I love Hybrids. But the financial benefits are non existent. Why?

It’s easy: let’s say the average hybrid gets about twice the mileage of a traditional gas powered car, which is mostly accurate and that’s why we all love them. But at what cost? The price of gas is nearly $3.00 in the US as I type this, that’s double what it was a few years ago during the SUV boom. Some say the cost of a gallon will hit $4.00 + soon.

Where am I going with this? The increased use of hybrids will only fuel (pun intended) increases in gasoline costs. With less demand on that fuel, the oil industry will want to keep its profits up and as a result the prices will only rise as consumption goes down.

So any financial benefit from driving a hybrid will become nullified or moot. It simply will be no cheaper in the near future to drive a hybrid that any regular gas car today. The more hybrids, the higher the price of gas.

Of course the benefits to the environment are worth it and reduced dependency on other nations (OPEC), but there will be no financial benefit at all. If anything, hybrids cost more to drive with higher price tags and more complicated repairs.

Should we buy and drive hybrids? Of course we should. But hybrids ARE NOT our future, just a band aid until a better solution arrives.

I don't know of any instances in which a drop in demand for a commodity resulted in an increase in the prices.

As demand for oil drops the prices will go down and gasoline should go down at the same time.

Nice I feel like I back in Econ....The supply stayed the same on the oil but Demand exploded with china really industrializing and the huge boom of cars in the US. It was bound to happen. The biggest problem is we have a bottle neck occuring at the refineries. They can dig it up as fast as possible but just can't refine it that fast.

As for the hybrids you would have to own it for over 10years for it to have it be cost efficient. Given you are paying 1,000 dollars a year in gas.

MOST hybrids do not get double the gas mileage. The new ones that are the small SUV type, get a few piddly more miles to the gallon. And they cost 3-5k more. The prius and insight, DO get very good gas mileage. They are small and fine for a single person as a daily driver. I sure wouldn't want to try and pile my kids into it. Not to mention I car pool often and couldn't with one of those.

The civic hybrid gets very good gas mileage, but costs much more

Don't forget you must replace the batteries at about 100k miles. That will run you about 3k.

I am just going to drive LESS. That will save more money than a hybrid. If I already owned a hybrid, I would be happy

Trouble with hybrids is they cost more than the average economical car, especially an older model compact. The cost of hybrid car exceeeds what you can make up in saving gas.

Get rid of the car loan payments and buy something used and cheaper would be the best way to save, take a mechanic's class too.

Originally posted by Conspicuouz
hate to be a prick but i'll have to refer you to business 101
the supply/demand curve

I couldn't have said it better myself!

With less demand they will be *forced* to reduce cost because they will be sitting on so much back inventory. Profit or no profit, if they are sitting on a lot of unsold product, that adds to overhead (ie- storage of a larger inventory, staff to manage larger storage area, etc), which takes away still more profit.

Business 101 is for rookies selling widgets and students trying to make a grade, come talk to me when you understand the real world.

Believe me when I tell you I understand supply and demand more than most of you ever will, its what I do for a living. The fact that you guys quote your school text books in this context tells me you know nothing more than what you were tought in grade school.

Traditional supply and demand does not apply here. Oil is not toasters or TV's, oil is a consumable that we use in such tremendous volume that any sudden stoppage or reduction of that usage would be catastrophic. And conversely any sudden lack of oil is just as catastrophic.

Why does supply and demand work differently for oil? Because there are no substitutes (currently adequate substitutes). When you apply the principal of S&D to other products or commodities, there are always alternatives, we have choices. With oil we do not have choices, the vendors dictate the rules, not the consumer. The oil industry is one of the only industries that can operate this way. And as long as energy is dependant at all on oil, supply and demand are moot.

Supply and demand simply does not apply to oil the same way it does blenders folks, and if you cant understand that, then you have zero clue about supply and demand. You guys keep quoting your cute little 101 books and professors, in the mean time I will be working in the field...

More hybrids, the more you will pay for gas



[edit on 31-8-2005 by skippytjc]

what's moot? I thought this thread was about alien hybrids!

what hes saying is that if we lower consumption (we cant eliminate consumption due no substitution), the oil companies will get together in their cartel and only sell it at increased prices to maintain profit.

If this goes on for long enough, production will just lower to the new demand to minimize costs and backordered goods. To break this cycle we would have to lower demand significantly (to what we produce in oil or could import from more friendly markets), which is impossible, because oil are like illegal narcotics, the supply ends up determining the demand.

I disagree that the cartels could do this though. If we lower consumption and china takes up the increase, we stop sending money (as much) overseas while china sends more to the ME. you can weight pros and cons of this yourself. I also disagree that oil prices would rise. because all countries would have to halt production and lay off workers, and because of international pressure.

I still think hybrids would be beneficial due to lower pollution. This would allow for more slack for industrial manufacturing. its true though that the individual person doesnt benefit froma hybrid yet. even if gas prices are at 4.00.

say a car gets 20 miles , its hybrid equivalent gets 40 per gallon. lets say the average person to work drives 12000 miles per year (or lets just make it 20k miles). (2 ways to work , foward and back 350 days a year, average commute of 28.5 miles or 57 roundtrip).

thats 1000 gallons for the car, 500 for the hybrid. for a total of 2000$. you will pay more than that for the hybrid. over the course of car life, a hybrid might be slightly cheaper, unless you consider the car loans and apr financing you will have to incur for bying a more expensive car.

[edit on 2005-8-31 by NuTroll]

Thats the issue, they can do this without getting together, and they are already together to boot.

Its not just gas guys, its every product you use, there is nothing that you or I use on a daily basis that isnt affected by oil. Can of Coke? Part of that cost is due to oil. EVETYTHING. They own us as long as we are dependant at all. The less we use the more they will charge, the cost of production does not go down with lower consumption as with other products.

Example: TV's. Traditionaly if people are in demand of your product, you can charge a premium for it, but if that demand falls, you need to keep competative by lowering prices. Why? Because we can get TV's from many, many competing sources, you and I dictate the rules with our choices. Another reason is TV's are an unnecessary item, a luxury item. Can we apply any of the basic principles of supply and demand 101 to oil? Nope. We MUST have oil, it only comes from a very few places and it can be depleted.

There is not a need for a cartel. There are so few producers of any sizeable sources of oil there doesnt need to be (but there are anyways). The USA cannot meet its own demand, neither can Russia or China.

Mark my words, I will only say this once: The price of a gallon of gas will NEVER go down in regards to previous comparable prices, no matter how reduced the demand is. Why dont you bring this topic up in class tomorrow kiddies...





[edit on 31-8-2005 by skippytjc]

Lower demand is a moot situation for that matter, cause it's not going to happen with China coming into industrial fruitation and other 3rd world countries waiting in the wings. Then enter population factors and all those new people consuming more goods made with oil. Then we have the climate that is peaking energy usage.

Finite resources in a keynesian market economy will be going up and up till no more. Get used to high oil.

Originally posted by NuTroll
skippy as soon (if) we can provide a substitute for oil, the price of oil should skyrocket down to fit in with the law of supply and demand?

NUTroll:

What replacement for oil? Hydrogen? Hydrogen is 15 years away at best estimates for any practical application. And that’s not my argument. My argument is that operating Hybrids will never be cheaper than using a 100% gas powered car. Ever.

If everybody in the USA changed to a hybrid tomorrow and cut our usage by 30-50%, the cost of a gallon of gas will not only remain high, it will continue to increase. Why? Because supply and demand doesn’t apply here, only the Golden Rule does.

Now, hypothetically if Hydrogen was available tomorrow and was as cheap and easy as gas, then the rules of supply and demand may start to apply as their will be choices.

Hey guys, why dont you get on the phone with Terhan or Kuwait and see if you can convince them to lower their prices or you will take your business elswhere, go ahead. Maybe explain to them the rules of supply and demand 101, tell them what your teachers told you. Ill be waiting at the pump, im certain your dissertation to the oil producers will cut the price of oil in half...

Originally posted by skippytjc
Business 101 is for rookies selling widgets and students trying to make a grade, come talk to me when you understand the real world.

Believe me when I tell you I understand supply and demand more than most of you ever will, its what I do for a living. The fact that you guys quote your school text books in this context tells me you know nothing more than what you were tought in grade school.

nip>

Supply and demand simply does not apply to oil the same way it does blenders folks, and if you cant understand that, then you have zero clue about supply and demand. You guys keep quoting your cute little 101 books and professors, in the mean time I will be working in the field...

Wow, i really should have known better and expected such an insulting, angry and visceral "because i told you so" style answers.

So not only are you an expert in terrorism, you're now an uber-salesman with the inside track on the oil biz eh?

In any case i'm going to reply once more to this thread, as i've been thinking about this quite a bit.

If the country switched entirely over to hybrids tomorrow, yes i could see an inital price spike as a reaction from the oil company. However, you still seem to be ignoring the fact that, eventually there would be a surplus due to everyone using less fuel. Surplus costs money to store, and who makes money on product that's not moving? No one. This is why i feel initally there would be a spike, but that will only result in people buying less gas due to having less money to spend on it (i don't know about you, but i do have a gas budget every month and i really can't afford to borrow from my bills budget nor my food budget to augment it). With less product being sold, the oil companies will have to do something with old stock in order to make room for new stock.

after this inital spike, i'd be willing to bet that in order to gain consumer confidence and brand loyalty, they could take on a slightly modified "razor blade" buisness model (initally sell at a loss to gain loyalty and confidence, then gradually increase the price untill sales level off. once sales level off, they will have found thier "sweet spot" for how much consumers will really be willing to pay).

with all this in mind, i really don't feel we'll ever see gas below ~$2-2.50usd/gallon, but with the treat of $4-5 gas it doesn't look that bad...

Originally posted by skippytjc
Business 101 is for rookies selling widgets and students trying to make a grade, come talk to me when you understand the real world.

Believe me when I tell you I understand supply and demand more than most of you ever will, its what I do for a living. The fact that you guys quote your school text books in this context tells me you know nothing more than what you were tought in grade school.

skip, I hate to pretend to be a moderator, but before one really gets here, can you just for ONE thread discuss the issue without getting pissed and throwing an assault or a semi-assault? In two of your posts in this thread, you have already done that. It's absurd and it escapes me why it is so necessary for you to do that in EVERY thread.

Try denying ignorance. Please. Back on topic.

I should not have to explain this, but it appears I have too...The cost to PRODUCE the amount of gas we use today does not change based on usage. I.e. the infrastructure in place to meet todays demand still must function the same even if our consumption is reduced.

Break it down even more you ask? The amount of oil that flows through a pipe does not change the cost of that pipe to be there functioning in the first place. Oil production is amazingly expensive. When I say "production" I mean the process to turn crude oil into fuel. The machinery, the logistsics, and the process is just as expensive no matter how high, or low, the output is.

Ill try an analogy for you: Lets say you use injection moulding to make widgets. The cost of the plastic to make just one widget is just pennies, but the machinery to turn that plastic into widgets costs millions of dollars to own and maintain. The fewer widgets you produce, the higher the cost per widget in production costs, even though the actual plastic that goes into a single widget never changes. Now imagine your consumer cannot exist without your widgets AND they cannot purchase them anyplace else. Even if the demand was reduced, ESPECIALLY if the demand was reduced, you would need to maintain or even increase your cost to cover your production costs.

But apparently I know nothing...

And sweat, your consistancy is amazing. Mention the context of my replies but no mention of the "101" insults that were directed at me to start things off. Anything to oppose...

I am done with the peanut gallery here. The cost of a gallon of gas in the USA will never go down regardless of usage. Ever.

[edit on 1-9-2005 by skippytjc]

on COMMODITIES. A little Econ101 on the laws of supply and demand wouldn't hurt either. Sorry but if demand on gasoline decreases so does it's cost.