An interesting article with some comments from Toyota regarding their perception of consumer behavior in regards to energy conservation.
Even $50 Oil Isn't Enough To Get US Consumers To Conserve
By Karen Matusic
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--For environmentalists and energy efficiency
campaigners, the fight for energy independence should begin at home in the
United States, which consumes one out of every four barrels of oil produced
in the world. And the most important ally in that fight should be high
prices, which provide the incentive to use less oil.
But even with crude oil prices near $50 a barrel - up 75% from a year ago
- U.S. demand for gasoline remains at record-high levels, and the energy
crisis hardly garnered a mention during the three presidential debates.
That raises questions about the presumed link between high energy prices
and conservation. At a minimum, the lack of conservation thus far shows oil
prices can move higher before a demand response kicks in.
Some experts believe supply, not prices, is the main motivator of
conservation. The last time Americans took energy conservation seriously was
in the 1970s. Prices were high then, but there was a also a shortage of
conveniently available gasoline, something that isn't the case now.
"America is one of the wealthiest countries in the world, so in the short
term when things get expensive the country tends to buy its way out of a
problem," said Chris Calwell, an energy efficiency specialist at Ecos
Consulting. "But if you tell an American he can't get gas today or he has to
wait in line for four hours, he will get interested in fuel efficiency. We
are not at that point yet."
No Political Pressure
While the time would seem ripe for a federal policy to wean Americans off
their gas-guzzling SUVs and pickup trucks, policymakers have been relatively
silent.
Even Sen. John Kerry, the vanquished Democratic contender who is
considered more environmentally friendly than President George W Bush, was
vague during the campaign on his plans to combat global warming or increase
the efficiency of the U.S. automotive fleet.
"The campaign rhetoric has gone around in almost a macro level about
releasing the Strategic Petroleum Reserve to dampen prices by pouring more
oil onto the market, but it hasn't gotten down to what we can do to start
weaning us from oil," said Kateri Callahn, president of the Alliance to Save
Energy. "But there is an intuitive understanding on both sides of the
political aisle that efficiency is the cheapest, quickest and cleanest to
meet demand growth."
Gasoline above $2 a gallon has yet to prompt a shift in consumer behavior
in favor of high fuel economy, said Bill Reinert, who as national manager of
the advance technology group at Toyota's U.S. unit works on cars like the
company's much-touted Prius gas-electric hybrid.
"Current consumer behavior really doesn't reflect a major shift toward
fuel economy," Reinert said. "Purchasing decisions have not been affected
yet by the high oil price. I believe this is under the radar screen of most
purchasers."
This is mainly because disposable income is higher than it was in the
1970s and because many drivers aren't convinced high prices are going to
stay. Moreover, most of the optional fuel consumption is done by the
wealthy, who are better able to resist high prices.
"There is a certain amount of demand that can change, but the high price
really hits people with the least amount of funds the hardest first, and
there is little they can do to lower demand," said James Bartis, a policy
analyst at RAND Corp. former a U.S. Department of Energy official. "If the
wealthy do not perceive these prices as permanent, they aren't going to
change much."
No Quick Fix
Experts say there really is no overnight solution to current energy
prices, given soaring demand and dwindling spare production capacity. Oil
companies and big producers are loathe to sink the necessary billions of
dollars to expand production capacity that they may have to mothball should
prices fall. And despite strides in hybrid vehicle and fuel cell
technologies, the hydrocarbon-fueled internal combustion engine isn't going
to disappear any time soon.
The only way to get on the road to energy independence, experts say, is to
dramatically increase the cost of oil well beyond current levels. But to do
this would probably require a politically unpalatable hike in gasoline
taxes.
"OPEC and other oil producers have done what most American politician are
is afraid to do - put an energy tax on Americans," said Rand's Bartis. "Are
we going to continue to plow over $100 billion a year into OPEC, a lot of
which goes to some unstable countries, or are we going to put tax on
ourselves and cause demand to adjust appropriately?"
The Alliance to Save Energy's Callahan argues that there are some measures
either party could take to boost energy efficiency. Tax incentives are
needed to boost sales of hybrid cars and energy efficient appliances and to
encourage consumers to construct energy-efficient new buildings and homes,
she says. But perhaps most important is for the federal government to "get
serious" about improving fuel efficiency.
"With oil prices as high as they are, the political will to at least
explore ways to improve the fuel economy is going to increase
significantly," Callahan said. "Consumers are going to demand it."
-By Karen Matusic, Dow Jones Newswires
(END) Dow Jones Newswires
11-04-04 1000ET
Even $50 Oil Isn't Enough To Get US Consumers To Conserve
By Karen Matusic
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--For environmentalists and energy efficiency
campaigners, the fight for energy independence should begin at home in the
United States, which consumes one out of every four barrels of oil produced
in the world. And the most important ally in that fight should be high
prices, which provide the incentive to use less oil.
But even with crude oil prices near $50 a barrel - up 75% from a year ago
- U.S. demand for gasoline remains at record-high levels, and the energy
crisis hardly garnered a mention during the three presidential debates.
That raises questions about the presumed link between high energy prices
and conservation. At a minimum, the lack of conservation thus far shows oil
prices can move higher before a demand response kicks in.
Some experts believe supply, not prices, is the main motivator of
conservation. The last time Americans took energy conservation seriously was
in the 1970s. Prices were high then, but there was a also a shortage of
conveniently available gasoline, something that isn't the case now.
"America is one of the wealthiest countries in the world, so in the short
term when things get expensive the country tends to buy its way out of a
problem," said Chris Calwell, an energy efficiency specialist at Ecos
Consulting. "But if you tell an American he can't get gas today or he has to
wait in line for four hours, he will get interested in fuel efficiency. We
are not at that point yet."
No Political Pressure
While the time would seem ripe for a federal policy to wean Americans off
their gas-guzzling SUVs and pickup trucks, policymakers have been relatively
silent.
Even Sen. John Kerry, the vanquished Democratic contender who is
considered more environmentally friendly than President George W Bush, was
vague during the campaign on his plans to combat global warming or increase
the efficiency of the U.S. automotive fleet.
"The campaign rhetoric has gone around in almost a macro level about
releasing the Strategic Petroleum Reserve to dampen prices by pouring more
oil onto the market, but it hasn't gotten down to what we can do to start
weaning us from oil," said Kateri Callahn, president of the Alliance to Save
Energy. "But there is an intuitive understanding on both sides of the
political aisle that efficiency is the cheapest, quickest and cleanest to
meet demand growth."
Gasoline above $2 a gallon has yet to prompt a shift in consumer behavior
in favor of high fuel economy, said Bill Reinert, who as national manager of
the advance technology group at Toyota's U.S. unit works on cars like the
company's much-touted Prius gas-electric hybrid.
"Current consumer behavior really doesn't reflect a major shift toward
fuel economy," Reinert said. "Purchasing decisions have not been affected
yet by the high oil price. I believe this is under the radar screen of most
purchasers."
This is mainly because disposable income is higher than it was in the
1970s and because many drivers aren't convinced high prices are going to
stay. Moreover, most of the optional fuel consumption is done by the
wealthy, who are better able to resist high prices.
"There is a certain amount of demand that can change, but the high price
really hits people with the least amount of funds the hardest first, and
there is little they can do to lower demand," said James Bartis, a policy
analyst at RAND Corp. former a U.S. Department of Energy official. "If the
wealthy do not perceive these prices as permanent, they aren't going to
change much."
No Quick Fix
Experts say there really is no overnight solution to current energy
prices, given soaring demand and dwindling spare production capacity. Oil
companies and big producers are loathe to sink the necessary billions of
dollars to expand production capacity that they may have to mothball should
prices fall. And despite strides in hybrid vehicle and fuel cell
technologies, the hydrocarbon-fueled internal combustion engine isn't going
to disappear any time soon.
The only way to get on the road to energy independence, experts say, is to
dramatically increase the cost of oil well beyond current levels. But to do
this would probably require a politically unpalatable hike in gasoline
taxes.
"OPEC and other oil producers have done what most American politician are
is afraid to do - put an energy tax on Americans," said Rand's Bartis. "Are
we going to continue to plow over $100 billion a year into OPEC, a lot of
which goes to some unstable countries, or are we going to put tax on
ourselves and cause demand to adjust appropriately?"
The Alliance to Save Energy's Callahan argues that there are some measures
either party could take to boost energy efficiency. Tax incentives are
needed to boost sales of hybrid cars and energy efficient appliances and to
encourage consumers to construct energy-efficient new buildings and homes,
she says. But perhaps most important is for the federal government to "get
serious" about improving fuel efficiency.
"With oil prices as high as they are, the political will to at least
explore ways to improve the fuel economy is going to increase
significantly," Callahan said. "Consumers are going to demand it."
-By Karen Matusic, Dow Jones Newswires
(END) Dow Jones Newswires
11-04-04 1000ET
