How $4 Gas Will Fuel Cleantech


Everyone was chattering about the record $4 price at the pump this weekend, from my SUV-driving relatives at a family barbeque, to GigaOM’s own Om Malik, who doesn’t even currently drive a car. On Sunday AAA officially said that the national average hit $4 for the first time, and according to a CNN/Opinion Research the vast majority of Americans are just waiting for gas prices to top $5 a gallon sometime this year.

For those reliant on long commutes, gas-guzzling vehicles, or working in industries like the trucking biz or the airlines, the trend is really starting to hurt. But it’s also causing regular Americans to question some basic fundamentals like the efficiency of the vehicle-needy suburbs, and leading to a drop in housing prices for areas like these McMansions in this southern subdivision. This Bloomberg article points out that housing prices in neighborhoods that have long commutes and little access to public transportation in the U.S. are falling faster than prices in communities closer to cities.

It’s also clear that the high prices are really starting to affect driving habits — 66 percent of the participants in the CNN/Opinion Research survey said they are already cutting back on driving. This Ipsos poll found that 67 percent of those polled have already changed their driving habits because gas-induced sticker shock. We think its safe to say that the high price of gas in the U.S. is one of the first real and recent shockers to the average consumer that the era of cheap energy is over. BP Chairman and CEO Tony Hayward expressed that sentiment at an oil and gas and conference in Kuala Lumpur today.

A big question is will that lead to more consumer interest in greener vehicles, and more investment in renewable energy and cleantech in general? In a nutshell: yes. It’s already starting. The CNN/Opinion Research poll says 71 percent of respondents said that they are considering buying a more fuel-efficient vehicle. March saw record sales of the Prius of 20,635, an increase of 16 percent from last March.

The ultimate sign of more interest in greener cars, is that GM is considering selling off the Hummer brand : the embodiment of America’s unsustainable addiction to fuel-hungry vehicles. At the same time GM is also shuttering four plants that have been making large vehicles and SUVs. Bigger at the expense of fuel efficiency is no longer the cornerstone of Detroit’s future.

As usual it’s the startups that are leading the way on the disruptive technology. Whether its companies that are making the traditional combustion engine more efficient, like Transonic Combustion is doing, or paving the way for grid-connected cars, like Tesla has done, the next-generation of technology will likely come out of the Valley first before it lands in Detroit.

But we’re a bit impatient and a lot of this disruptive tech is several years from commercialization. Perhaps the most frustrating aspect for us, is how few good options there are for moderately priced, truly green vehicle option for consumers today. As the Wall Street Journal pointed out last week its not even a smart economic play to trade in an old SUV for a Prius, which averages only 45 miles per gallon. The electric cars that are actually selling now are either expensive — try a $100,000 Tesla Roadster — or a slow, small, boxy neighborhood vehicle.

Then there’s the fact that if gas prices come down, will the green vehicle trend fall by the wayside? Well, most are expecting expensive gas to be the new normal. The Wall Street Journal quotes Mike Jackson, CEO of the largest auto retailer in the U.S., AutoNation, as saying “If the price of petroleum goes down…it undercuts the viability of new technology.” But Jackson adds: “You have to tell the American people the truth,” he says. “Energy costs will be higher.”

Goldman Sachs oil analyst Arjun Murti told Barron’s this weekend that, “Our view has been that the price will keep going up to the level where it meaningfully reduces demand,” (via Kedrosky).

So the worst thing right now for the cleantech world would be if gas prices actually dropped again. While it might not be good for the classic American lifestyle, we’re actually glad that we’re not expecting an ease anytime soon.

Image courtesy of Flickr.



four has come and go, but is certainly changing people behavior

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