10/25/2005

Gas Prices Cause a Shift in Demand

It seems that the recent rise in gasoline prices has influenced a shift in consumer demand from gasoline-powered cars to hybrids. Toyota came out with their first hybrid model about a decade ago, when gas prices started rising. They predicted that gas prices would continue to rise, and there would be a point where consumers would not be willing to pay for gas. American car companies, such as Ford and General Motors, are now in trouble. Consumers are switching from their gas-guzzling SUV's to the smaller, more fuel-efficient Asian cars. The Toyota Prius, a hybrid, gets 65 miles to the gallon in the city and 51 miles to the gallon on the highway. Toyota claims that the hybrid is also powerful, for those who are worried about driving a car with no power. The hybrids will not only be cheaper in gas, but they will also be better for the environment.
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1 comment:

Dr. Tufte said...

Hybrids are nonsense, and business students should know why.

First off, they are more expensive. Why is that? Because they can't be made as efficiently as standard cars.

Secondly they get better gas milage. There are two ways to do this: make the car weigh less, and use some fuel other than gas.

Making cars lighter and less safe to get better gas milage is an old strategy. The government actually encourages this. Another name for this is statistical murder - if they entice you to buy something that is less safe they should be held responsible.

As to using less gas, where do you think the energy in the batteries of a hybrid comes from? Burning fossil fuels in other locations, that's where. Have you ever seen a hybrid advertisement talk about what it does to your utility bills? Have you ever thought about how much gas (or other fuel) has to be burned at a power plant to light up your home?

Higher gas milage is great, but if you are focusing on that alone then you have bought into a marketing pitch that is successfully getting you to ignore important opportunity costs.

Lastly there are the batteries. Household batteries are already the single largest source of hazardous waste in this country. And yet the issue of disposal of batteries from hybrids is being suppressed. That appalls me.

9:10 AM

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