Expensive gas substantially increases the price of fuel-efficient used cars, as people become increasingly willing to pay more for a vehicle now to save on fuel costs later. This is what economic theory predicts. For every $1-per-gallon increase in the cost of gas, the price for the most-efficient 25 percent of used cars goes up $2839, on average, finds a new paper at the National Bureau of Economic Research.

But the pattern is far less striking for new cars. Demand for fuel-sipping cars caused by a $1 gas increase drives up the price of the 25 percent most fuel-efficient new cars by only 3 percent. The difference, the authors find, is that the supply of fuel-efficient new cars is much more elastic than the supply of efficient used cars. When gas prices soar manufacturers crank up the production of efficient vehicles. But the supply of used efficient cars, dependent on previous production patterns, is more or less fixed.

Posted by Jay Hancock at 10:18 AM | Permalink | Comments (1)
Categories: Energy
        

Nuclear energy (from already-built and -depreciated reactors) is already cheaper than energy from fossil fuels. A tax on carbon -- directly or indirectly through a cap and trade scheme -- and nuclear energy gets even more competitive. That's behind today's statement by Constellation Energy CEO Mayo Shattuck favoring an agreement in Copenhagen to cut carbon dioxide emissions. From his statement:

There appears to be a global consensus that the world needs to cut its emissions in half by 2050, compared to today’s levels,” said Shattuck. “At Constellation Energy, we are particularly focused on the technological and industrial transformation that will be necessary to meet that objective. Nuclear energy currently provides about 14 percent of the globe’s commercial electricity and that number needs to increase substantially if we are to meet the 2050 long-term goal.

Posted by Jay Hancock at 10:35 AM | Permalink | Comments (3)
Categories: Energy
        

The mystery of the paralyzed police cars remains. Yes, I realize this undercuts my speculation that a world awash in ethanol is prompting people to spike the gas supply with excess corn likker.

Contradicting statements by Baltimore officials, the supplier says gasoline blamed for crippling much of the city's police fleet last week did not contain excess amounts of ethanol. Norfolk, Va.-based IsoBunkers conducted its own tests and found the gas was 10 percent ethanol -- just what it was supposed to be, company President Charlie Joanedis told me on the phone.

"They obviously had a problem with a certain number of their vehicles, but we still don't know what caused the problem," Joanedis said. "We took a sample out of the tank at the filling station and sent it to a petroleum inspection company. Everything they tested was on spec."

A week ago more than 200 police cars had problems after being filled with IsoBunkers gas. As much as a third of Baltimore's fleet was briefly out of action. City officials tested the fuel and blamed ethanol, which is added by law to reduce pollution and is also the subject of a huge federal subsidy directed toward corn farmers and refiners.

IsoBunkers got the gas from a Baltimore marine terminal, where the ethanol was added as it went into the truck, Joanedis said. From there the truck went straight to the city service station, he said.

"We want to find the answer," he said, just like the city. "We didn't make the gas. If our supplier gave us bad gas I want to know about it and I want to go back to them for recourse."

Joanedis wondered why only police cars and not other city vehicles seemed to be affected. One theory, which he admitted was speculative: Perhaps the Chevies were unusually sensitive to normal seasonal changes in the gas formula that take place at the end of September.

Given IsoBunkers' results, the city will continue its inquiry, said Khalil Zaied, director of general services.

"We're not done yet," Zaied said. "If the outcome of their work came up agreeing with ours, we would probably stop investigating."

UPDATE: This is a response from Matt Hartwig at the Renewable Fuels Association. He responded to my original post last week. I meant to include it with this post & forgot. Matt sez:

This issue of improper blending by some petroleum marketers is serious and our industry does not support selling ethanol blends in excess of 10% unless they are properly labeled for use in flex fuel vehicles designed to use higher level ethanol blends. However, you seem to blame the fuel itself for finding its way into gasoline in higher than recommended levels rather than the people doing the blending.

When used properly, ethanol has proven a very effective fuel additive, and in the case of E85, a gasoline replacement. In fact, the entire Indy Car Series uses pure ethanol to fuel its race cars, as do some drivers in Brazil.

While we certainly have concerns about your mischaracterization of the environmental and energy securities values of ethanol, this is an issue on which we both can agree: ethanol, like all fuel additives, should be used within the bounds of the law.

Matt Hartwig

Director of Public Affairs

Renewable Fuels Association

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (16)
Categories: Energy