Relief on oil supplies

We’re finally starting to see signs of gains in global oil production.

As Econbrowser readers are well aware, the big story on world oil markets over the last year has been Saudi Arabia, whose production in August was a million barrels a day below the level seen in 2005. On September 12 I wrote:

I doubt very much that OPEC would have made an announcement such as the one yesterday unless the kingdom intended to boost production by several hundred thousand barrels a day beginning in November. The interpretation that I have been favoring for why Saudi production fell by a million barrels per day over the last two years is that production from northern Ghawar, their most important oil field, has peaked. Furthermore, the recognition that higher oil prices have not led to as big a reduction in demand as we might have expected historically leads them to want to extract the remaining reserves more slowly. The Saudis have made big investments in developing other sources such as southern Ghawar and Qatif. I take the OPEC announcement as confirmation that these other sources are producing enough that the Saudis feel they can comfortably increase production by a few hundred thousand barrels per day.

We’re now receiving confirmation that this is exactly what happened. The most recent data from the U.S. Energy Information Administration only go through August, at which point Saudi Arabian oil production was still estimated to be at 8.6 million barrels per day. But the latest report from the International Energy Agency estimates that production climbed to 8.75 mb/d in September and 8.85 mb/d in October. And today Reuters quotes Saudi Oil Minister Ali al-Naimi as claiming that November production is up to 9 mb/d. Reuters also reports that the private tanker tracker Petrologistics estimates November Saudi production at 9.15 mb/d.



Data source: 2004 through August 2007: EIA; Sept and Oct: IEA; Nov: press statement by al-Naimi.
saudi_nov_07.gif



I continue to favor the interpretation of these developments that I offered in September. The best evidence suggests to me that the northern part of the Ghawar oil field in Saudi Arabia is in decline. On the other hand, the new Haradh project in southern Ghawar likely began contributing an additional 300,000 b/d in 2006:Q2, and
Chris Skrebowski’s megaprojects database lists the Saudi Abu Hadriya/Khursaniyah/Fadhili oil and Khursaniyah natural gas liquids projects as coming onstream in 2007 with a combined peak flow of 750,000 b/d. The basic concern raised by Stuart Staniford is that total Saudi production is still down from its 2005 peak despite these new projects. Yet Skrebowski also anticipates new Saudi projects onstream in 2008 adding 560,000 b/d, in 2009 adding 1.3 million b/d, in 2010 adding 250,000 b/d, and in 2011 adding yet another 1.2 million b/d. Of course, it takes a lot of these to replace the perhaps 3 million b/d that had been coming from northern Ghawar. I take the latest Saudi production estimates as confirming that the Kingdom has the ability and the intention to boost production substantially above the 8.6 million b/d low we saw for most of the last year.

The IEA report has promising news on a number of other fronts as well, estimating for example that Iraqi oil production may have reached 2.3 million b/d in October (up from the 2 million figure we were seeing for the first half of this year). Overall the IEA estimates that global production increased 1.4 million b/d in October compared to September.

Moreover, the accumulating evidence of a weakening U.S. economy (on which I’ll write more later this week) has to be a drag on global oil demand. With supply up and demand down, it’s hard to see the run-up in crude oil prices continuing over the near future.

Predicting oil prices is a pretty risky business. But my best guess is that, for the time being at least, they have peaked.



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52 thoughts on “Relief on oil supplies

  1. Anonymous

    Thanks for the update. I’d consider this to be extremely convincing hard evidence as well:
    1. TANKER RATES for crude have been suddenly surging from 33,000 per day to over 75,000 per day recently. Part of it can be explained by switching from wet oil to dry bulk and the rest is speculation that the saudis will increase production soon to get oil prices down somewhat. (from Monness, Crespi, Hardt & Co.
    2. From Reuters, the benchmark VLCC rate on the key Gulf-to-Japan route hit a 22 month high AFTER DOUBLING IN LITTLE MORE THAN A WEEK.
    If you believe in watching what’s happening in the real world rather than believing published numbers from the IEA or elsewhere, this seems like pretty good confirmation, I’d think.

  2. Hal

    For a “contrarian” perspective on Peak Oil I recommend the Peak Oil Debunked blog which has recently restarted after a long hiatus:
    http://peakoildebunked.blogspot.com/
    It’s always useful to read as many sources of information as possible in order to get a balanced perspective. Almost everyone writing on Peak Oil is a believer so it is helpful to see what the skeptics have to say.

  3. Barkley Rosser

    A couple of weeks ago when the Saudis let a lot of reporters in for the big OPEC leaders conference, there was a major story in the Fin Times about their development of the Shaybah field out in the Empty Quarter. That is where they have been sending a lot of that equipment, including pipelines from Russia, in recent years. Of course, they have in the past very secretive about what is going on out there, but I would suspect that that field is part of any increase in production going on there.

  4. Barkley Rosser

    Oh yes, Iraqi production is apparently up a bit also, although still not up to levels under Saddam. The Kurds keep cutting deals with lots of international (although mostly small) oil companies, although the central Iraqi government has been declaring them all illegal.

  5. odograph

    Huh. I’m worried. If I think those Peak Oil Debunked posts are funny … am I irredeemable?
    (Not that I would have posted that link here! There is a voltage mismatch in the seriousness of the sites.)

  6. Steve LeVine

    I question Saudi Arabia’s time frame for putting its fresh production capacity to work. Yes, there is growing demand year by year. But there’s a case to be made that the current export increase, reported in the last few days by The Wall Street Journal, is not a function of capacity, but a temporary political response to the hullabaloo over the prospect of $100-a-barrel oil. Thoughts?
    Steve LeVine, author
    The Oil and the Glory (author)
    http://www.oilandglory.com

  7. jg

    Sounds plausible, that, short-term, oil prices have peaked, Professor.
    But, the offset to the real factors that you cite — increasing Saudi production, potentially falling demand in the U.S. — will be the value of the dollar.
    Short-term, there may be ups for the dollar (flight to safety) and downs (Bernanke cutting rates, again and again), but long-term, the value of the dollar is going nowhere but down (given the creaky, soon to be falling, economy) –> very expensive oil.

  8. MarkS

    Short-term (4 years out), the volatility in the security and banking markets are encouraging the Saudis to increase oil production. They do not want their dollar denominated assets to take a big hit, nor do they want a worldwide recession to erode demand too much.

    Longer-term (10 years out), worldwide demand for liquid fuels, (currently increasing at 3-4 percent/year), will totally overwhelm production. At that juncture, oil prices could easily escalate 300 to 500 percent.

    More interesting, is whether the Saudi government wishes to keep oil prices as high as possible, without doing too much economic damage, as a means of constraining demand growth and encouraging development of renewable energy resources. From an ethical perspective, such a strategy would yield the best long-term return on their oil resources, and would be of the most benefit to the rest of the world… Your thoughts?

  9. Barkley Rosser

    MarkS,
    Long term Saudi policy goals have long been very explicit and very clear, and they are not oriented to the goody goody stuff you propose. They want to maximize the present value of their oil revenues, and have a lower discount rate in that calculation than more heavily populated OPEC members with lower reserves.
    So, they like a price high enough to provide a nice flow of revenues, but they are most definitely completely against having prices so high that research and innovation and substitution to non-oil sources of energy will occur, no way. Needless to say, this is not the position of many other more “hawkish” OPEC members, who would just as soon max revenues now.

  10. thefinancedude

    Perhaps the reason so many people believe in PO is because they have a brain that functions on logic and reason instead of feelings. Do the math and it adds up to a peak in the world oil production period. Not to mention trying googling net export model. This is what matters. It matters what leaves each country from where it was produced. KSA might increase production, but have you taken a gander at what their domestic demand has crept up to?
    When the oil fields start declining and we can’t replace the declining fields which we can’t on the whole, then we’re screwed. Just because people have cried wolf on this doesn’t mean it wont be so. Simple scientific principles should quickly bring you to the conclusion that it really doesn’t matter if PO is here or not. The fact that a gallon of crude is nearly five times as energy dense as the next form of energy is the real point. Wise up everyone.

  11. odograph

    Dude, I think ‘peak oil’ is real in the sense that, with a finite resource and the realities of extracting it, a “run up” at the beginning of production and a “run down” at the end are almost assured.
    Where I can laugh with JD is at the idea that this necessarily means we should have boxes of survival goods in our kitchens … or that we are smart enough to name the shape of that graph between “run up” and “run down.”
    That said, I’ve made my moderate preparations. I have a Prius, and I know how to ride a bike (Doh! I might have gone too far with that second one).

  12. Nick

    “a gallon of crude is nearly five times as energy dense as the next form of energy”
    And what is that next form??
    Oil fields produce crude. Wind turbines produce electricity, which is mighty dense. Now, batteries are less energy dense than gasoline, but electric engines & peripheral accessories are 6x as efficient as gasoline engines, and probably weigh about 50% which frees up space for batteries, so PHEV’s will work just fine.

  13. GK

    “”a gallon of crude is nearly five times as energy dense as the next form of energy”
    Nonsense. A gallon of gasoline is just 50% more dense than a gallon of ethanol.
    Electricity can propel a car at 3 times the distance for each dollar of fuel consumed.
    And oil is nowhere near as energy-dense as nuclear power.

  14. Nick

    “Electricity can propel a car at 3 times the distance for each dollar of fuel consumed.”
    Actually, if you charge at night (a very reasonable assumption), electricity will go perhaps 15 times as far per dollar.
    The average vehicle (at 22MPG) costs $.15/mile at $3.30/mile. An EV like the Volt (at .25kwh/mile and $.04/kwh) will cost about $.01/mile.
    See http://www.thewattspot.com and https://il.thewattspot.com/login.do?method=showChart for hourly pricing: the cost is below $.04/kwh between 11pm and 6am, prime charging time.

  15. Nick

    “Long term Saudi…like a price high enough to provide a nice flow of revenues, but they are most definitely completely against having prices so high that research and innovation and substitution to non-oil sources of energy will occur..”
    I agree. Fortunately, oil prices have clearly passed that point for the US, and the current explosion in R&D for renewable electricity and electric transportation will show dramatic results in 2 to 5 years. Wind, CSP (thermal solar) and PV are all growing very fast. Plugin hybrids will arrive in 2009, and ErEV’s (extended range EV’s) will be ready by 2010.
    50% of light vehicle miles are driven by vehicles less than 6 years old, so the transition won’t take as long as many think.
    I think the Saudi’s are getting very nervous about killing their future…

  16. Nick

    The current explosion in R&D for renewable electricity and electric transportation is an interesting example of the effect of the falling dollar.
    Oil prices are much higher for the US than for most countries. This means that the US is being much, much more aggressive about R&D for renewable electricity and electric transportation, and will have a real advantage in these areas in just a few years.
    Europeans just don’t understand hybrids, in part because they drive so little, and they understand diesel. Diesel is fine, but it’s a dead-end technology. The US is going to have a big advantage in a world where oil keeps getting more constrained, and where “green” tech has serious export possibilities.

  17. will rahal

    One benefactor of a decline in oil prices is if the US Dollar. I have shown the relationship between the price of oil to US imports. The improvement of our trade deficit with the potential of rising Real Yields in the US bodes well for the US dollar
    See. “Oil and the US Dollar”

  18. fred schumacher

    This posting appears to confirm what has been predicted, that the big fields are peaking and the new fields are much smaller. If Ghawar is at peak, then we can expect, based on previous experience, to see rapid declines in production, especially if the field has been damaged by overpumping in the past. For a more detailed analysis of Saudi production see http://www.theoildrum.com/node/2331
    The Saudis are no longer able to be the swing producer, regulating the market through variable oil output. This helps to explain Cheney’s obsession with Iraqi and North Slope oil. He’s an oil man, and he knows were at peak.

  19. M1EK

    You guys must have a lot of secret news about battery breakthroughs which I don’t have – because in the real world, the choice is between a hybrid-style narrow chargeband strategy (30-70% or even less) or cell-phone like short lifetimes. Neither one results in anything remotely close to the useful energy density of gasoline.
    PHEV’s are non-starters until a substantially new battery shows up. Take that to the bank.

  20. Footwedge

    Separate but related is the impact of all these dollars flowing to the gulf states. I know there are those that crow about the great confidence that this shows in our dynamic economy but I can’t help seeing this as the opposite or the converse of outsourcing – they just buy our companies and eventually we ALL work for foreign companies. I’m aware of the history of Japan buying Pebble Beach and Rockefeller Ctr and how that worked out for them. It seems to me, though, that while they bought high and sold low Abu Dhabi’s deal is just the opposite. If a company like Citi is that desparate what else will oil money (cheap dollars at that) be able to find around here?

  21. Nick

    “Don’t you think we’re a ways off from practical electric cars though?”
    We’re are 5-10 years away from an affordable, pure, no-compromise Electric Vehicle (EV). We’re very likely about 3 years from having the Volt, which will be an affordable, pure, no-compromise Extended Range Electric Vehicle (ErEV). It will have an electric range of about 40 miles, and get 50MPG after that. That allows a 50-100% reduction in fuel consumption over a Prius, depending on driving pattern. You can expect the all-electric range to rise, as batteries get cheaper.
    “You guys must have a lot of secret news about battery breakthroughs which I don’t have ”
    Have you looked at A123systems batteries? They’re not a secret, and they’re only one of a number of feasible new li-ion chemistries.
    “in the real world, the choice is between a hybrid-style narrow chargeband strategy (30-70% or even less) or cell-phone like short lifetimes”
    Not really. A123systems has a very long cycle life at 100% Depth of Discharge (DOD). OTOH, GM will indeed reduce the chargeband in the Volt, to be be very conservative. That strategy does come close to doubling battery costs, of course, but that doesn’t raise those costs out of the feasible range.
    “Neither one results in anything remotely close to the useful energy density of gasoline.”
    Not true. The key word is “useful” – see my earlier post on that. If you disagree, please be more specific.
    “PHEV’s are non-starters until a substantially new battery shows up.”
    Not true at all. Heck, even lead-acid would work and be cost-effective at current gas prices, at the cost of a bit of convenience (changing the batteries every few years).

  22. Barkley Rosser

    fred shumacher,
    “Cheney’s obsession with Iraqi oil,” umm, yes. He was, but our invasion, pushed so hard by him, certainly did nothing to increase Iraqi oil production, certainly not in the short run anyway.

  23. M1EK

    Nick,
    Battery claims like this have been made enough times before with nothing resulting that I’ll believe it when Toyota or Honda is ready to tackle it. GM has a history of FUD in this realm – so I don’t take the Volt as evidence of serious progress.
    Lead-acid would absolutely _not_ be remotely feasible today. The cost of replacing those batteries plus the reduced range would be a killer — that, rather than conspiracy theories, is why the EV1 sunk.

  24. Jim

    Time series fluctuate. Is this (temporary) relief in oil price (of how much magnitude?) of major significance or just a minor fluctuation as production volume marches on to peak? I think yes.
    It is interesting that we increasingly closely scrutinize the fluctuations of oil volume and price as time goes by. Looking for hope in the finer details while the larger picture remains the same. A psychological aspect to the economic analysis. This is in itself a confirmation of peak oil in my opinion.

  25. Nick

    “Battery claims like this have been made enough times before with nothing resulting ”
    To what are you referring? I’m not familiar with any false battery claims like that in the past. Again, have you looked at A123systems? Their basic chemistry is well validated and selling in very large volumes in Dewalt power tools (a very demanding market).
    “GM has a history of FUD in this realm ”
    No question. On the other hand, they’ve publicly called their abandonement of the EV-1 their worst mistake in recent history, strongly accepted Peak Oil, and said that they see the Volt as the future of the company. They’re staking their reputation on the Volt, as well as spending a lot of money on bringing it to production. Have you looked at http://www.gm-volt.com ?
    “Lead-acid would absolutely _not_ be remotely feasible today. The cost of replacing those batteries plus the reduced range would be a killer”
    Have you done the calculations? A Trojan T-105, at about $65/KWH, and 200-400 cycles (depending on how conservative you want to be – 400 cycles is specification) at 80% DOD gives you cost parity at $1.75-$3.50/gallon. If you disagree, please be specific and quantitative.
    “that, rather than conspiracy theories, is why the EV1 sunk.”
    The EV-1 sunk because it was expensive. It was expensive because they made fewer than 1,000. They made fewer than 1,000 in large part because they weren’t really committed to it. I haven’t seen the movie (“who killed the EV”), but I’m told that it validates your view that GM was spreading FUD. I should think that your feeling that GM was insincere should figure into your analysis of what happened with the EV-1….

  26. M1EK

    Nick, GM is about as far from staking their reputation on the Volt as they possibly could be – every dollar of investment in the Volt is matched by hundreds to thousands of dollars of investment in their SUV platform.
    With a whopper like that, it’s hard to see much point in continuing.
    But again, I trust Toyota and Honda to commercialize this technology when it’s ready (if not before – note both Honda and Toyota had been pushing hybrids for a vehicle-generation each before the Prius really took off). Toyota in particular has been very transparent and honest about the shortcomings of battery technology.

  27. igorsway

    Aren’t the new Saudi fields that are coming online mainly heavy sour while Ghawher was mostly light sweet crude – so it’s harder to refine, dirtier, and doesn’t crack the same proportion of petroleum?

  28. Nick

    “GM is about as far from staking their reputation on the Volt as they possibly could be – every dollar of investment in the Volt is matched by hundreds to thousands of dollars of investment in their SUV platform.”
    Well, we certainly are far apart. Let’s say GM is investing 100M/year in the Volt (they have roughly 500 engineers working on it now, plus contracts with two battery suppliers) right at the moment (this is likely to rise quickly, if GM is close to telling the truth about their development plans). Let’s cut that by 90%, then multiply by 100,000: you’re estimating expenditure of a trillion/year on SUV’s?
    Have you been reading what GM has been saying, and what the press is reporting? I’d say it’s pretty clear that the automotive and PHEV communities see it the way I reported it. The producer of Who killed the electric car, Chris Paine, sees it that way. Can you imagine the PR GM will get if they kill the Volt? GM certainly can. GM is hanging on by it’s teeth, and they know it. They have to take chances, and they see the Volt as their chance to leapfrog the competition.
    “I trust Toyota and Honda to commercialize this technology when it’s ready (if not before – note both Honda and Toyota had been pushing hybrids for a vehicle-generation each before the Prius really took off). Toyota in particular has been very transparent and honest about the shortcomings of battery technology.”
    No, Toyota and Honda have been quite quick to bash their competition. I don’t know why you believe them, when their claims make no sense (Honda says EV’s are more practical(!), and Toyota has said lately that customers will never want to plug in(!!)), and GM is using a very transparent development process, with tech that makes perfect sense.
    Again, have you done the cost-parity calculations?Have you looked at A123systems, and gm-volt.com??

  29. odograph

    “No, Toyota and Honda have been quite quick to bash their competition.”
    Technically I think you mean “their non-competition” ;-)
    The prius remains the most efficient US-legal vehicle, as listed in real world mpg databases, or in EPA data.

  30. Joseph Somsel

    I’m with M1EK on EVs. The energy density of chemical, rechargable batteries is explicitly limited by the possible electrochemical reactants found on the Periodic Table of the Elements. And they don’t get more energy-dense than lithium.
    What will make EVs marketable is a defining down of expectations for personal transportation devices (ie cars). At some point a 300 mile range automobile will be so expensive to operate that we will welcome an EV with a 40 mile range and actually buy and use them.
    Back on Peak Oil, the new production cited above doesn’t sound like it will make up for depletion and internal consumption increases.
    I sure HOPE the Professor is right but hope is not a plan.

  31. Dave Cohen

    Private reports sent to paying clients written by a cheerfully optimistic consulting firm whose leader’s first name rhymes with “Ban” says that Ghawar is chugging right along with no significant disruption to production rates.

    Looking over the latest IEA Oil Market Report, I see no significant upturn in natural gas liquids production from OPEC (read Saudi Arabia, other Persian Gulf) — about 200,000 barrels per day since the 2nd quarter.

    I have written that the Kingdom’s demonstrated capacity is 9.6 million b/d, with likely more heavier sour crude available.

    Their latest production increases are still well within what I take to be their capabilities.

    There is still no evidence that Ghawar is having significant problems. Until that evidence surfaces, I am not persuaded.

    This is not to say that Ghawar will not be in big trouble sometime in the next 5 years or so. Nothing lasts forever.

  32. Barkley Rosser

    Regarding the new player among Saudi fields, I have yet to hear anything regarding the quality of the oil coming out of Shaybah in the Empty Quarter (Rub al Khali). Does anybody know about it?

  33. Nick

    “The prius remains the most efficient US-legal vehicle, as listed in real world mpg databases, or in EPA data.”
    No question, if you’re buying a car right now, the Prius is the way to go. OTOH, if you’re evaluating the future of oil replacements, than you have to look to the future. Oil prices have only been expensive for 2-3 years, it took a year or two for people to believe they would stay there, and cars take 3-4 years to develop. 2010 for the Volt is very good. We all just have to have patience, as hard as that is.
    “The energy density of chemical, rechargable batteries is explicitly limited by the possible electrochemical reactants found on the Periodic Table of the Elements. And they don’t get more energy-dense than lithium.”
    But that doesn’t matter. As I said earlier, batteries are less energy dense than gasoline, but electric engines & peripheral accessories are 6x as efficient as gasoline engines, and probably weigh about 50% which frees up space for batteries, so PHEV’s will work just fine.
    “At some point a 300 mile range automobile will be so expensive to operate that we will welcome an EV with a 40 mile range and actually buy and use them. ”
    How about an EV with 40 mile range, and a backup generator that gives you another 600 miles at 50MPG (to use if you want to)??

  34. M1EK

    But that doesn’t matter. As I said earlier, batteries are less energy dense than gasoline, but electric engines & peripheral accessories are 6x as efficient as gasoline engines, and probably weigh about 50% which frees up space for batteries, so PHEV’s will work just fine.

    How about an EV with 40 mile range, and a backup generator that gives you another 600 miles at 50MPG (to use if you want to)??

    Those two statements are contradictory. If you don’t get the weight savings because you have to tote along a “backup generator” (i.e. gasoline or diesel engine), then the energy density problem with batteries comes back to the forefront.
    You trust GM at your own peril. Two years ago, you’d have been telling us how there was no way they wouldn’t be commercializing the Hy-Wire any day now.

  35. Nick G

    “Those two statements are contradictory. If you don’t get the weight savings because you have to tote along a “backup generator” (i.e. gasoline or diesel engine), then the energy density problem with batteries comes back to the forefront.”
    Not really. this whole energy density thing is a mistake, a distraction. Here’s why:
    1) The “backup generator” doesn’t weigh that much. It’s not very large (IIRC, it’s 1 liter), it runs at a constant speed, so it and it’s supporting equipment, can be optimized for size, weight and efficiency.
    2) You replace a gas/diesel engine with a much smaller smaller electric engine, and if it’s a ErEV you add a much smaller gas engine. A lot of components disappear or get smaller (transmission, cooling, fuel handling, etc).
    3) The batteries don’t really weigh all that much. IIRC, the Volt battery may be 220 lbs.
    4) you may spend a little extra to reduce weight in places where weight was less important before.
    5) EV/ErEV’s have regenerative braking. Even if you end up with a net weight that’s a little higher, regenerative braking reduces the weight efficiency penalty, because energy spent on acceleration of mass is recovered during deceleration.
    “You trust GM at your own peril. Two years ago, you’d have been telling us how there was no way they wouldn’t be commercializing the Hy-Wire any day now.”
    Well, first GM never promised to commercialize the Hy-Wire quickly. 2nd, they are in fact using a lot of that tech: electrification of various systems like braking and steering is happening throughout the industry. 3rd, and most importantly, did you ready my earlier post on GM’s credibility?? You might want to reply specifically to that, instead of just repeating variations on the same claim.

  36. M1EK

    “Not really. this whole energy density thing is a mistake, a distraction.”
    No, it isn’t. Everybody who seriously looks at either PHEV or BEV vehicles views the energy density problem as the #1 hurdle to overcome, period. The fact that you brush it off shows me that you’re not really, uh, realistic about this technology.
    As it stands today, your choice is either poor energy density with long life (a BEV or PHEV using NiMH with Prius-like charge-maintenance) or medium energy-density with short life (Lithium, if it ever comes together). Medium is relative – it’s still a lot closer to NiMH (or even lead-acid) than it is to petroleum.
    Either way, you’re an order of magnitude less useful than today’s charge-sustaining parallel hybrid.

  37. M1EK

    As for the gm-volt site, yes, I have perused it, and found it to be useless. A lot of people who are rooting for the Volt due to nothing more than nationalism and are upset people are buying Priuses today, instead of waiting for GM.
    Guess what? I’m rooting for the Volt too. I’d love to be proven wrong and find out that this was more than just FUD. But I’m not going to ignore physics and chemistry (and history) in the process.

  38. Nick

    “Everybody who seriously looks at either PHEV or BEV vehicles views the energy density problem as the #1 hurdle to overcome, period.”
    Not at all. It’s a significant problem for a pure EV (Tesla went with conventional cobalt li-ion in part because they wanted a 250 mile range, and that’s harder to do w/iron/phosphate chemistry), but cost is by far more important, as the Tesla demonstrates: the Tesla is a perfectly good, competitive sports car, but it’s expensive, in part due to $20K of batteries. Density is certainly a design/engineering concern for a PHEV, but it’s not fundamentally a big problem. Again, how much of a problem is a 220 lb battery?? If you want to continue this discussion, please use numbers. Be specific: what is the problem with a 220 lb battery, in a 3,000 lb vehicle?
    No, cost is by far the biggest problem. If A123systems batteries could be manufactured at $100/kwh, it would be perfectly clear to everyone that the future was overwhelmingly electric, and very, very soon. As it is, we’re depending on economies of scale to bring down the costs, and that’s a little slower than we would want in order to accelerate this approach.
    “As it stands today, your choice is either poor energy density with long life (a BEV or PHEV using NiMH with Prius-like charge-maintenance) or medium energy-density with short life (Lithium, if it ever comes together).”
    No. A123systems li-ion have a very long life. Do you disagree? Please give evidence.
    “Medium is relative – it’s still a lot closer to NiMH (or even lead-acid) than it is to petroleum.”
    No, it’s the whole system that matters. Please respond specifically to my earlier points on that.
    “As for the gm-volt site, yes, I have perused it, and found it to be useless. A lot of people who are rooting for the Volt due to nothing more than nationalism and are upset people are buying Priuses today, instead of waiting for GM.”
    You’re not reading it carefully. First, ignore the comments – the substance is in the posts (and I haven’t seen anybody criticizing the Prius as a car (they’re mainly annoyed with Toyota’s bashing of the Volt), though I have noted a few people saying that they want to wait for an ErEV). 2nd, look at the technical details, and what GM is doing program-wise. 3rd, please respond specifically to what I said earlier about GM. In particular, how do you explain the enthusiasm from people like Chris Paine??

  39. M1EK

    “but cost is by far more important”
    Either way, energy density costs. Either you replace batteries frequently because you did charge-depleting mode, or you have to carry more weight in batteries than you would otherwise need to keep charge-sustaining.
    I read the gm-volt site very carefully – what I saw was the same kinds of comments as on AutoBlog – a bunch of nationalistic tripe.
    A123′s batteries are completely unproven in the real-world application we’re talking about here. That’s the kind of willful ignorance the gm-volt site is chock-full-of.

  40. Nick G

    “Either way, energy density costs.”
    Yes, li-ion is usually a little more expensive than NIMH per KWH, but there’s nothing ordained by god or physics about that. I’ts just manufacturing efficiency (which is related to manufacturing experience and volume), and commodity costs. Actually, talking about commodity costs, nickel is getting pretty expensive lately.
    “I read the gm-volt site very carefully – what I saw was the same kinds of comments as on AutoBlog – a bunch of nationalistic tripe.”
    Not in the main posts. Of course you’ll get some of that kind of thing in the comments – few blogs are lucky to have the kind of sustained high-level comments that this blog often achieves. Would you judge the usefulness of James Hamilton’s original post using this discussion?
    “A123′s batteries are completely unproven in the real-world application we’re talking about here.”
    What makes you say that? 1st, they’ve been successfully used in a very demanding commercial environment – heavy duty power tools (Dewalt 36V) – for a while now. That’s a much harsher application than a well-protected, thermally and DOD managed car application. 2nd, A123systems has published test results. Bench test results are pretty straightforward – if you discharge the battery at a high amperage to 100% DOD, and do it 5,000 times and the battery still has 80% capacity left, it’s likely to do the same thing in the field. 3rd, GM is going to do both field and bench tests over the next 6 months (and longer), so we’ll see pretty soon.
    Let me reassure you, FWIW, that I’m not an advocate for GM. I like Toyota – we bought our last car from them. I was hoping that Toyota would add a plug and a better battery to the Prius. They were in fact planning to do so, but then they had some quality problems on other cars which hurt their reputation (see Consumer Reports), laptop batteries suffered some fires, and they got nervous about attaching their reputation to the conventional li-ion to which they had committed. Now they’re trying to improvise: figure out how to use NIHM until they can get an improved li-ion chemistry (or perhaps better separator design), and try to cover in the meantime with criticism of the Volt (that’s not a partisan comment – it’s my best assessment of the situation, and I expected better from Toyota).

  41. M1EK

    That’s a much harsher application than a well-protected, thermally and DOD managed car application

    No, it fundamentally isn’t. The power-tool maker doesn’t have to worry about a crash, among other things.
    That’s just one small item out of your post, but it’s particularly telling. That kind of willful delusion about the difference between prototype and market is why people still don’t understand how big of a lead Toyota really has.

  42. Anonymous

    “The power-tool maker doesn’t have to worry about a crash, among other things.”
    Well, first, yes they do. Power tools get dropped all the time, and suffer shocks much greater than one gets in a crash. 2nd, the iron-phosphate chemistry is much safer than cobalt li-ion, or gasoline, for that matter. It has been tested extensively for shock safety( crushing, puncturing, etc). Are you clear on the difference between cobalt and iron-phosphate li-ion?
    “That kind of willful delusion about the difference between prototype and market”
    The Dewalt is on the market. The chemistry is pretty well tested. What is a prototype is the battery pack electronic controls – that’s sophisticated engineering, but there’s no breakthrough required.
    ” how big of a lead Toyota really has.”
    They have a lead in an obsolete design.

  43. Nick

    “They have a lead in an obsolete design.”
    Not that they don’t have a good design. They do – the Prius is a Very Good Car. It’s just not as good as we need in the long run, and with it’s NIMH and parallel design it’s a bit of a technological blind alley. Not nearly as much as diesel, say, but still, a bit of wrong direction.
    Was it the wrong direction at the time of production? No. It was a necessary step in the evolution of EV’s. But now, especially with Toyota having made a commitment to the wrong battery chemistry, Toyota has probably been leapfrogged by GM, and is just a little bit behind GM.
    This, of course, makes GM froth at the mouth, and makes Toyota frantic to catch up. This is all to the good – I expect a lot of plug-in’s to arrive in the next several years.
    Competition is good.

  44. M1EK

    Let’s remember – if we were to ignore all of the misgivings and caveats about energy density and about GM’s credibility, and took them at their word, they’re looking at, what, 2010?
    And if we STILL took you at your word that it was still superior and was actually going to come to market then, the ‘inferior’ alternative could easily still ‘win’ given that head-start; to whit, Beta vs. VHS and many other examples.
    I, of course, hold fast to all of those caveats and misgivings. GM is not trustworthy in any way, shape, or form after blowing FUD at us so many times in the past – with variable displacement, diesel, fuel-cell, and then misleading advertising quoting only highway mileage on a bunch of cars mostly imported and resold under their name. They’ve been party to blowing 1.5 billion of taxpayer dollars on the last attempt to divert us from hybrids, too (PNGV).
    Forgive me if I remain a skeptic. Toyota never took tax money from either our government or theirs in an attempt to forestall fuel economy or emissions rules by pretending to make a high-mileage vehicle; they just went ahead and invested billions of R&D on their own. You know, kind of like what we used to call the American Way.

  45. Nick

    “the ‘inferior’ alternative could easily still ‘win’ given that head-start; to whit, Beta vs. VHS ”
    The technical differences between Beta & VHS were pretty small: Beta had better picture quality, but much smaller capacity. Arguably, VHS was technically better, as most consumers valued recording time more than picture quality.
    The most important metric for hybrids, by far, is overall MPG. Toyota was recently planning to improve Prius MPG dramatically by going to li-ion (which allows much better renerative braking), but has backed away. Now, they’re stalling with PR about testing of plug-in Prii with a double NIMH battery pack, while they scramble to find a better battery chemistry or design. They’ve vowed to beat GM to market with Li-ion, but are keeping the details quiet – it’s not clear if that’s for competitive advantage, or if they haven’t yet figured out how to solve their problem.
    The bottom line, though is that an ErEV/PHEV will get MUCH better overall MPG than a plain hybrid. An ErEV/PHEV is just the next, necessary step, and it will replace the plain hybrid.
    One of the competitive strategies here, being used by all car companies in this arena, is the tactic long used by Microsoft: pre-announce a product in order to induce consumers to hold off on buying a competing product, and wait for yours. This increases the value of PR on upcoming vehicles and vehicle tech.
    “GM is not trustworthy in any way”
    I certainly don’t accept info from them on it’s face value – I’ve disbelieved them many times in the past, especially when they were “dissing” the Prius. I’ve evaluated the Volt program carefully, and what they’re saying just makes sense.
    “They’ve been party to blowing 1.5 billion of taxpayer dollars on the last attempt to divert us from hybrids, too (PNGV).”
    I’m not sure I understand what you’re saying. PNGV was in fact a development program for hybrids, and was part of the inducement to Toyota to develop the Prius (they took the PNGV program more seriously than did Detroit). I understood the figure to be about $1B – do you have a source for the $1.5B figure?
    “Toyota never took tax money from either our government or theirs in an attempt to forestall fuel economy or emissions rules by pretending to make a high-mileage vehicle;”
    Neither Toyota nor GM has a moral edge. Toyota takes plenty of government money (hybrid tax credits, plant opening subsidies, etc, etc), and is now attempting to forestall fuel economy and emissions rules by blocking California’s regulations.
    Toyota vs GM is a distraction, a red herring. I don’t care who comes up with an PHEV/ErEV first, I just want it. And…I’m pretty sure both of them will produce it in the next several years, which is a good thing.

  46. M1EK

    “PNGV was in fact a development program for hybrids, and was part of the inducement to Toyota to develop the Prius”
    PNGV was a US-only program. Toyota didn’t get any research out of it – they were quite a bit ahead by that point.
    http://en.wikipedia.org/wiki/Partnership_for_a_New_Generation_of_Vehicles
    As for tax credits, Prius gets $0.00 at this point. Read that again – 0 dollars and 0 cents. Despite the law being written in a way to encourage US hybrids, the Prius is #13 in sales, and all other hybrid cars put together don’t approach it.
    As for FUD, Toyota has said very little about the next Prius – what little they HAVE said was wrenched out of them by plug-in fanboys who demanded they say something, anything, about it.
    I want the American car companies to make cars like that, quietly, without having to use taxpayer money to do it. In my estimation, naive fanboyism about the Volt actually hurts this effort more than it helps it – the old “false balance” equation being primarily used in your case.

  47. Nick

    “”PNGV was in fact a development program for hybrids, and was part of the inducement to Toyota to develop the Prius” – PNGV was a US-only program. Toyota didn’t get any research out of it”
    Yes, I agree.
    ” – they were quite a bit ahead by that point.”
    My understanding is that the Prius development effort started after the PNGV program. See the following:
    http://john1701a.com/prius/prius-history.htm
    “As for tax credits, Prius gets $0.00 at this point.”
    Sure. My point is that Toyota doesn’t turn down subsidies – nor would I suggest that they should.
    “what little they HAVE said was wrenched out of them”
    Wrenched out of them??? Interviewers put them in a back room at Guantanomo?
    “I want the American car companies to make cars like that, quietly, without having to use taxpayer money to do it. ”
    Actually, staying quiet might help them in the long-run, as it might reduce their competition. But, GM can’t do it quietly, they need the publicity. And thats better for the public. It’s a very important development, and people should know about it, and the more competition the better. At this point they’re not using taxpayer money, though I would have no objection if they did: the important thing is actually producing the thing, and anything that accelerates that is good.
    GM’s sin, and it was a big one, was in killing the EV-1 (although I would note that Toyota also killed and crushed the RAV-4). We know it, they know it, and we’re all paying for it. They won’t do it again without paying a very large cost – much of their reputation, a significant part of their stock price, not to mention their likely future as a car company, all depend on it.
    “naive fanboyism about the Volt actually hurts this effort ”
    It might, if it existed. OTOH, I think the enthusiasm is very realistic. And you might want to stop using such disrespectful terms – that hurts your credibility. After all, you seem to want to persuade me, or readers, of your point of view – acting like a serious commentator will only help that.
    “the old “false balance” equation being primarily used in your case”
    My point is that these are for-profit, non-idealistic companies, all of them. Japanese car companies have benefited by having a domestic market that was very, very protected and very subsidized, and having a domestic product (small cars) that have been increasingly in demand in the US. Detroit has suffered from a strong dollar policy, and health care and pension costs that are much more socialized everywhere else in the world (why is there more production in Ontario than in Michigan? Canadian healthcare…). Sure, Asian companies were smart to increase quality, and US companies didn’t give it high enough priority, but quality does have a cost, and the asian companies had the money to invest in it. Has Detroit been less honest? I would have said so until recently, but all of the Asian car companies have been saying remarkably dishonest things about the Volt program, which has been very disappointing. Imagine, Honda saying that ErEV’s weren’t practical (that pure EV’s are better), or Toyota saying that they don’t think anyone wants to plug in!
    But, I’m not sure any of that really matters. Again, who cares whether the product comes from GM or Toyota?

  48. M1EK

    “GM’s sin, and it was a big one, was in killing the EV-1″
    And in pushing fuel cells and hydrogen in geneal and diesel when asked why they didn’t have a hybrid car, when they really had no intention of commercializing any of those things within a short enough timespan to be remotely relevant. You keep downplaying GM’s repeated, and I emphasize, more than just the EV-1, history of FUD. Toyota talked about plug-in Priuses because fanboys kept bugging them about it – but they’ve always been skeptical (consistent, unlike GM).
    GM was saying that hybrids weren’t practical when Prius was selling 100,000 per year. The worst thing you can say about Honda or Toyota is that they’re saying that plug-in’s aren’t practical when GM is selling 0 (ZERO) of them per year and doesn’t even promise to for years more.
    That’s false balance for you.

  49. Nick

    “You keep downplaying GM’s repeated, and I emphasize, more than just the EV-1, history of FUD. ”
    Yes, GM and the rest of Detroit have been pretty dishonest about avoiding high MPG vehicles. OTOH, they’re much more dependent on their sunk investment in large vehicles than are Asian manufacturers (due to varying geography in their domestic markets). I see no sign that Asian manufacturers are inherently more honest – they just have less to lie about.
    Honda & Toyota may have been consistent in downplaying plug-ins. They may even have been honest, early on. But now, they’re clearly being dishonest for competitive reasons. The alternative is that they’re incompetent, which seems unlikely to me.
    Really, the bottom line is – who cares what manufacturer it comes from? I evaluate the fundamentals, and ask: “Are the economics and the engineering correct? Do the things that the manufacturer is saying make sense?”. If they are, then that’s all that matters.
    GM has always said that the Prius is more about PR than economics (which I think was deeply short-sighted on their part). Now, they say that both PR and economics (in the form of Peak Oil) have aligned behind a very strong need to develop an ErEV. That’s true, and I believe that they believe it too.
    I’m not sure if you’re simply mad at GM’s dishonesty, or having trouble evaluating GM’s sincerity about the Volt. If it’s the former, I think you need to let it go. If it’s the latter, all I can suggest is that you read more about the new battery chemistries, redo some calculations of battery cost per cycle vs gasoline, and have a more open mind.
    What do you make of Chris Paine’s apparent enthusiasm about the Volt? Here’s what he said at ( http://www.autobloggreen.com/2007/01/09/who-killed-the-electric-car-director-chris-paine-tells-autoblog/ ):
    “Chris Paine, the director of “Who Killed The Electric Car?:
    We came to Detroit for the unveiling and the Volt looks great. It’s a beautiful design and the result of what looks like earnest and incredible hustle at GM over the last 12 months. I was impressed. The proof, of course, will be when the car is sitting in your or my driveway, but in the meantime you can be sure that all of our pressure as consumers and citizens has made a difference.
    GM has listened and made some good decisions to return to the EV table in earnest. I do not agree with their press faulting the EV1 nor do I believe that everything must wait for the perfect lithium battery; but by the same token I don’t feel that this is just a PR play at GM. We talked to senior executives and many employees who looked us in the eye and spoke from their hearts. One executive said “the public won’t forgive GM twice” which is a revealing and accurate comment.
    From what I can see, GM is doing the right thing and I’m supporting them as long as they keep making good decisions and moving plug-in cars into production reality. ”

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