Peak Oil and EVs

Max Dunn, Sustainable Energy, Summer 2008 

Abstract
 
Demand for oil keeps rising while production has leveled off and will soon decline. This trend will continue and will cause oil prices to increase, wide price fluctuations and oil shortages. Since personal transportation consumes the highest percentage of oil in the US, this is a major area where oil usage can be reduced. Electric vehicles (EVs) will be at the forefront of this conservation effort. While there remain some challenges with EVs, they are ready for use and many models will be available soon. This study looks at some of the signs pointing to peak oil production, the current and future state of electric vehicles and how they will play a major role in reducing our usage of oil.
 
Peak Oil
 
The world will never run out of oil completely. There will always be oil remaining somewhere that can be scavenged from old oil fields or reclaimed from tar sands or oil shale. However, the oil that is easy and cheap to get out of the ground has already been exploited and to bring new oil supplies online it is now necessary to drill in more challenging environments or to use more energy intensive methods to reclaim it.
 
All oil fields have a production curve that rises at the beginning, may stay stable for a period of time, and then falls. This is a natural given that all oil fields hold a finite amount of oil. So the term “peak oil” refers to when the world’s supply of oil collectively hits this production peak, not when it runs out.
 
M. King Hubbert was the first geoscientist to look at this effect and predicted that oil field production would follow a bell-shaped curve. The peak of this curve is referred to as the Hubbert Peak. In 1956, he predicted that oil in the US would hit a peak in 1970 and while this theory was widely ridiculed at the time, it came true. Since then, many other oil fields around the world have hit their peak and are in production decline.
 
The demand for oil is relatively inelastic in the short term. For example, when gas prices rise consumers don’t immediately trade in the gas-hogging SUVs for fuel-efficient Priuses, but the next time they buy a car they will likely buy one that is more fuel efficient. The inelasticity of demand can also be seen in the fact that since 2003, oil prices have tripled1 yet demand for oil has kept increasing at 1.5% to 2% per year2.
 
Oil supply is also inelastic. It take many years to drill and develop new oil fields. There are no oil fields in the world that have spare capacity (for the more desirable light-sweet crude), otherwise they would have increased their production already to take advantage of the higher prices.
 
Even though many developed nations are being more efficient in their use of oil, the developing world is rapidly increasing its usage of oil. For instance, from 2003 to 2008, China alone increased its oil consumption of oil by 2.44 million barrels per day (mbpd) which is more than half the increase of oil consumption of the rest of the world combined.3
 
China is also not able to significantly scale back its increase of oil consumption. This is because every year in China, millions of workers are migrating away from low paying farm jobs and looking for higher paying factory jobs and millions of college graduates need to find work. In order to avert social unrest, China’s government needs the economy to grow at a rate of over 10% a year to create these jobs. And a growing their economy also requires growing their energy consumption.4
 
The problem is that oil discoveries peaked in 19645 and oil production has been essentially flat since 2005.6
 
Looking forward, projections based on bottom-up analysis7 - looking at the decline of existing oil fields and contributions from new mega-fields coming online - as well as curve-fitting analysis8 all show the same conclusion - peak oil is either here or very close, maybe no more than a few years away.
 
A vivid illustration of the problem is a plot the world gross domestic product (GDP) on the same graph as oil production. In this graph, it can be seen that GDP and oil production increased at about the same percentage rate from 2003 to 2005, but since 2005 GDP has continued to increase while oil production has been flat. This gap between oil and growth is likely to have extreme effects.
 
 
Peak Oil Effects
 
One of the effects of peak oil will be wide price fluctuations. This happens whenever there is a inelastic demand for a commodity with inelastic sources. As the demand rises just slightly above the supply, prices will skyrocket. Eventually, more sources will come online and demand will go down until demand is just slightly below the supply. Then the price will plummet and the cycle will start over again.
 
One historical illustration of this cycle is the peak of whale oil. When whale oil peaked, kerosene and other forms of oils for illumination were in wide use, so whale oil demand was not as inelastic as petroleum oil is today. Nonetheless, after peaking, the price of whale oil increased greatly and experienced wide fluctuations:9
Another more devastating effect of peak oil will be shortages. At a certain point when demand continues to rise but supplies stay flat or fall, there won’t be enough oil for everyone that wants it, no matter what the price. We will then relive the scenes from the 70s where gas stations often didn’t have any gas to sell, and the ones that did had long lines of people waiting to buy it at any price.
 
Electric Vehicles Can Help
 
Electric vehicles will be one of the major tools that can be used to counteract peak oil. First, lets define some terms:
 
  • ICE - Internal combustion engine, or conventional vehicle
  • HEV - Hybrid Electric Vehicles (not plugged-in)
  • PHEV - Plug-in Hybrid Electric Vehicles (electric and gas)
  • BEV - Battery Electric Vehicles (electric only)
 
The general term “electric vehicles” or “EVs” refers to either a PHEV or BEV, that is, any vehicle that is plugged in whether or not it has an additional ICE.
 
In the US, the largest segment of oil use is personal transportation which uses 41% of the total.10 Therefore, efficiencies in personal transportation will provide the greatest reduction in oil use.
 
A conventional vehicle uses almost 500 gallons of gas per year, while a hybrid uses just over 300. A PHEV by contrast uses about half of that, or 150 gallons a year, while a BEV uses none. Therefore if the entire US fleet of personal vehicles were converted to EV operation, it would save between 28% and 41% of the oil currently used. Given more realistic fleet conversion rations, EPRI estimated that EVs could save between 2.0 and 3.7 million barrels of oil per day (mbpd).11 The 3.7 mbpd is more than the amount we currently import from Saudi Arabia, Nigeria, Venezuela and Russia combined.12
 
EV and Sustainable Energy
 
One important benefit of EVs is that they can be charged with sustainable electrical sources like solar, wind, geothermal, etc. In addition, they can help make the electric grid more stable and better utilize all electrical energy sources.
 
To understand why this is true, it is important to realize that on the electric grid, there is no significant storage capacity. Pumped hydro does provide about 20 GW of power in the US, but this is only 2% of the total electric capacity.13
 
Electricity demand also fluctuates greatly each day and in the US, daytime energy requirements peak at about twice that of nighttime requirements. This means that electric power plants often need to run at less than full capacity or be turned off and on, both of which significantly reduce their efficiency.
 
EVs charging at night can fill in the nighttime valley and make better use of existing electricity sources:14
 
 
 
Since there is no electric storage on the grid, the intermittence of wind and solar power could destabilize the grid. It has been estimated that the grid can accommodate only about 20% wind-generated electricity before stabilization problems appear.15 The same is true for solar power, as moving clouds may cause variability in their power output.
 
Besides unexpected variability, both solar and wind have expected variability. Solar produces power only during the day, and wind produces power only when the wind is blowing, which is usually at night. Some wind farms in Colorado have the problem that a portion of their power is wasted since there is no demand for it.
 
EVs can help with both forms of variability. Charging at night, they can make use of wind power. Charging during the day, they can utilize solar power. With a smart grid, EVs can also be instructed to charge periodically throughout the day as extra power becomes available, or even give some of it back if extra power is needed. This capability can help stabilize the grid and make better use of intermittent sustainable energy sources.
 
EVs Are Ready
 
Unlike other technologies which are not ready for actual use, EVs are here, ready for use, and many more are coming in the next several years. Let’s look at some of them.
 
GM EV1
 
GMs EV was a very popular electric vehicle that was introduced in 1996. It performed well, accelerating from 0 to 60 MPH in 8 seconds, had an electronically limited top speed of 80 MPH and a range of 100 miles. Unfortunately, when the California zero emission vehicle (ZEV) mandate was rescinded in 2003, GM recalled all the vehicles and crushed them.16
 
Toyota RAV4-EV
 
The Toyota RAV4-EV was introduced in 1997. It has a range of 100 miles and a electronically limited top speed of 72 MPH. In 2003 when the California ZEV mandate was dropped, Toyota offered these vehicles for sale and several hundred of them were sold. As such, they are the longest running electric vehicle and provide a good opportunity for study. One result of a survey of RAV4-EV owners was that they have a high level of satisfaction with their cars and experience a lower level of repairs.17
 
Another interesting outcome of the RAV4-EV was that its batteries lasted longer than expected. The battery pack was warranted for 60,000 miles and was expected to last 100,000. However, several RAV4-EV owners have put on 150,000 miles before the battery range dropped too low to be useful to them.18 Many of the new Li-ion batteries will have even longer lifetimes than this 10-year old NiMH technology.19
 
Tesla Roadster
 
The Tesla Roadster was designed to be one of the fastest production sports cars available and with its acceleration from 0-60 MPH in 4 seconds, it certainly met that goal. It also has an impressive range of 230 miles and a top speed of 125 MPH. However, it also comes with an impressive price - about $100,000. It is shipping now, but there is a long waiting list.
 
Electric Conversions
 
Hobbyists for years have been converting the cars to electric operation.20 The process involves removing the gas motor and replacing it with an electric motor, controller and batteries. There is also some other work involved, like adding a vacuum pump for the brakes and sometimes an additional motor for the power steering and air conditioner. The replacement electric motor is considerably smaller than the gas engine it replaces, however, the batteries take up quite a bit of room - especially if they are the cheaper lead-acid batteries. The cost for parts and lead-acid batteries runs between $8,000 and $15,000.21
 
Hymotion PHEV
 
Hymotion is a subsidiary of the battery maker A123Systems and is offering a conversion module to turn a Prius into a plug-in hybrid. The cost is $10,400, including installation and shipping, and will usually double the mileage of a regular hybrid.22
 
In the next few years, it is likely that manufacturers will start shipping PHEVs as part of the normal lineup.
 
Aptera
 
The Aptera is shaped more like an airplane rather than a car. As such, it will be the most wind-efficient vehicle on the road with a drag coefficient of 0.11. To put this in perspective, the previous most efficient vehicle was the GM EV1 with a drag coefficient of 0.19 and the Prius has a drag coefficient of 0.26. The Aptera is also very lightweight which will make it even more efficient. The performance is good too with a 0-60 MPH time of 10 seconds and a 85 MPH top speed and 120 mile range. The cost for the all-electric version is $27,000 and it will start shipping in late 2008.23
 
Chevy Volt
 
The Chevy Volt might be the first all-electric car from a major automotive manufacturer. While it will be a pure electric drive vehicle with 40 mile range, it will also include gasoline engine operated in series with the electric motor. This means that the engine will not power the drive train directly, but will instead power a generator that will feed electricity to the motors. After the all-electric range of 40 miles has been depleted, the generator will kick in to give the Volt a total range of 600 miles. Performance will also be good with a 0-60 MPH time of 8 seconds and a 120 MPH top speed. While the price hasn’t been finalized yet, it is likely to cost about $40,000 and be available in 2010.
 
Other Upcoming EVs
 
Many other manufacturers have plans for EVs. Some of them include:
 
  • Miles XS500
  • Smart EV
  • Th!nk
  • Tesla Whitestar
  • Mitsubishi iMiev
  • Nissan GT 2012
  • Tata Indica EV
  • REVA
  • Dynasty iT
  • Phoenix Motorcar SUT
 
EV Challenges
 
While EVs are ready for use, there are still some challenges. One of them is that with a pure battery EV, the range will be limited. Studies have shown that a 40 mile range would satisfy the needs of 63% of all drivers.24 Opportunity charging (that is charging at work or when shopping) will increase the effective range. Hybrid EVs, won’t have this range limitation since they can continue to drive on gas power after battery power is exhausted.
 
Another challenge with EVs is that only about 50% of the US population parks within 25 feet of a charging outlet each day.25 This will improve as charging outlets are installed in apartments and workplaces.
 
Lastly, while a BEV costs about the same as an equivalent gas car (take out the gas engine and add an electric motor and controller), battery costs will push the total price quite a bit higher. Currently, a Li-ion battery that provides 40 miles of range adds about $12,000 to the cost of the car, and a for a 100 mile range, the additional cost is about $30,000.
 
However, these prices are dropping and a major EV battery manufacturer announced that it expects prices to drop to half the current prices once volume starts to rise.26
 
Balancing the additional cost for batteries is the fact that EVs cost less to operate. On average, EVs use about $0.03 per mile for electricity, versus $0.20 per mile for an average gas-powered car. In addition, maintenance costs are less since there are less brake pad replacements (with regnerative braking.) Also, BEVs don’t need oil changes, tuneups or smog tests.
 
Taking a real-world example, BlueSky Motors in Sacramento has a stock of lightly used Ford EV Rangers that they occasionally sell on eBay for about $29,000.27 The equivalent gas-powered version of the Ranger costs about $9,000, so the battery premium is about $20,000. Over 100,000 miles, the electric version will consume about $5,000 of electricity and the gas version will consume about $25,000 in gas, so the electric savings is $20,000 - exactly the same as the extra cost of the electric version.28
 
This leads to an opportunity to finance the extra battery cost with the gas savings. A company called Better Place is taking this approach. They are partnering with Renault-Nissan to make a 100 mile BEV that is affordable because owners pay a lower amount up-front for the vehicle and then pay for miles that they drive. Better Place is also setting up a multitude of charge spots where the cars can be recharged and also battery exchange stations where the entire battery pack will be swapped out for a fresh pack instantly giving an additional 100 miles. Better Place has already formed agreements with Israel and Denmark to deploy their cars and setup the charging and battery replacement infrastructure.
 
EV Ramp Up
 
We have seen that soon the world won’t be able to produce enough oil to fill the demand. So how fast can we ramp up electric vehicles to help with the coming oil shortages?
 
Under normal circumstances, it will take a long time to replace the current vehicle fleet. There are 250 million registered passenger vehicles in the US29 but only 16 million new cars are sold each year.30 Cars are becoming more reliable which contributes to their increasing lifetime which is now 9 years. As an illustration of this, in 2007 over half of the 1990-model cars were still on the road.31
 
To see how fast we could ramp up EVS, it is instructive to look at the penetration of diesels into the French market. From introduction, it took about 22 years for diesels to reach a 50% market share:32
 
 
EPRI came to a similar conclusion when they estimated that PHEVs will achieve a 50% market share by 2030.33
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But what if we don’t have that long and start experiencing skyrocketing gas prices and widespread shortages before then? If Americans get serious about saving oil, the ramp up time could be substantially reduced. One example of this is to look at airplane production during WWII. Before the war, less than 4,000 military planes were built per year. However, 5 years later almost 100,000 planes were produced - a 25 fold increase.34
 
Conclusion
 
In conclusion, peak oil is here and will only get worse. Electric vehicles can be a major component of reducing oil usage and can readily use sustainable energy sources. There are still some challenges remaining with EVs, but the technology is ready and many electric vehicles will be available soon. EVs will be more expensive than gas-powered cars, but the extra cost can be financed through the gas savings. Finally, the ramp up to EVs will proceed slowly until oil shortages become acute, and then EV production will increase quickly.
 
References
 
1 The Oil Drum “Oilwatch Monthly - July 2008” http://europe.theoildrum.com/node/4296
2 BP Statistical Review of World Energy June 2008
3 ITF “Interim Report on Crude Oil” http://www.cftc.gov/stellent/groups/public/@newsroom/documents/file/itfinterimreportoncrudeoil0708.pdf
4 Spiegel Online “As Olympics Open, China's Economy Slows” http://www.spiegel.de/international/business/0,1518,570810,00.html
5 The Oil Drum “Peak Oil Overview - June 2008” http://www.theoildrum.com/node/4172
6 The Oil Drum “Peak Oil Update - August 2008: Production Forecasts and EIA Oil Production Numbers” http://www.theoildrum.com/node/3720
7 The Oil Drum “Wikipedia Megaproject Update (August 2008)” http://www.theoildrum.com/node/4419
8 The Oil Drum “ The Oil Drum “Peak Oil Update - August 2008: Production Forecasts and EIA Oil Production Numbers” http://www.theoildrum.com/node/3720
9 The Oil Drum “Crude Oil: how high can it go? (19th century whaling as a model for oil depletion and price volatility)” http://europe.theoildrum.com/node/3960
10 SAIC “The Hirsch Report” http://www.hilltoplancers.org/stories/hirsch0502.pdf
11 EPRI “Environmental Assessment of Plug-In Hybrid Electric Vehicles” http://mydocs.epri.com/docs/public/000000000001015325.pdf
12 EIA “Crude Oil and Total Petroleum Imports Top 15 Countries” http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html
13 EIA “Existing Capacity by Energy Source” http://www.eia.doe.gov/cneaf/electricity/epa/epat2p2.html
14 EPRI “Driving the Solution - The Plug-in Hybrid Vehicle” http://www.calcars.org/epri-driving-solution-1012885_PHEV.pdf
15 EWEA “Large-scale Integration of Wind Energy in the European Power Supply” http://www.ewea.org/fileadmin/ewea_documents/documents/publications/grid/051215_Grid_report_summary.pdf
16 Sony “Who Killed the Electric Car?” http://www.sonyclassics.com/whokilledtheelectriccar/electric.html
17 Eschew Obfuscation “Battery Electric Vehicle User Experiences” http://blog.maxdunn.com/articles/2008/02/04/battery-electric-vehicle-user-experiences
18 Eschew Obfuscation “RAV4-EV 146,000 Miles and Still Going” http://blog.maxdunn.com/articles/2008/04/25/rav4-ev-146-000-miles-and-still-going
19 Eschew Obfuscation “Altairnano Batteries - 25,000 Cycles” http://blog.maxdunn.com/articles/2008/05/12/altairnano-batteries-25-000-cycles
20 EVAlbum “The Electric Vehicle Photo Album” http://www.evalbum.com/
21 EVAlbum “How much will it cost?” http://www.evalbum.com/build#cost
EAAEV “How much does an EV conversion cost?” http://eaaev.org/Flyers/index.html
22 Hymotion Web Site http://www.a123systems.com/hymotion
23 Aptera Web Site http://aptera.com
24 “Anant Vyas, Argonne National Laboratory” http://www.maxdunn.com/Conference-PI+Reducing+Oil+Usage
25 UC Davis ITS “The Early U.S. Market for PHEVs” http://pubs.its.ucdavis.edu/publication_detail.php?id=1191
26 Reuters “Ener1 sees hybrid battery costs halving”http://www.reuters.com/article/GCA-GreenBusiness/idUSN2944827320080829?sp=true
27 eBay “eBay BlueSkyMotors Store” http://motors.shop.ebay.com/merchant/blueskymotorsinc
28 Eschew Obfuscation “Ford EV Ranger Cost Analysis” http://blog.maxdunn.com/articles/2008/05/21/ford-ev-ranger-cost-analysis
29 BTS “Table 1-11: Number of U.S. Aircraft, Vehicles, Vessels, and Other Conveyances” http://www.bts.gov/publications/national_transportation_statistics/html/table_01_11.html
30 BTS “Table 1-12: U.S. Sales or Deliveries of New Aircraft, Vehicles, Vessels, and Other Conveyances” http://www.bts.gov/publications/national_transportation_statistics/html/table_01_12.html
31 SAIC “The Hirsch Report” http://www.hilltoplancers.org/stories/hirsch0502.pdf
32 ANL “Use of National Surveys For Estimating “Full” PHEV Potential For Oil Use Reduction” http://www.transportation.anl.gov/pdfs/HV/525.pdf
33 EPRI “Environmental Assessment of Plug-In Hybrid Electric Vehicles” http://mydocs.epri.com/docs/public/000000000001015325.pdf
34 “Table 74 - Factory Deliveries of All Military Airplanes” http://afhra.maxwell.af.mil/aafsd/aafsd_pdf/t079.pdf

 

Revised on September 16, 2008 08:59:45 by Max Dunn (69.226.216.130)