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ZOOM, The Global Race to Fuel the Car of the Future
john posted in politics & culture, rides, technologies on December 11th, 2007

ZOOM The Global Race to Fuel the Car of The Future by Iain Carson and Vijay Vaitheesswaran October 2007 Twelve Books or from Powell’s

Overview
ZOOM covers the history of the oil business and its growth into a tangle of giant industrials and oil-rich governments, followed by an analysis of what will happen if we don’t stop using oil voluntarily. Then, the authors cover the gamut of alternative fuels and automotive technologies, and follow up with a conclusion of what’s required from government, business, and society to move to sustainable transportation.

The Authors
Carson and Vaitheeswaran are correspondents for The Economist. They take a journalistic viewpoint, based on many interviews with industrialists and oil ministers, scientists and environmentalists. They do not neglect the ripe influence of Washington politics, and they cover recent developments in India and China in particular.

The Audience
The book is written in a breezy journalistic style, without footnotes or pedantry, but it does have an extensive bibliography. It does not go into scientific or complex financial detail, so it makes for an easy read, while still covering one of the most important issues for the twenty-first century. It’s a must-read for people interested in the car, oil, and alternative transportation business. It is a good choice for lay people interested in green transportation.

The authors focus on the way things work now, how we got here, and how using the tools that seem to work in this world, we might get to a more sustainable transportation economy. This will seem overly free-market oriented to some environmentalists, and too scientific and regulatory to an industrialist. But the authors’ point of view seems moderate and thoughtful to me. Note that in line with overwhelming scientific consensus, the authors have no doubt that man-made Global Warming is upon us. Their sense of the harm it is causing is more financial and political than environmental, as fits their role at a financial magazine.

What ZOOM isn’t
It’s not a guide to buying a car, engineering, investing, or even voting. It’s not an environmentalist, economics, or political tract, and it focuses on the US, Japan, and Asia, though the lessons are equally applicable to the UK and EU. It’s more a recipe for how to think about the problem, than a guide for specific solutions.

The Book
When petroleum became a valuable commodity for the first time, coal and coal gas was lighting and heating the houses of the Western world. Kerosene was the first petroleum fraction to gain wide use, as a replacement for whale oil. Today, we are searching for new automotive technologies, and new energy sources to run our vehicles. The twin crises of depleting oil reserves and Global Warming are driving research, investment, and legislation all over the world.

Once gasoline and diesel engines supplanted steam and electric on the roads, the low cost and high energy value of petroleum fuels quite literally made the modern industrial world possible. In an age of coal heat, and millions of horses on the streets, gasoline cars and oil furnaces were actually once a cleaner model. Now of course the numbers have caught up with us, and transportation accounts for a substantial share of greenhouse gas emissions in the US. In addition, petroleum diesel also contributes dangerous particulates to the mix of photochemical smog and greenhouse gases. Today, with a saturated car market in the developed countries, the sudden explosion of car buyers in India and China pose both an environmental threat and a financial one, as their demand destabilizes the international oil markets. The bungling of the political situation in the Middle East is also damaging international stability.

There are three types of technology that vie to replace petroleum: hydrogen, bio-fuels, electric batteries. Bio-fuels are easiest to implement, because they use existing internal combustion engines, and can be added to the pipeline and filling-station infrastructure. But most ( all types today) do not solve the greenhouse gas problem, and they emit at the vehicle, which is the most difficult location to clean up.

Battery-electric vehicles are as old as gas and diesel, but recent advances in battery technology and electronic controls are making battery-electric vehicles (BEVs) feasible again. While BEVs use well-understood electric technology, the batteries are still unproven and too expensive. The electric grid may not be able to support a flood of new loads. However, some will argue that night-time charging, and extensive conservation, coupled with moderate growth in the grid will balance out the extra load.

Hydrogen fuel-cell vehicles have superior fundamental efficiency, but suffer from hydrogen storage problems, and the high cost and fragility of fuel cells. The degree to which the lack of hydrogen distribution infrastructure is a problem is under debate, similar to the debate over the capacity of the electric grid.

Both hydrogen and battery-electric vehicles suffer from a lack of clean sources of energy, as both hydrogen and electricity are currently made from dirty sources. Ironically, it may be hydrogen storage which provides a storage solution for intermittent wind and solar electricity.

The authors take a market-oriented view of how the decisions will be made on which technology succeeds. In fact there is no assumption that any one technology will dominate in future in the way that petroleum does today.

There is a huge amount of information covered in the book, so I’ll list some important points:

US does not depend directly on Saudi oil: The US gets the vast majority of its oil outside the Middle East, yet we have been spending upwards of 50 billion dollars a year (before adding the cost of the Iraq war) to protect and defend the supply of Middle Eastern oil. Its an old story: the need for oil in World War Two pushed the Japanese invasion of Southeast Asia and the German invasion of Russia.

US reserves are small: If every possible oil reserve in the US was tapped fully with no regard to environmental protections, less than ten percent of our use would be filled.

The Oil Curse: Countries with low standards of living and large oil reserves invariably have sick, corrupt, and impoverished economies, not excepting Saudi Arabia which has terrible unemployment and potential unrest.

Saudi Arabia controls: The Saudis, with the largest proven reserves, profitably pumped at $20/barrel, can effectively control world oil prices by varying their production, unless increased Chinese and Indian demand or some new conflict overwhelms Saudi capacity.

Petro is dominant for a long time: There is such a vast amount of oil used every day that it is unthinkable that it won’t be dominant for decades. There is no demand issue that will prevent the major oil companies from continuing to profit handsomely from oil for a long time. However, the majors ( Big Oil) are very vulnerable to political situations especially if the US is reluctant to enter another war for oil after Iraq. The majority of oil reserves are now controlled by governments.

Peak Oil: The concept that as total proven reserves plateau and oil becomes ever harder to extract, new demand will trigger dangerous price bubbles is discussed. The authors think it likely that elastic demand caused by rising prices, and new supplies made profitable by very high wholesale prices, will balance out the shrinking supply. On the other hand, they didn’t foresee today’s sudden $80-100 oil price.

Price Supports: The authors consider falling oil prices to be a real potential problem for maintaining the profitability of new alternative technologies. They consider proposals to put a price floor on oil to be worthy of consideration.

Military Greens: Some new enthusiasts for getting off oil addiction come from the military. The US military is the single biggest user of petroleum in the world and keenly aware of its logistical vulnerability to oil supply cut-offs, as well as the real possibility of more wars for oil.

Dirty Washington as Usual: As with many other pressing issues, corruption and cronyism in Washington is blocking serious discussion of measures to mitigate our dangerous reliance on oil. The historical one-two combination of auto and oil industries, now including greedy farm-state corn-to-ethanol proponents is still powerful. Executives at some oil companies have still not acknowledged the existence of Global Warming or their association with it. Other companies have better PR, but are still blocking meaningful legislation. American auto companies still control committee chairs in Congress, but are themselves enmeshed in collapsing market share and an inability to keep up technologically. They have a legitimate desire to see the industry change once, and only once, they assume to hydrogen. But most observers think that bio-fuels and plug-in hybrids (gas-electric cars with larger battery packs) will be essential stopgap measures until hydrogen technology and cheaper batteries are viable.

The Far East: India and China are ramping up quickly to build millions of cars annually, making them major players in the world auto market. Their increased fuel demands and choice of greener technologies will be extremely important in the balance of oil price and Global Warming. There is real movement in both countries to start their industry by building greener cars, but the low price-point of their emerging markets makes that difficult.

Some points I think the authors miss:

It is axiomatic that the flood of new cars built in India and China will be made of mostly small cars, which is good, and they will be very inexpensive. In the West also there is renewed market interest in tiny cars such as the Smart and several new concepts shown this year. Yet small cars are the least profitable in the market, and being inexpensive can’t generate profits to fund research nor high-enough prices to include new technology. New manufacturing concepts like the Hypercar may well be required to break this deadlock.

Because they are journalists for a financial magazine, and have access to the CEOs and oil ministers of the world, the authors place a great emphasis on what individuals in power can do - following the classic Great Man theory. It seems to me however, that aside from founders like Bill Gates, or Hewlett and Packard, it’s a rare thing for an incoming CEO to reshape a company. It is far more common for them to generate a mixed record and be pensioned off for a new favorite. See Ford Motor and Jack Welch at GE.

The authors explain the technical and environmental issues of the vast Canadian tar sands deposits thoroughly, but neglect to predict the financial impact of really extensive extraction of these expensive and dirty sources. In fairness, the wholesale price of oil may have crossed the profit threshold of tar sands since they wrote the book, making extraction suddenly more attractive financially.

ZOOM is very America-centric, assuming I infer, that the rest of the world will follow American prescriptions, both good and bad. I would argue that an activist Europe in alliance with China and India could create a green gap like the cold war missile gap, that can be used to drive Americans, the most wasteful users of energy on the planet, in the right direction. Perhaps the authors have more faith in America and less in Europe than I.

The authors blame major environmental organizations for not pushing painful necessities like gas taxes, carbon taxes, cap and trade systems. While this may be true about traditional non-profits, there are lots of people pushing this kind of regulation, many in government and academia. Many environmental organizations have built their fundraising on absolutist never-say-die rhetoric and appeals to the heart, which do not play well with the compromises and complex technical solutions which are ahead. ZOOM does not go into what’s possible on the environmentalist or activist side in depth.

The great lesson of Rocky Mountain Institute’s Hypercar concept is that it must have low weight, much lower than current small cars. Low weight is required as a simple matter of physics to achieve stop-and-go driving efficiency. Getting to a low-weight 4-5 passenger car is going to take total re-engineering of the car, and of the car market. This problem has reverberations across the social, governmental, and economic cultures. If low-weight cars become a reality, many carmakers could be bankrupted by development costs and sheer inability to keep up, governments will have to mandate radical fuel economy or weight directly, and the market will have to change what it expects from a car, even in Europe and Japan.

Their Summary:

“Americans need to pay honest prices for fossil fuels”
The subsidies, direct and indirect for petroleum should be dropped; the replacement and environmental costs of oil, much higher than the standard wholesale cost shows, should be captured in the pump price.

“The business of business is business”
Don’t expect giant multinational corporations to act except in their self-interest.

“Leave it to the market to pick the winners”
Micromanaging market choices by government regulators will not succeed.

“Government must act”
Leaving the market alone will also not succeed. There never has been anything remotely free about the energy markets, they are creatures of regulation and government control. Governments must make it in the corporate self-interest to protect the environment.

“Individual action is the essential catalyst for change”
Individuals must create new leaders who will drive change.

My Summary:

It’s a good book, worth reading. Are they right about everything? Of course not, they are just guessing based on the guesses that other people are making. Everybody is guessing about alternative energy. Maybe bio-fuels are less-polluting than I think, maybe sustainable electricity can replace more coal than many think. The whole world situation is dynamic, like a room full of spinning plates. Many factors outside the energy economy can have huge effects on energy: agricultural markets, financial markets, replacing petro-dollars with euros, even a revolution in Saudi. Least likely I think is a disruptive technology, but that’s possible too. On a bad day the situation looks like a planetary train wreck, on a good day it looks like the biggest opportunity since cars and transistors to start a whole new industry which is actually good for the community.

What do you think?