Why What Jamie Lee Curtis drives is Important.

Gasoline in California costs almost $4.60 a gallon.  I have no idea how those folks afford that.  However an eventual alternative is coming in the form of hydrogen powered vehicles.  Last week the first commercial fuel station was introduced in Los Angeles to support early hydrogen fueled test cars.

BMW, Honda and GM are introducing hydrogen powered test vehicles.  The total number of prototype vehicles is under 100 nationwide.  The test however, isn't really as much about the technology to produce the cars as the ability to produce and distribute the hydrogen fuel.  Today, the number of hydrogen fueling stations is less than 30 nationwide.

Movie star Jamie Lee Curtis drives a hydrogen car.  Honda gave her a new FCX Clarity sedan to drive.  They gave her husband and an number of other celebrities prototype cars to drive as well.  Their purpose is to provide high profile demonstrations of the new technology to early adopters who may have the shekels to secure the first expensive vehicles. About 200 of the cars will be part of a milestone leasing program over the next three years in the US and Japan.

The benefit of hydrogen is that the exhaust of an H powered vehicle is water vapor.  The problem with hydrogen is that it's a bulky gas.  It's too bulky to produce in a central refinery environment then transport to a fueling station. Hydrogen needs to be produced on site at the fueling station.

Producing hydrogen gas involves electricity.  A lot of electricity. Basically you take high voltage electrical current and pass it through water.  This cracks the hydrogen atoms (H) off of the water molecule (H2O).  The resultant gas is collected in a tank for use as fuel. 

From an environmental point of view, hydrogen may be a clean fuel, but the means to create it may not be when electricity is largely produced from coal, oil and nuclear fuels.

Given the energy requirement to produce hydrogen as a fuel source, it's use for automobiles may not be commercially viable for awhile. However, when considering commercial vehicles like semi-trucks, the possibilities change. Trucks already use centralized fueling stations either through company depots or over-the-road truck stops. Truck Stops present a concentrated opportunity to create hydrogen based fuel stations.

Trucking companies and truck stops would have to make infrastructure investments to make the fueling of hydrogen powered vehicles a reality.  However, state and local governments could make allowances for these investments in fuel tax exemptions or other tax related benefits to offset the initial costs.

State legislatures in the US (Oklahoma and North Carolina for example) have made investments in other energy hungry industries in the last few years, in particular the allowance of tax credits to technology companies like Google, Yahoo! and Microsoft that consume as much as 50 mega watts of energy annually through regionally placed data centers.  (That's enough electricity to power a small city.)

One of the critical ways that the data center technology firms work with state governments is through investment in alternative "clean" energy sources such as wind, hydro and solar energy sources.  Wind energy in particular presents attractive possibilities because wind turbines can be deployed in multiple locations where the basic requirement is wind strength.

Warren Buffett and Berkshire Hathaway invested in railroads and rail tank cars because they realized that the conveyance of coal, ethanol and grains would be profitable businesses in an energy shortage.  The transport of commodities that are the potentials of energy generation are almost guaranteed to be profitable.

The same can be said for wind energy when related to the production of hydrogen fuels as well as direct electrical grid power generation.  Electricity cannot be stored as a fuel.   However, hydrogen, produced by electrical generation can be.   

The firms that produce wind turbines include GE, Hitachi, Siemens and others.  Their order books are full.  They will stay full for a long time.  Long enough to change the core businesses of these conglomerates over time.  In due course investors will realize that the critical investment is in the producers of the technology that produce the fuels. Buffett gets this already.

Google, Microsoft and Yahoo! etc., power the electron economy.  Trucking companies deliver the goods.    Both will have wind energy behind them sooner rather than later.

In the meantime, Jamie Lee and others will simply look cute in their new cars, mostly unaware of the economic harbinger their vehicles represent.

Eric

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Comments

[Ray]

I suppose what one considers cheap or expensive is relative so we could argue this ad nauseum. Fact of the matter is, comparitively, the US, compared to all other western industrialized nations has very inexpensive fuel (even more so when looking at per capita income compared to other western nations).

Yes oil/gas companies are making record profits, but that isn't the issue. They're entitled to it (as long as we keep paying), no matter how shocking their profits are. What is at issue is the valuation of the underlying input and its price will keep going up until there is no more oil left to pump (at a viable price).

In any case, I'm not advocating people drive 'mini-cars' and bicycles, but rather that they don't complain about the price of fuel when driving around in a Suburban or similar ridiculously sized vehicle.

What is abundantly clear is supply chains will need to be re-worked given the ever increasing price of oil. Time to re-evaluatate our globalized sourcing options. If you haven't already seen this report 'Will Soaring Transport Costs Reverse Globalization?' check it out.

http://research.cibcwm.com/economic_public/download/smay08.pdf

[eric]

Sorry Ross, Gas at $4.60 a gallon is ridiculous. ExxonMobil is the most profitable company on the planet because of fuel prices. This isn't about cost pass through. This is PROFITS.

There are a lot of hidden costs to the price of fuel, and it goes well beyond driving a mini-car and riding a bike. (though I agree with you on the need to do these things).

Forbes had a pretty good article on this today. Check it out.

http://www.forbes.com/lifestyle/2008/07/09/fuel-price-casualties-forbeslife-cx_jm_0709gas.html

Eric

[Ray]

About your comment that you don't know how people can afford gas at $4.60 gallon, we're paying about $5.70/gallon in Canada (mostly due to taxes) and we're not hurting all that bad! In Europe it's even pricier.

The diffrence? We're driving (on average) smaller cars! It would seems this is a pretty obvious way to cut consumption and cash (in the short term) while waiting for new technologies to wean us off oil.

Gas at 4.60/gallon is cheap!

[Eric]

any energy strategy is going to be a combination of resources. Brazil and Argentina use ethanol and natural gas respectively in cars.

Brazilian ethanol is made from cheap and plentiful sugar cane, which the US lacks due to growing conditions. Natural gas is an an Argentinian resource.

hydrogen generated from wind or solar electricity is not environmentally damaging. Electricity cant be stored, but hydrogen can be.

[Paul Gooch, The Logical Group]

strange, I was asked only yesterday if I knew of any companies which may be considering shipping hydrogen by marine tanker. My initial reaction was, why would you want to do that when hydrogen is everywhere. Considering the high input cost (electricity)do we want to compound the felony by shipping the stuff halfway round the world? Perhaps I'm missing something...could someone enlighten me?

[John Otten]

I was wondering what the cost per gallon equivalent is for hydrogen...based on your comments that it requires a significant amount of electricity (coal,oil, nuclear etc. to produce). Is it really a viable alternative (cost wise) or is the real value in the pollution reduction?

[Gunny]

Just think of hydrogen as a battery - it stores electricity.