Goodbye to the open road?

Today’s question: What’s the future of the personal automobile? Previously, White and Taylor discussed calls to build more nuclear power plants, T. Boone Pickens’ alternative-energy plan and offshore drilling.

More electric, less driving
Point: V. John White

Four-dollar gasoline has sent shock waves through the U.S. economy. Indeed, for the first time in memory, U.S. gasoline consumption has declined.

India’s and China’s rising demand for oil to power their explosion in automobile use is putting pressure on the world’s oil supply system. Global production of new cars is projected to rise from 60 million a year to more than 200 million by 2050. Worldwide competition for gasoline will push fuel prices up, assuming that oil production hasn’t already peaked and supplies can somehow expand to meet global demand.

As U.S. gasoline demand has fallen, more people are using trains, buses and bikes. But the personal automobile remains the primary means of American mobility and is likely to remain so for decades to come. In his new book, “Traffic: Why We Drive the Way We Do (and What It Says About Us),” author Tom Vanderbilt writes, “It will be easier to remove the internal combustion engine from the car that it will to remove the driver.”

With China and India driving up global oil demand and competing with the rest of the world for gasoline, keeping our cars and being able to afford the energy to power them will be tough. Big changes will be required, both in the kinds of energy we use for our cars and how much we use autos. As for energy, increasing vehicle efficiency and expanding the use of electricity in cars and trucks holds the most promise.

Battery and electric drive technologies are rapidly improving. By 2020, all new cars sold in California could be hybrids with onboard batteries, electric drive components and regenerative braking systems. The Chevy Volt plug-in hybrid will be in showrooms in the fall of 2010, and a small Massachusetts company, A123 Systems, will soon be supplying plug-in retrofit kits for the Toyota Prius that will enable the cars to run solely on electricity for 40 miles and increase gas mileage to 100 miles per gallon. BMW plans to introduce a battery-powered Mini Cooper in 2012.

Hydrogen-powered fuel cells will follow later but will use the same battery/electric drive platform that hybrids and plug-ins will use. Using more electricity for transportation without making global warming worse means we have to get serious about renewable energy.

Driving less is the other way to reduce gasoline demand and stave off higher fuel prices. The California Legislature will soon pass a bill to curb urban sprawl by encouraging transportation and housing construction that reduces the need for driving. And voters will have a chance in November to pass a $10-billion bond to go toward a high-speed rail system.

Jerry, I know you hate subsidies and government regulation. But if we want to preserve the personal freedom that the automobile provides, states and the federal government have to step up to the challenge. We need an aggressive combination of regulatory sticks and financial carrots to accelerate public and private investment to transform the way we power and use our personal automobiles.

V. John White is executive director of the Sacramento-based Center for Energy Efficiency and Renewable Technologies.

No one should make predictions
Counterpoint: Jerry Taylor

John, humility demands that we acknowledge that we have no idea what the personal automobile will look like in the future. You may be right that hydrogen-powered fuel cells are on the economic horizon and battery technology will advance to such an extent that we will see the introduction of low-cost, high-performing all-electric vehicles or plug-in hybrids.

But technological advances might make super-efficient internal-combustion engines a reality. Maybe advanced cellulosic ethanol or methanol will emerge as the lowest-cost fuel of the future. Or perhaps less exotic natural gas-fired or synthetically fueled cars (essentially turning coal into oil) are in the cards. Unless your organization has access to some sort of time machine, you simply don’t know what you pretend to know.

And despite what you think, John, we can’t discount the possibility that oil prices will return to the historic mean (as they always have) and that the cars of tomorrow will look a lot like the cars of today. A recent statistical analysis of world crude oil prices from 1970 to the first quarter of 2008 by UC San Diego economist James Hamilton finds no statistically significant scarcity signal whatsoever. He concludes that “the real price of oil seems to follow a random walk without drift.” He pointedly notes, “It is sometimes argued that if economists really understand something, they should be able to predict what will happen next. But oil prices are an interesting example (stock prices are another) of an economic variable which, if we really understand it, we should be completely unable to predict.”

We do know, however, that given the high price of gasoline at present and public anxiety about reliance on foreign oil and greenhouse gas emissions, market actors have both the means and motive to pursue promising avenues of research. What need is there for your “carrots and sticks”?

Using “financial carrots” -- your euphemism for tax dollars -- to engage in this sort of thing allows corporations to hijack my earnings for their ends by using the public treasury to pay for what otherwise would have been paid for by corporate stockholders.

Using “regulatory sticks” to promote what you say is preordained geologic, demographic and technological realities introduces the possibility of error. If the government makes the wrong bet(s), promising technologies and industries will emerge less quickly and time and money will be wasted promoting commercial dead-ends.

I think you would agree with me, John, that automobile manufacturers are primarily interested in making money. I don’t think I’m going out on a limb here by suggesting that the best means of doing that is to produce cars that people want to buy. If oil prices continue to rise and batteries and fuel cells perform in the future as you say, consumers will want to buy the cars you prescribe, automakers (in a lust for profit) will move heaven and Earth to make those cars, and all will be well. If you are wrong, however, about future oil prices or the chance of technological advances along any number of scientific fronts, your policy proscriptions will do more harm than good.

I don’t necessarily “hate subsidies and government regulation,” John. I do, however, deeply distrust their utility in the automotive and energy arenas for two very good reasons. First, I distrust the ability of politicians to say no to well-organized special interests that are quite adept at rigging the market to the detriment of the public under the cover of solving social problems (see the ethanol boondoggle). Second, I doubt the omniscience of policy planners who pretend to know with ridiculous certainty what the future may hold on multiple hard-to-predict scientific and economic horizons.

Jerry Taylor is a senior fellow at the Cato Institute.