An Inconvenient Truth From the NYT on Hybrid and Electric Cars

The venerable New York Times has been a reliable cheer leader for electric and hybrid cars in its A “news” section. Its "Business Day" section is for readers who base business decisions on what they read. They don’t want to be bothered with political correctness – just the facts. Except for a slip here or there, there is little difference between the Times Business Day and Wall Street Journal business reporting. With its table “The Cost of Higher Fuel Economy,” the Times has blown the cover of the electric or hybrid car. They do not make economic sense even at much higher gas prices.

I see that Drudge has picked up this story. Now everyone will know the house of cards on which the Volt is built.

In its Payoff for Efficient Cars Takes Years (April 5), the Times publishes a table that shows that buying an electric or hybrid car makes little business sense as compared to buying the closest conventional model from the same manufacturer. For example, a buyer choosing between a Chevy Cruze Eco and a Volt requires 27 years to break even. The best buy appears to be  the Jetta TDI  (which sells for only $500 more than the conventional Jetta) and breaks even in a year.

It takes much too long for the fuel savings to pay for the higher sales prices – even at $5 or $6 gas. It would take $12.50 gas to make the Volt a decent buy even after the $7,500 government credit.

The Times article concludes that people buy Volts and Fiesta SFE’s because it makes them feel better and more civic minded. That is not a very solid foundation on which to build a market.

Is There are Clearer Case of Media Bias? Gas Prices under Bush and Obama

The Times’ March 1 news piece Tensions Raise Specter of Gas at $5 a Gallon reflects an obvious media bias. As the Times news piece claims, rising gas prices are the result of international events over which President Obama has no control. I cite the first paragraph:

With no clear end to tensions with Iran and Syria and rising demand from countries like China, gas prices are already at record highs for the winter months — averaging $4.32 in California and $3.73 a gallon nationally on Wednesday, according to AAA’s Daily Fuel Gauge Report. As summer approaches, demand for gasoline rises, typically pushing prices up around 20 cents a gallon. And gas prices could rise another 50 cents a gallon or more, analysts say, if the diplomatic and economic standoff over Iran’s nuclear ambitions escalates into military conflict or there is some other major supply disruption.

Under Bush, the “rising gas price” news story would invariably mention  Bush by name, Big Oil, and his long-standing ties to the oil industry.

I was about to document this media bias by searching news archives, when I found an excellent blog of March 1 by Julia Seymour, whose main results I cite below:

The Business & Media Institute examined all the broadcast network news reports mentioning gas prices during each of those time periods and found ABC, CBS and NBC aired more than 2 ½ times more stories (63 stories to 24) in 2008 than they did in 2011.

But it was more than just the amount of coverage that showed the media's willingness to spin gas prices one way under Bush, and another way under Obama. In 2008, network reporters mentioned "Bush," the "president" or "government" in gas price reports 15 times more often than in 2011 under President Obama (15 stories to 1).

Congratulations to Julia Seymour for excellent reporting and analysis.

“We Can Make the Cars, but Will People Buy Them?” Or: The State Cannot Mandate Average Fuel Efficiency Standards

The Obama administration proposes to raise fuel efficiency to an average of 56.2. miles per gallon by 2025, putting the U.S. on par with Europe. If achieved, average 2025 fuel efficiency would double its current level. Supporters claim the higher standards will save gasoline, reduce global warming, and cut oil imports.

The administration neglects one important fact: Europe achieves higher average fuel efficiency because its gas prices are more than twice ours. Europe’s astronomical gas prices, not EU standards, cause Europeans to purchase fuel-efficient cars.

For the U.S. to achieve average European fuel efficiency, we must have European-style gas prices!

Auto makers understand this point very well. Said one auto executive: “We can build these vehicles. The question is will consumers buy them?”

As long as we are allowed a free choice of vehicles, average fuel efficiency depends on the price of gas. Currently, gas averages $8 per gallon in Europe. In the U.S., it is slightly under $4 per gallon, and we think that is very high.  Europeans have had to pay more than twice what we pay in the United States for gas for a very long time. Their purchases of fuel-efficient cars reflect the higher gas prices.

Average mpg equals the share of large cars times their mpg plus the share of small cars times their mpg. As long as US gas is cheap relative to Europe, we’ll purchase larger cars and have lower average mpg, even if we are given exactly the same choice of cars.

As far as I see it, we can achieve European average mpg by 2025 in three ways:

1)      Raise our gas prices to European levels, which would be more than a doubling from today’s high prices.

2)      Take away freedom of choice by outlawing certain low-efficiency vehicles.

3)      Bribe people to buy fuel efficient automobiles by means of subsidies and other incentives paid for by taxpayers and penalize purchasers of low-efficiency vehicles by higher taxes and other penalties.

As I write this piece I am sitting outdoors at a Starbucks in Menlo Park, California waiting for my wife to waive to me that she has finished shopping at Safeway across the way.  She can see me and I her only if non-SUVs are parked curbside. We do this every week, and I must report it is a rare occasion when our view is not blocked by a solid row of SUVs.

To rephrase the auto executive: We can make them but we can’t force people to buy them, even in Northern California.

Holder’s New Bluster: The Fraud Task Force on Gas Prices

Strapped American families can rest easy. On Thursday April 21, Attorney General Eric Holder Attorney rode to our rescue with the following announcement:

“Rapidly rising gasoline prices are pinching the pockets of consumers across the country. We will be vigilant in monitoring the oil and gas markets for any wrongdoing so that consumers can be confident they are not paying higher prices as a result of illegal activity. If illegal conduct is responsible for increasing gas prices, state and federal authorities should take swift action.”

Holder’s new Financial Fraud Enforcement Task Force Working Group (acronym FFETFWG) will protect us from the sinister forces that raise gas prices by “monitoring oil and gas markets for potential violations of criminal or civil laws to safeguard against unlawful consumer harm.”

I guess Uncle Sam is in the business of deciding what is a “just” price of gas!

Holder’s announcement sent me to Google to download the last 120 months of data on U.S. crude oil and gas prices. As a patriot, I should assist him in this worthy investigation of gas price gouging.

Here is what I learned from my 30-minute investigation:

1) Gas prices are determined about 72 percent by oil prices. On average, for every plus or minus dollar change in crude, the gas price changes plus or minus 2.5 cents.

2) Factors other than crude prices, such as weather, economic conditions, consumer hoarding, expectations, and random factors explain the other 28 percent. How in the world will Holder’s agents sort out the fraud they have been charged to find from these other factors? I do not envy them in their task.

3) In some cases, a dollar increase in crude raises the gas price by more than 2.5 cents, and a dollar drop in crude lowers the gas price by less than 2.5 cents. (Aha: We seem to have evidence of chicanery!) But in almost as many cases, the rascally oil giants raise the gas price by less than 2.5 cents and lower the gas price by more than 2.5 cents. (I guess they do this to throw the Holder Fraud detectives off their scent).

My main finding is that the Holder fraud-seekers should expand their portfolio to investigate “cases of the unlawful and artificial holding down of retail gas prices.”

If “Big Oil” does not always pass crude price increases fully on to the gas consumer, Holder’s agents should track down cases of “unlawful” holding down of gas prices for the purpose of discouraging alternative green fuels. They could perhaps find some Saudi Sheikhs behind this sinister plot. We might as well throw this into the mix as well.

Attorney Generals should do what Attorney Generals are supposed to do. There is no point to his Fraud Task Force other than to intimidate, to score political points, and to shakedown campaign contributions.