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Big Oil Is About to Lose Control of the Auto Industry


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Big oil is losing its grip on the auto industry; and, perhaps more interestingly, the recent drop in oil prices is at least partly the result of demand destruction rather than simply being a supply issue; according to analysts at Bloomberg New Energy Finance (BNEF).

 

A number of recent presentations by BNEF analysts went over many of the finer points and specifics of these assertions, providing some interesting insights (imo). A nice break from watching the US “pat itself on the back for the riches flowing from fracking wells” — those are Reed Lamberg’s words over at Bloomberg Business, if you’re wondering.

 

As far as the link between the fossil fuel industry and the auto industry weakening — much of this is simply the result of low-emissions cars gaining ground on conventional ones, according to the analysts. (I have my doubts that this is the only major cause. It seems that declining rates of ‘economic prosperity’ and resource availability are playing into this fall in oil demand as well.)

 

There is a lot to learn in the complete article and charts from their research. Startling really.

 

Except:

 

"While the U.S. pats itself on the back for the riches flowing from fracking wells, an upheaval in clean energy is quietly loosening the oil industry's grip on the automotive industry.

 

Presentations by analysts at Bloomberg New Energy Finance (BNEF) this week pick away at the idea that supply alone is behind the plunge in crude prices to $50 a barrel. The presentation also shows that low-pollution cars are gaining ground, weakening the link between oil and driving.

 

The result: Future transport is likely to look a lot different than what the major oil companies are fueling now. Instead of biofuels such as ethanol and green diesel making the internal-combustion engine fit into a world with greenhouse gas limits, wholesale new solutions are coming fast. “Where we are is in an age of plenty,” said Michael Liebreich, BNEF's founder. “We have cheap oil, cheap gas, cheap renewables. You do have an abundance of supply in a way you haven't had for decades. We also are in an age of competition.”

 

The author goes on to show why investors who still think oil investments are blue chip investments, might want to see that the big guys pulling out of oil investments are not just "greenies" taking their money out in environmental protest. If the money ride were not ending with oil they would stay for the profits. Pulling out for investment revenue declines can also be spun as ecological responsibility, which makes good press. The article covering the whys in depth with the trends clearly seen on the history graphs, it might be time to assess fallback positions from oil as a portfolio cornerstone.

 

The whole article from Bloomberg is here: http://www.bloomberg.com/news/articles/2015-04-16/big-oil-is-about-to-lose-control-of-the-auto-industry

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Nothing really new in that story, other than perhaps that Bloomberg is talking about it. All of that has been publicized for quite some time now. If you follow magazines like "The Economist" or similar publications they have been saying these things for some time now. The oil imports have been falling for a long time now.

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IMO the oil industry is undergoing a severely stressful time due to the confluence of a variety of factors - sort of a perfect storm. But IMO they will recover, probably to a "new normal" of high profitability. This report from Edmonds indicates there are still a lot of people that prefer a nice big comfortable vehicle to the current "green" offerings.

---ron

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Here's an interesting article: http://money.cnn.com/2015/04/21/autos/electric-car-hybrid-for-suv/

 

It seems that people prefer gas guzzling, safer, more polluting SUVs to EVs and Hybrids and only went to them for purely economic issues. With the price drop in oil, we are seeing a resurgence of less thrifty, more polluting vehicles that most people prefer.

 

Personally I like the idea of a smart sized EV as a supplemental "city car," sort of like a over grown street legal golf cart. If someone would just make them for a reasonable price ( say under $10k) with a reasonable range (say 100 miles) and capable of a reasonable top seed - (say 70mph) then they will surely sell plenty, but they will never replace the soccer mom's SUV. To do so they would have to make an SUV sized EV that competes with a gas model in all parameters, price (including economy of operation), range, comfort and speed. And they are a long way off from this.

 

Chip

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I agree that oil will stay as it is needed for many products.

 

Ron and Chip, I find it more than interesting that both of those article were very obvious in not naming which car the 45% who did trade in for another alternative fuel vehicle was being traded in and which was being bought. I say that it is obvious they could not for this reason. From 2008-2010 the Tesla roadster was on the roads and sold out no carmaker came up with anything for two years, and then only one. The Toyota Prius hybrid had been around for a decade and a half so that was not included I guess. My point is this, as of today there are only a few EVs and none getting more than 85 claimed miles per charge except Tesla. I would like to see those article redone with the cars traded in that caused those comments, and the vehicles they traded in for 45% of the time. I have also seen those articles that leave Teslas completely out and only discuss or include in their lists the Leaf, a few compact newcomers to the EV arena, and the hybrids. In other words bigger than what. And the answer to that is not to object to price or about price. They did not mention price but size as a factor. I did read both articles.

 

The only real EV that has been out since 2010 is the Nissan Leaf, and it is mid size with about 80 miles a charge I believe. All the rest are compact or subcompact that have come out like the Kia Soul EV and others. The only full size EV today is the Tesla and that will hopefully change soon, since Musk released his patents all sorts of folks have announced EVs in 2017 or later with 200 mile range.

 

The Model X SUV comes out early 2016, just a few months late.

 

I admit to being a greenie. I am looking forward to saving lots of green, dollars that is, when the Tesla consumer model comes out 2017ish and I can afford one without cashing in any of our Tesla shares.

 

I've driven a Tesla Model S. I've driven a Nissan Leaf.

 

I agree that the most affordable cars are at least two years away. But Tesla will begin to have control of the battery costs according to his press, next year as the Gigafactory opens.

 

Chip,

I'm not anti gasoline, just gas hogs. For more immediate gratification I put money down to have a place in line for one of the first of these:

http://www.eliomotors.com/

 

They will be making them here, about 20 mins from my house. Yes there is a chance it does not come to market, but I bet a hundred bucks it does.

 

Great info guys.

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By the way guys, you really should get out and at least test drive these new full EVs. Now don't get me wrong, I don't care if one prefers gas/diesel for any reason/s at all. But the EVs today are radically different in every single way. First off, unlike the folks who have never driven one, those who have are usually amazed by things they never considered. For example. After already driving a Tesla Model S and a Leaf, my buddy who has a used car lot and owned the Leaf for awhile, got rid of it because he lives another ten miles from town then me and I am ten miles from town. Anyway he has had a 2012 Mitsubishi MiEV, the tiny one, unsold for the last year. It gets a no joke tested 62 miles per charge combined. Then claim, because of regenerative braking 98 miles per charge. You can see that here: http://www.mitsubishicars.com/imiev/specifications then scroll down to Fuel economy and click on the plus sign to see more and the range is there.

 

 

One thing folks need to look for in the smaller ones is that they "estimated" mileage is usually at no more than ~60 mph, and with no air conditioning or heaters running. And with no passengers.

 

What did I mean by surprised at things you never thought of? Well, for starters the effect on handling the batteries have. I found the tiny MiEV that is almost as small as a Smart car, to ride more like a larger full size car. See, the low center of gravity of battery weight makes it feel like much larger full size luxury sedan. It does not have that bouncy springy noisy subcompact car ride. The lack of noise really strikes you, especially when you put the pedal to the metal and the thing accelerates in a very snappy way. Then the fear of running out of charge hit me because he had gotten it charged but did not have the charger which was on order and I forgot to ask how to check remaining charge. I drove it about five miles on Hwy 80 here at 60 mph and goosed it some and did some mild evasive maneuvers, and loved it. But that used 1/12th of the rated range. I would love to buy that as a toy, but the new wave of EVs are right around the corner with lots of 200 mile plus models coming out in all price ranges, so I will wait. I drove it on the same stretch of road, the same way, and both were sluggish compared to the Model S which is indescribable with perfect handling and acceleration like being shot out of a slingshot. And none of the mechanical clattering's and tranny and springing noises that accompany a muscle car.

 

Isn't it ironic that the full size sedan EV turns out to be faster than any muscle car save a few in actual races?

 

I remember way back when a buddy was buying his first motorcycle and Since I had been riding my Motoguzzi at age 14, and was then 21 and riding my Triumph Daytona 500, he brought me along to help him pick one out. The guy had a like new used Kawasaki 500 three cylinder two stroke which I referred to as the wing ding ding brigade. The salesman gave me the look like he knew better when I said I rode a Triumph and I doubt that bike could keep up, let alone beat it. He got me to test ride just to see. I rode it slowly out to the road on the gravel drive fine, turned it onto the four lane and figured I'd see what it could do. So I gave it full throttle and not expecting much, was catapulted back on my toes barely hanging on by my fingertips, with the bike in a wheelie almost straight up. It took all my strength to lunge forward enough to let up on the grip throttle I had been hanging on for dear life to. I learned to never assume a new to me vehicle will act like all the others with that one. I had to keep it out for about ten minutes, enough time to stop shaking from my near accident from stupidity. I continued to ride for most of my adult life until just about five years ago. I had owned an Electra Glide Classic I bought new and many others through the years from Norton Commandos to the first water cooled 'Zuki water buffalo to scooters and four Wings, three Gold and One silver full dress, along with a Kawasaki 500 of my own a few years later, and the Yamaha 750 triple threat crotch rocket. I never made such a bad error in judgment assessing any vehicle from two to ten wheels ever again.

 

But I gotta tell you guys that you really ought to test drive a few of these EVs, especially if you think you will never buy one. Not to win you over but that is the only way you will understand what I am writing about since you likely won't ever buy one. These aren't your daddy's EVs. ;)

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Heck, I'd love to just *see* a Tesla, let alone test drive one!

 

The DW drives about 35 miles each way to work. That is probably too far for most EVs given that she would like the AC on when those 100F summer days show up and the heater on when it's 23F. I think that for people who live in rural areas - where driving 35,000 miles a year is commonplace) a hybrid makes more sense than an EV; certainly a pluggable hybrid. I still have a 1985 VW Rabbit diesel that got 55mpg back in the day. Why couldn't we have a diesel electric that does 5 times that?

 

But I certainly share your enthusiasm for "green". I wouldn't even care if it didn't help clean up our atmosphere, just the idea of getting away with something is good enough for me. :P

 

I wonder where my Elio is.

 

WDR

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How long before they will come up with some way to collect some some kind of tax to offset road taxes collected at the pump and necessary to maintain and build roads?

Oregon has already experimented with a GPS device that calculates how far you've driven on their roads so they can collect a tax. So it's only a matter of time before it is widespread. And insurance companies are already offering customers a device that they can plug into their vehicles OBD port that will tell them how you drive (speeding, full stops, etc.). I'm guessing that within 10 years you won't be able to buy insurance for your car unless you accept one of those OBD devices.

 

WDR

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Oregon has already experimented with a GPS device that calculates how far you've driven on their roads so they can collect a tax. So it's only a matter of time before it is widespread. And insurance companies are already offering customers a device that they can plug into their vehicles OBD port that will tell them how you drive (speeding, full stops, etc.). I'm guessing that within 10 years you won't be able to buy insurance for your car unless you accept one of those OBD devices.

 

WDR

This past summer I voluntarily installed one of those driving monitor devices in the OBD port in response to an offer from Progressive Insurance. They monitored my driving for about 3 months or so and then gave me a retroactive and continuing 22% discount on my truck insurance. Great deal to take advantage of if you are a careful driver and do most of your driving during daylight hours.

---ron

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I thought about getting one of those Big Brother devices, though I don't think I'd save any money. In fact I think they'd jack up my rates. I'm a very careful driver with a clean driving record who doesn't speed, in fact I use my cruise control 90% of the time. However, I drive 3,500+ miles a month for business.

 

I'd love to have an Elio, ditching my 2 small motorbikes when I retire, though I have my doubts that they will ever roll off the assembly line with the specs ad prices they advertise (mainly due to government interference and suppression) but I guess I'm a pessimist, it's just that I've seen it happen before. I'll bet the government (spurred by crony capitalist influence from GM, Government Motors, and others) quickly re-classifies it as a 3 wheeled car as soon as they go into production, to force all their car regs down their throat. I don't think my DW will fit in one though, as she is slightly wider than the cabin allows. B)

 

Chip

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Dave,

I finally realized you were referring to the avatar which even on my 27" screen just looks like some kind of landing gear. I finally clicked on it and saw some more detail. What the heck is that? It looks like a radial engine on a motorcycle???? Ok give a link to an article or better pics or a name so I can. My curiosity is peaked.

 

Chip,

I hope so too. I believe they will produce the Elios and will be tickled if they are plus or minus 20% in price and mileage. I am confident because they have already gotten state legislatures across the country ro eliminate the requirements to wear a helmet because most three wheelers are cycles. Many have created a new designation called "Auto Cycles" that they will fall under and not require a helmet. THey never mention if the requirement for a motorcycle endorsement and test would be required in all states, some, or none in their blogs. I am getting one. Regardless of company claims, I doubt they would refuse a factory pick up since I am local and had a number.

 

You have to remember that Musk released his patents so all the car makers can make competing cars. He did that because his goal was to create a genuine alternative to gas and diesel vehicles. But the others just were not up to the engineering. See he still has first in advantage, and if you think about it, all those naysayers in the stock market biz screaming about the sales figures neglect to mention that the company does not have a billion dollar advertising budget. They have used strictly awe and shock that cause word of mouth and a disbelieving media world something to write about.

 

Let me say that again. They spend nothing on advertising. HIs projects "Just Work" and are inherently newsworthy. If you want to see how much the major auto makers outsell Tesla just have them cease all advertising to put up or shut up. That written with a grin not in anger.

 

The 200 plus miles per charge cars are coming in two years. Period. And some of them, including Tesla's will be in the consumer price ranges. Why make his patents available? Because he needs many more battery buyers to bring down the cost of them, as well as competing technologies and battery designs he can buy and use.

 

It is funny how when a market exists, it cannot exist in a vacuum. Investors and buyers abhor a vacuum where money making is available. Musk needs the whole world to make EVs so his battery biz can take off and in a couple of years really drive down the cost to build. And whoever holds the patents to the next prevailing battery technology, will affect not only EVs, but every cell phone, computer, tablet, stereo, flashlight, radio, car truck and aircraft! Remember those batteries don't have to be soldered together into EV and solar back up power packs. They can be sold as AA and AAA singles much cheaper with more profit margin because they don't have to meet crash tests without burning.

 

I won't have one of those devices installed because I do a lot of right turns on red and always drive five over with cruise control. If I did not use cruise on the local 70 mph interstates, I will slow down to 50 and up to 85 without realizing it when I'm talking on the hands free in my vehicles. I'm a safe driver but can't watch the road and talk and watch my speedo. I believe it is more a function of my having a cruise control for years than inability. Texting while driving? Why yes, I di have Cortana read them to my by just answering yes when she pops on to tell me a text just came in from XXXX, and asks if I want to ignore it, or have her read it to me. Then after she reads it asks if I want to reply. She takes great dictation and usually gets my replies perfectly, but to be sure asks if I want it sent. If I say yes, the reply is sent. All without taking my eye off the road or touching my phone or hands free Bluetooth device. I see texters hanging to one or the other side of their lane looking at their phones not the roads all the time. They will hang on my right rear quarter in the fast lane when I am in the right passing them doing 60 in a 70. Now yes I could ask Cortana to call 911 but that requires me to reach up and press a button.

 

I pay attention and wear my seatbelts and refuse to engage in anything more distracting to me than conversing with a passenger, be that my hands free passenger or a corporeal one in person. ;)

 

As Dylan said so well, "The Times They Are A Changin'"

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The times are not changing quickly enough, I'm afraid. And I always expect Big Oil or Power Utilities or Detroit to throw monkey wrenches into the mix. For all the talk against California they seem to have done more to spur EVs than anything else. Their laws are such that to sell vehicles there they have to include an EV in the mix.

 

I can only imagine that power utility executives wake up in a cold sweat every few nights thinking about what he could do to their business model. But several utilities are partnering up with him on the theory that if they own the solar panels and batteries and just lease them to the homes - and if they can get that solidified into the legal code - they'll be good to go.

 

I was mooching around on Google Earth last week and checking out the beach homes in Malibu and then down to the bungalows in Santa Monica and I was surprised at how many of those bungalows have solar panels on their rooftops. Lots of them.

 

Musk is certainly an amazing guy. I think you, RV, were the first person to actually clue me into this. Before reading your remarks on him I had just thought of him in terms of very expensive but not very practical E-cars. There is a lot going on.

 

Hope it goes faster.

 

WDR

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My main problem with the Elio is it's diminutive size - like it's made for teenagers, Asians or something. The driver seat width is only 20.6" while the shoulder width is 26.8". I'm an average size guy 5'11" of average build. I will fit, but just barely. My 19" wide butt (when seated) will have about 3/4 of an inch clearance on each side while my shoulders (23") will have less than 2" on each side. Even though I could barely squeeze in, I'm afraid I would feel terribly claustrophobic in such a tiny space. A broad shouldered football player or a portly fellow (never mind a B-ball player) would never fit. Women have much wider hips (thankfully) than men do, so the bottom clearance is the critical dimension for them, eliminating many potential customers. My DW fits comfortably in a 24" camping chair, nothing less. MY DW could ride in the passengers seat, but couldn't fit in the driver's seat!

 

One would think it advantageous for them to make an XL model for larger framed people. Simply going to 24" at the hips, 30" at the shoulders and maybe adding 2-3 more inches in height won't compromise its CdA by that much (What's 2-3 mpg in an 84 MPG vehicle?) yet will fit maybe 15-20% more potential buyers. Maybe when they get up and running and see all the cancelled orders because many folks just can't fit (or if they do, they feel uncomfortably restricted, as they must remove their keys, wallet and have zero room to scratch their nose, let alone anything else) they will offer another slightly larger "luxury" or "touring" model for us bigger folks.

 

Chip

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Chip,

I found this in their FAQs:

"Yes! Most everyone will fit in the Elio. We designed the vehicle to fit a 6’1” 220 person and have had many larger and smaller people try it out and loved it! Tallest so far… 6’8”, largest so far … 6’3” 365, smallest … under 5’ (weight not asked!)."

That s here under will I fit? https://www.eliomotors.com/faq/

 

6'3" and 365 pounds fit?? Dang my 5'11" 220 will be fine.

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Oregon has already experimented with a GPS device that calculates how far you've driven on their roads so they can collect a tax. So it's only a matter of time before it is widespread. And insurance companies are already offering customers a device that they can plug into their vehicles OBD port that will tell them how you drive (speeding, full stops, etc.). I'm guessing that within 10 years you won't be able to buy insurance for your car unless you accept one of those OBD devices.

 

WDR

We switched to Liberty Mutual and was offered these devices, which we accepted. After already saving big $$ over our past insurance company we saved an addition 20% on our truck and 10% on our car. It sure paid in our case.

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