The 1973 oil crisis started in October 1973, when the members of Organization of Arab Petroleum Exporting Countries (OAPEC) including Arab members of OPEC, plus Egypt, Syria and Tunisia, launched an oil embargo against the U.S. The impact of the embargo resulted in prices quadrupling from approximately $3 per barrel to $12 per barrel. This resulted in fuel rationing, long lines at gas stations and even a reduction in the speed limit across the US. The crisis also prompted a call for individuals and businesses to conserve energy, including a campaign with the tag line “Don’t Be Fuelish”.
Hummer vs. Hybrid
Though prices leveled off after 1974, there was another huge price spike in 1979 and then again with the onset of Desert Storm. Oil prices have seen great volatility, most notably due to unrest in the Middle East, as is evident today with prices recently eclipsing $112 a barrel. During the last couple of decades we’ve seen the advent and explosive adoption of SUV’s and minivans including the Explorer, Suburban, Navigator, Escalade and Hummer, to name a few of the larger models. Though there has been widespread adoption of SUVs, there has been relatively modest acceptance of Hybrids or dramatic improvement in fuel efficiency for that matter. Alternative fuels for transportation vehicles still remains something closer to science fiction than near term reality.
In retrospect, with the volatility in oil prices and the political uncertainty with the oil producing countries in the Middle East, one might have thought there would be an all out effort to dramatically curb our appetite for Middle East oil, and the gas guzzlers which consume this oil at an accelerated rate. Even the “Drill Baby Drill” supporters, must suspect the limited supply and expected supply duration of oil would prove the need to support alternatives regardless of the interim source. Though vehicles have seen incremental improvement in mileage, it is not significant enough to dramatically curb oil and gas consumption. (Go to the U.S. Energy Information Administration (EIA) for more consumption information, they collect, analyze, and disseminate energy information and statistics at: http://www.eia.doe.gov/).
But here we are again, with another spike in oil prices correlating to increased pricing at the pump. In the US, gas is now approaching $4.00 per gallon, and in Europe and many other countries it is considerably higher. One important question which continues to remain elusive is, how high do prices have to go, and how much volatility must there be, before we see explosive adoption of hybrids and alternative fuel sources? Will our backs be against the wall before doing so? Can consumers demand, or at least demonstrate a willingness to purchase vehicles with dramatically better fuel consumption to send a message that we are ready to make the change? Can government show a willingness to lead us to a better and faster path to improved fuel economy and adoption of alternative energy options. This is no easy task, but then again, we’ve had an ample opportunity to do so since the oil price spike warning shot was fired in 1973.
Let’s say there were approximately 11 million cars sold in the US in 2010, and about 275,000 were hybrids. I use this metric with all due consideration to the fact that defining exactly what constitutes a “car” is no easy feat, let’s just consider this a general estimate. The best selling hybrid was the Prius with approximately 141,000 sold. This remains significantly below SUV sales levels in the US. For example, recent sales figures show the Honda CR-V netted sales of over 200,000 units and Lexus RX sales increased to almost 100,000. The Chevrolet Equinox ranked in the middle with sales of about 150,000 vehicles. All three of these might fall under a vague category called “fuel efficient SUVs”, the question remains, is that good news or bad news? Is the term fuel efficient SUV oxymoronic, or is it an indication that we are moving, or perhaps creeping, toward more fuel efficient sentiments? Hybrid SUVs would perhaps be more worthy of a fuel efficient SUV title, nonetheless, even a Hybrid SUV is consuming oil.
So where does that leave us? Most should agree that fuel consumption will increase over the coming decades, and will do so rapidly. With China and India emerging as the largest auto markets in the world, they can dwarf the number of vehicles in use by the US and EU. Thus it is almost a certainty that gas consumption will rise dramatically. On the other side of the coin, the supply side, many experts agree that world oil production is in the process of peaking. Some say it has already happened, others predict it will happen by 2018, some say it won’t be until 2050. Everyone seems to agree that the day will come when we will hit the bottom of the oil well, and that day isn’t too far off, be it 50, 100 or even 150 years.
Perhaps we’ve been conditioned to think that scientists and engineers will bail us out of this problem. Perhaps viable alternatives will appear with a precipitous increase in gas and home heating fuel prices. There have been many alternatives discussed from hydrogen to biofuels, from eclectic cars to methane power. It is obviously challenging as little has been accomplished from a behavioral standpoint since 1973, 40 years later we’re still driving gas fueled vehicles, some of them much larger than their predecessors and only incrementally better when it comes to fuel consumption. One thing we can say for certain, for many there is a love affair between people and their cars and changing consumer behavior when it comes to making sacrifices won’t be easy. Styling, acceleration, comfort, roominess, reliability and performance are always on the minds of consumers. Fuel efficiency ranks somewhere on that list, though it is difficult to ascertain where. It would seem one of two changes will cause a drastic change in driving behavior; dramatically higher gas prices, or a new fuel source that offers consumers stylish vehicles with good acceleration, comfort, roominess and performance at a price point comparable to what they are paying today. If hybrid vehicles (or other alternative fuel vehicles) offered good acceleration, comfort, roominess and performance and reliability at a competitive price point, many consumers would adopt sooner. Regardless. at $6 per gallon it is likely we’ll see a significant change in automobile purchasing behavior, and at $10 per gallon we’ll see truly significant changes in alternative fuels for vehicles, and home heating, and manufacturing and other oil consumptive activities. In any case, I’m betting that we’ll see a much more dramatic change over the next 40 years than we’ve seen over the preceding 40. Though no wager is guaranteed, I’d say it’s a very likely bet.
PS Virtual businesses rarely use any type of vehicle – For more on virtual go to: http://startmarketingtech.com or http://www.alanblume.com or read Your Virtual Success (Career Press).
