I must say, I'm a big fan of the Chevy Volt and what it stands for. Today, oil is spiking up well over $110 a barrel, so it seems like a pretty good time to bring it up. First I want to talk about oil and gas, then the Volt.
For years and years in the United States, we have been lucky to have very low gas prices relative to the rest of the world. Or at least, "lucky" is how many people would phrase it. Americans are so sensitive to the price of gas because low prices give them freedom... and that's what we're all about. Politicians can make or break their career on it, which has resulted in relatively little taxation on gasoline as compared with the rest of the world. In addition, a large part of the U.S. budget is spent subsidizing oil and gas companies. We were (or are still?) set to pay $36.5 billion to oil and gas companies in the form of subsidies from 2011 through 2020. That's good right? Low cost of gas "lubes" the economy.
Those of you who are all about free markets should be up in arms over oil. Its production is controlled by a cartel of nations in the middle east and individual governments around the world can't seem to leave it alone. In the US we push the price down; around the rest of the world it is taxed like crazy to provide money for other government programs. Somehow though it seems like oil gets lost in the democrats vs republicans mess. This is a major generalization and obviously doesn't apply to everybody, but democrats seem to hate oil because of environmental concerns, and republicans don't seem to mind it because the democrats hate it so much and just want to prove A) that democrats are dumb and B) that global warming is stupid. So many important aspects of the issue get avoided by that basic and ubiquitous "us" vs "you" argument. Don't worry, I plan to avoid the subject of rainforests entirely.
The price of gas has started to go up again and everybody is very worried. They should be worried because an oil shock can devastate our economy and make it very expensive for us as individuals to go on trips or make that long commute to work. At least in the short run they should be worried. The only reason we're potentially in this mess in the first place is because the price of gas has been kept so low for so long.
Low gas prices have lead to more dependence on oil, leaving us further at the risk of oil shocks. How many times on your morning commute have you been stopped on the freeway in traffic and taken a moment to look around? How many SUVs and trucks do you see? How many of the cars and trucks around you have seats for 4 or more and have 1 person in them? OK if you're Shaq, and you're twice the size of a normal person then you can drive a Hummer. If you're normal size, then you suck. The commercials show the Hummer flying over unpaved roads, not stuck in traffic on LA freeways. Low gas prices gave us the economic freedom to buy large, gas guzzling cars... so we did! It gave us the freedom to live in the suburbs where we can buy big houses and commute like crazy, so we did! It gave us the freedom to scoff at the bus system, complain about how its a tax drain and nobody uses it, and turn down expensive mass transit projects, so we did. All of this has left us more vulnerable to oil and the countries that control it.
The hunt for sustainable alternatives has also been greatly affected by the low cost of oil and gas over the years. When gas goes up, the economics of an alternative become increasingly attractive. When a large number of people begin to adopt an alternative, infrastructure gets built and prices go down as companies are able to scale up their operations. This has not yet happened, and you better believe OPEC knows its a possibility. In order to maximize their long term profit, they must find the balance between overproducing and charging too little (high supply = low price and they run out of reserves faster) and charging so much that alternatives begin to develop at great speed. Their goal is to squeeze the maximum amount of dollars out of all of their reserves. Alternatives are developing, just much slower than they would be with higher energy costs.
In sum, we spend a lot of money to keep prices low, which increases our dependence, which increases our vulnerability, thus making the problem worse by artificially making it better. Short term pain in the form of higher gas prices would result in long term gain as we move to alternatives. I hate to drop the "instant gratification" phrase that our generation is so well known for... but it's true! We don't want to deal with it, we want somebody else to handle it.
So what happens when we develop alternatives? Not all good things, for example with even cheaper personal transport we will buy bigger cars and live even further from work until traffic (and parking) gets so bad that we all move next door to work or telecommute. However, all of the money sent overseas to countries that (for the most part) don't like us can be diverted elsewhere. Most importantly, we will no longer be vulnerable to the price of oil, which can decimate our economy and we ultimately have no control over if push comes to shove.
Finally, I have been following the Chevy Volt for a while now. I don't think it is perfect, but it is an awesome step in the right direction. However, everywhere I look there seem to be complaints about A) how much it costs and B) the fact that the government is offering a $7,500 subsidy to purchase one.
Yes, it is expensive at over 40k before subsidies, but what new technology isn't? That's how it works! New technology is released and the early adopters that just have to have the latest tech purchase it no matter what the cost. Meanwhile, the company that's producing the car (in this case Chevy) is ramping up production, improving their production methods, and improving their technology as they receive feedback from the early adopters. With scale, production experience, and technology improvements comes price reduction. Competitors follow in their footsteps... competitions also results in lower prices. Finally, as more people adopt cars like the Volt (which is capable of running on all electric for about 40 miles and gas thereafter) infrastructure begins to appear. You will start seeing more charging stations in parking lots and installed in new homes. This opens the door for the all electric vehicle. Although if everybody made the switch today and charged their cars all night, our electrical grid (which is also in need of some serious improvement) wouldn't be able to handle it. Slow and steady wins the race.
The government subsidy is also drawing a lot of flack. First of all let's start by pointing out Chevy only plans to sell about 10,000 of them the first year. That's $75 million, or in other words less than a drop in a bucket. Now let's compare that subsidy to that of oil... yeah now it looks really small. Subsidies aren't always bad things. Sometimes nascent industries are faced with a chicken and egg problem. It costs a lot to build new tech, so new tech is expensive to buy. It is also untested. People do not want to buy the new tech because it is both too expensive, and untested. A subsidy is the egg that hatches the chicken to begin the cycle. Once enough are sold, the price comes down, infrastructure is built, and the subsidy is cancelled. That is a good subsidy, assuming of course that the industry or tech is worthy of being born.
A lot of people also connect the subsidy with GM's government bailout. Should the company have been bailed out? On the one hand, if they didn't have the foresight to stay alive without government help, then they shouldn't be in business. On the other, the economic consequences of GM's collapse along with all of the parts manufacturers, distributers, etc could have been much more expensive for taxpayers than the bailout. I don't have an answer for you, and frankly it is irrelevant to our argument. If you believe that the government shouldn't interfere in anything and should not have bailed out GM, then I cannot fault you. However, if you use this to argue against the subsidy of the Volt, it is counterintuitive. The Volt and the government subsidy to help it out of infancy combat one of the least market driven industries of all: oil. In essence, if you argue for free markets over government, you are forced to pick the lesser evil... oil or Volt. The Volt wins the title of lesser evil hands down.
Also, I really like how it looks.
Let me know if I missed anything. If anybody has a better understanding of the government oil and gas subsidy, I would love to hear about it.
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