Petroleum Review Editorial June 2007
Electric shock
As any planner will tell you it is fairly easy to spot the primary influences or trends but much harder to spot the secondary reaction to the trend, and even harder still to get the timing right.
In the 1980s there were lots of inaccurate predictions of oil prices going to $100/b right up to the point (1985) when they collapsed. What they had failed to appreciate was that high prices had produced an economic reaction (slowdown), a technical reaction (fuel efficient equipment) and, finally, that Saudi Arabia could not go on supporting prices by reducing production (they stopped when they lacked associated gas for desalination plants).
Repeat the process
In the face of current high prices, lack of new incremental production capacity and the challenges posed by climate change/global warming, it is becoming clear that we need to repeat what happened in the early 1980s and redesign everything to be more fuel efficient.
But do we actually need a disruptive technology, something that renders what went before obsolete? The oil industry doesn't have much experience of disruptive technology as oil was the disruptive technology that displaced coal usage, horse drawn vehicles and steam trains. The changes the industry has faced have tended to occur at a pace where adaptation, if not easy, was not particularly disruptive. So, coping with declining fuel oil markets or meeting higher quality specifications was not that difficult.
Other industries haven't been so lucky. The word processor killed the typewriter, the DVD killed the video cassette and the digital camera has largely displaced the film camera. So technology can move pretty fast. If it is the same companies making the better solution as made the earlier one, the disruption is internalised but, if not, the impacts can be severe.
Could the electric car be the disruptive technology that both addresses some contemporary challenges and secures rapid take up?
A necessary step
At first glance it seems somewhat unlikely. The general perception of electric vehicles is of milk floats with limited ranges from their charging station. However, this is quite a long way from reality. The US army now has some electric vehicles. Battery technology has improved significantly and very soon a whole range of rechargeable hybrids will be on the market. At one level the rechargeable hybrid is an absurd vehicle lugging around two engines, batteries and fuel. However, it should be seen as a necessary step before the full electric vehicle emerges.
It is a necessary step because people buy vehicles against their most demanding requirement. They usually buy for carrying capacity, range and performance that are probably only required once or twice a year. However, as large vehicles are more profitable, the car manufacturers eagerly promote the idea that customers need maximum range, performance and carrying capacity and have been very successful in doing so.
What the rechargeable hybrid will do is show that for most of the time battery power will be more than sufficient for most commuting and shopping. It will also show that electricity at the (claimed) equivalent of $1 per gallon is a rather good deal. All the opposition that electric cars are underpowered, lack range and performance, and are unmanly will largely evaporate in the face of the reality [already one of the Toyota saloon hybrids – the 450h – is claimed to out-accelerate a 911 Porsche to 60 mph].
The next stage
This then leads on to the next stage, which could occur surprisingly soon, in which the traditional engine and drive chain is removed and substituted by a small, probably diesel, generator. Now we have a lighter vehicle with great performance and range.
The generator trickle charges the batteries when the vehicle is in use, extending the effective range. When the vehicle is stopped, whether for a meal or overnight, the generator is run to recharge the batteries.
The generator can be highly efficient because it can be set up as constant speed unit. The other great advantage for the owner is the limited amount of parts and the limited amount of maintenance they will require.
All this technology is already in place, the only question is how rapidly it is fully developed, marketed and promoted. It has the potential to be a highly disruptive technology, but it also has the potential to help address a number of contemporary challenges.
Huge opportunities
For the motor industry it offers huge sales opportunities once they get over the shock of not selling internal combustion engines and recognise that maintenance and part sales will have to become much less important.
For governments it offers a realistic way to tackle burgeoning carbon dioxide emissions from transport because it is much easier to clean up power station emissions than the 800mn tailpipes there are around the world. There will be emissions from all those small onboard generators, but it's a much smaller problem as most of the time they're not in use.
The challenge for governments will be to replace the fuel taxation revenue, although potentially cheaper vehicles could bear a higher sales tax. If, as some claim, the world has not really exploited its potential gas reserves, this could produce cleaner electricity. And it is a truism that the alternatives – wind, waves, solar – all produce clean electricity.
For the oil companies it could prove a truly disruptive technology, but this depends entirely on the speed with which it is adopted. With 800mn vehicles on the world's roads it will take many years to really impact motor fuel sales. In the meantime it could reduce supply pressure on the system and start ameliorating carbon dioxide emissions from transport.
Chris Skrebowski
The opinions expressed here are entirely those of the Editor and do not necessarily reflect the view of the EI.
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