vehicles, is overtaking GM’s position as #1 market share leader globally. It threatens to beat GM to market with a plug-in hybrid. Within three years, Nissan Motor Co. plans to develop and market subcompact electric cars powered by self-developed lithium-ion batteries.
Honda wowed visitors at the LA Auto Show with its 350-mile range hydrogen fuel-cell Concept FCX, which it will start leasing to consumers and business in 2008. When Honda started selling motor scooters in the U.S. in 1959, GM could not have anticipated Honda’s future success in cars. Now as the global market shifts towards electric vehicles, Honda is also one of the leader’s in selling e-bikes in Asia. Is it déjà vu all over again?

In the sea of change that is beginning, tsunamis are racing to crash on America’s shores. One is Asian production of vehicles with electric drive systems. Another is the disappearance of cheap oil. Another is global demand for affordable vehicles. We will see how skillfully GM navigates in a perfect storm.