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Why hybrid cars aren't selling well

By Alan Caruba
web posted March 26, 2007

An article in the March 19 issue of Business Week magazine caught my eye. "Why Hybrids are Such a Hard Sell" was the topic and reporter David Welch began by writing, "Given all the buzz about hybrids, not to mention the greening of the citizenry, you'd think they would be easy to sell. They're not."

The sale of hybrid automobiles constitutes an anemic 1.8% of all vehicle sales, down from a peak of 2.1% in October 2006.

I would suggest that Americans aren't all that "green" despite the endless print and broadcast media harangues that our wonderful lifestyles are to blame for everything from hurricanes to frizzy hair. Those who have tried to be green have found that there are considerable additional costs involved and this has proven particularly true of hybrid cars that include batteries to permit electricity to replace the use of gasoline.

"One major reason is that hybrids typically cost $3,000-plus more than conventional cars," noted the reporter. "With gas at $2.50 a gallon, it would take ten years to recoup the extra $3,000 cost of the Accord hybrid." The cost of the batteries account for about half the hybrid premium and "cheaper lithium ion cells won't appear for several years."

My guess is that auto manufacturers are producing hybrid cars as a way to take some of the heat away from the endless claims that cars and trucks are to "blame" for a global warming, but that fewer and fewer people think it's occurring or will occur. Even without a lick of knowledge about the science involved—and there is precious little to support the global warming theory—the average consumer has concluded that (a) it's not happening and (b) the cost of a gallon of gasoline is not likely to rise dramatically barring some very bad news out of the Middle East or elsewhere.

A week earlier, the Associated Press took note of an announcement by oil giant, Exxon Mobil, that "it will spend some of its huge profit on more than 20 global projects during the next three years, investments expected to add one million oil-equivalent barrels a day to the company's volumes at peak production."

The other Big Oil giants aren't exactly sitting around either. The simple arithmetic of profits is that they are necessary if new reserves of oil are to be found, extracted, refined and delivered to the market. Oil executives get paid to calculate risk and, when it comes to finding oil, the money involved is in the billions. It is a cruel reality that much of the world's oil reserves reside under nations whose stability is always in doubt and often way offshore in deep waters.

Moreover, oil is a global commodity. As a source of energy, not only does the incredibly productive United States of America need and use a lot, but every developing nation needs it as well. To lift the overall welfare of billions of people in places like China and India, oil is an essential component of economic growth. Oil transcends a lot of the interim issues that nations in the West and elsewhere devote constant debate.

For example, while think tanks churn out all kinds of analysis of our future relations with a China that has dumped communism as an economic system, though not yet politically, oil companies are moving ahead with projects that will benefit both China and, in the case of a recent joint venture between Sinopec, Fujian Province, ExxonMobil, and Saudi Aramco, initiate a world class project to meet China's need for petroleum and petrochemicals. The deal was concluded in February.

The Fujian Refining and Ethylene Joint Venture Project will expand an existing refinery from 80,000 barrels-per-day to 240,000 barrels-per-day. The upgraded refinery will primarily refine and process a type of oil called "sour Arabian crude." Other upgrades are included and the result will be approximately 750 service stations and a network of terminals in Fijian Province that will be jointly owned by Sinopec, ExxonMobil, and Saudi Aramco.

Is the real world growing smaller and more closely integrated? Yes! That's the real power of Big Oil. It is also part of the reason people contemplating their purchases are not likely to embrace hybrid cars no matter how loudly Greens shout that fossil fuels will destroy the Earth. The truth is just the opposite. They underwrite the enrichment of life everywhere for millions more people.

Fossil fuels are a part of the Earth's ecology, not some bogus threat to it, nor is there much evidence that the Earth is running out of oil.

In an informative new book by John Ghazvinian, Untapped: The Scramble for Africa's Oil, the author notes that, "Thanks to more than a decade of wildly successful discoveries by the world's largest oil companies, as well as the efforts of a growing army of Washington's lobbyists and lawmakers, Africa has been quietly transformed in policy-making circles from an insignificant backwater into a potentially lucrative new source of oil and gas for the global market."

"Since 1990 alone," writes Ghazvinian, "the petroleum industry has invested more than $20 billion in exploration and production activity in Africa. A further $50 billion will be spent between now and the end of the decade, the largest investment in the continent's history—and around one-third of it will come from the United States."

"Three of the world's largest oil companies—the British-Dutch consortium Shell, France's Total, and America's Chevron—are spending 15 percent, 30 percent, and 35 percent respectively of their global exploration and production budgets in Africa."

The need for energy, the lifeblood of economic development, is driving nations of considerably divergent outlooks in terms of their religions and their political systems to work together for their own and the greater good of the world's population. It is largely an invisible force at work, but it shows up at the gas pump and in the auto showroom where hybrids go unsold.

The ultimate irony is that Big Oil may do more for world peace and prosperity than all the posturing of diplomats and world leaders combined. ESR

Alan Caruba writes a weekly column, "Warning Signs", posted on the Internet site of The National Anxiety Center, www.anxietycenter.com. His book, "Right Answers: Separating Fact from Fantasy", is published by Merril Press. © Alan Caruba, March 2007

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