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Who Says It's Inelastic?

Has our oil consumption dropped to 2002 levels? We'll see what effect it has on the economy. It has to be hurting tourism.

[Late morning update]

Paul Dietz mentions Bob Zubrin's flex-fuel crusade in comments. It looks like both candidates may be on board with a mandate for this:

The really good news is that both Senators John McCain and Barak Obama have declared their support for the Open Fuel Standard that must be adopted to ensure that each of the roughly 17 million cars we buy in this country every year are Flexible Fuel Vehicles.

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Paul F. Dietz wrote:

The elasticity of demand has a temporal component. We're seeing increased demand destruction now from longer term changes, like purchase of more efficient vehicles.

BTW, you've seen Zubrin's latest push, for a flex fuel vehicle mandate? This seems much more likely to go somewhere than tilting at martian windmills. Even today, gasoline is being adulterated with methanol in some parts of the world (like China), so making cars work with methanol would be prudent, if only so the cars don't malfunction when given this gray market stuff.

Paul Milenkovic wrote:

Are the candidates tech-savy to know that the Zubrin Plan is for triple-flex (gasoline-ethanol-methanol) instead of bi-flex (gasoline-ethanol)?

To tolerate methanol, you need some pricey stainless steel or otherwise corrosion-resistant fuel-system parts. No real rocket science in the race-car biz, but perhaps a challenge for the mass market.

With bi-flex you are essentially restricted to corn for now, perhaps cane sugar or switch grass in the future. With tri-flex, you can use coal-derived methanol, the option to do this being the whole point of the mandate. If we need to start turning coal into transportation fuel, coal to methanol is apparently an easier path than coal to gasoline or coal to Diesel.

ech wrote:

I was just in Las Vegas and the combo of higher gas/JetA prices and slowdown in the California/US economy is hammering them. And over 20K new hotel rooms come online in the next year to 18 months.

ech wrote:

Doesn't methanol flex fuel also require new parts on gas pumps, like the flexible hoods that trap vapors while refueling?

Paul F. Dietz wrote:

It is my understanding that making a car gasoline/ethanol/methanol compatible would add perhaps $100 to the price of the car. I would consider this quite acceptable, especially if methanol were selling at a considerable discount to gasoline (per unit of energy), as it is now.

red wrote:

If we're going to have another regulation, and I don't doubt that we will, Zubrin's FFV mandate seems like the kind of regulation to have. At $100/vehicle, the cost is minor compared to the economic and strategic cost of high gas prices. It also, in one sense, actually promotes economic choice and freedom, whereas most regulations don't have such a benefit. Methanol (and more ethanol) pumps would also be needed, but that would be a lot easier to bring about with an FFV fleet than without one. Gas stations like to have a prospect of customers before investing in an E85 or M85 pump. The FFV cars would also be a huge incentive for non-food ethanol and methanol fuel research and industrial development. Why invest now in methanol fuel, even if gas goes to $8/gallon, when cars can't use methanol?

I don't know the answer to Rand's question on the economy, but X PRIZE Cars blog had a link a couple weeks ago that might give a hint:

The link in question (to Wired) is "Rising Gas Prices Finally Kill the Once-Mighty SUV".

Karl Hallowell wrote:

I get the impression that if a 1% increase in price results in less than 1% decrease in demand then the demand is considered to be inelastic with the degree of inelasticity increasing as the change in demand shrinks. The time dependency in oil production and consumption, of course, complicates this model and any description of elasticity.

Fletcher Christian wrote:

"Rising Gas Prices Finally Kill the Once-Mighty SUV".

About time.

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This page contains a single entry by Rand Simberg published on July 1, 2008 6:45 AM.

And Now For Something Completely Different was the previous entry in this blog.

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