The Commodity Investor Q&A
With Matt Badiali
November 25, 2009
Q: I read Nissan has an electric car coming out in 2010. The CEO of Nissan said he's in favor of a gasoline tax to make people switch. What's your opinion? – A.H.
A: The electric car is a poorly thought out, politically expedient marketing gimmick. Supporters dump facts for faith because they want to "reduce their carbon footprint."
The electric-car-as-savior myth is false on two fronts: that they are "good for the environment" and that they will save you money.
For every 100,000 electric cars – not even 1% of car sales every year – we'll need to add 33 megawatts of power-generating capacity. According to the Oak Ridge National Laboratory, we could need 160 major new power plants within 20 years to meet demand from electric cars.
That electricity won't be "clean." According to the Energy Information Agency, 33% of the new electrical capacity coming on line over the next three years will run on coal. Coal supplies about 31% of our electricity right now.
So all those patchouli-scented do-gooders are simply trading gas for coal.
But wait, what about all those "green" power sources? Again according to the Energy Information Administration, we'll add over 7,000 megawatts of green power in the next three years. The problem is, as I explained a while back, wind and solar energy produce only about 27% of their planned capacity.
Let's say by 2030, electric vehicles make up 10% of all the cars on the road. That would be around 12.5 million cars. We'd need around 41,380 megawatts of new power plants. Each plant costs between $1.5 million and $4 million per megawatt. That means we'll need to spend at least $62 billion on those projects.
That won't be the burden of just the electric car owners. We'll all carry the burden in solidarity. And it won't just be the cost of new power plants...
Remember when we discussed the government's grand carbon reduction plan? I told you it includes reducing our use by raising the price of electricity through "cap and trade." If this bill goes through, we're going to see soaring electric bills. Here's what I wrote:
As soon as it's enacted, it will increase our electric bills by 32%. The costs will climb to an extra 62% within the first 18 to 24 months.
Ouch. And with extra demand from electric cars, our bills will soar even higher.
But even with higher electric bills, we'll still save money because gasoline is so expensive, right? Wrong.
If you travel less than 500 miles per month (about 17 miles per day) and you live in an area with cheap electricity (like a nickel per kilowatt-hour), the electric car should save you some money on fuel. But you're generally only going to find cheap electricity in places like Wyoming, where everything is far away.
The rest of us pay about 10¢ to 20¢ per kilowatt-hour of electricity today. According to a recent government report, electric cars need about eight hours of charge, which will work out to between $300 and $600 per year in fuel. Remember, if cap and trade goes through, electricity will be much more expensive. A 65% increase in electricity will drive your fuel costs up to between $490 and $990 per year.
I drive a Subaru Forester. I get about 25 miles to the gallon. If I only drive 500 miles per month and pay $2.65 per gallon for gasoline, I'd spend $636 per year on gasoline.
Electric cars are a wash, both environmentally and economically. But the current political climate will make electric vehicles the marketing success of the decade.
Happy Holidays,
Matt Badiali
P.S. Before you spill your granola in a rush to send me hate mail, I've got one more thing to say: I'm not a big fan of swapping gas for electricity. It doesn't save a thing and it adds costs for everyone. But I am coming around to the idea of a gas-electric hybrid...
Hybrids save gas and charge themselves off the grid. And the gas infrastructure is already in place. Tax subsidies aside, I'm not paying for your car and you don't have to pay for mine.
P.P.S. If you're still fired up, send your vitriol here. |
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| • |
Grocery staples rally... General Mills, H.J. Heinz, Campbell Soup, and Hormel hit new highs. |
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Two-year Treasuries sell for record low yield... investors seeking safety accept 0.8%. |
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Cotton climbs 52% this year on the back of growing Chinese demand. |
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Earnings today... Deere, Tiffany. |
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Last |
Change |
52-Wk |
| S&P 500 |
1109.30 |
+1.45% |
+27.03% |
| Oil (USO) |
40.29 |
+2.99% |
-12.75% |
| Gold (GLD) |
111.63 |
+1.72% |
+52.29% |
| Silver (SLV) |
18.01 |
+5.01% |
+92.41% |
| U.S. Dollar |
75.37 |
+0.68% |
-13.15% |
| Euro |
1.49 |
-0.70% |
+17.54% |
| VIX |
22.89 |
-2.01% |
-65.48% |
| HUI |
475.53 |
+3.26% |
+155.07% |
| 10-Year Yield |
3.33% |
-0.10 |
-0.37 |
|
|
| Company |
Sym |
Industry |
DIRECTV Group |
DTV |
satellite TV |
General Mills |
GIS |
packaged foods |
Coca-Cola FEMSA |
KOF |
soft drinks |
Mylan |
MYL |
pharma |
Equifax |
EFX |
credit services |
Inergy |
NRGY |
gas distribution |
DSW |
DSW |
shoe stores |
Rehabcare |
RHB |
hospitals |
Johnson & Johnson |
JNJ |
Big Pharma |
MedcoHealth |
MHS |
pharma |
Stryker |
SYK |
medical supplies |
Xcel Energy |
XEL |
utilities |
LAN Airlines |
LFL |
airlines |
American Natl |
ANAT |
insurance |
Nu Skin |
NUS |
toiletries |
Par Pharma |
PRX |
pharma |
M&F Worldwide |
MFW |
business services |
Novartis |
NVS |
Big Pharma |
National Grid |
NGG |
utilities |
Kinder Morgan |
KMP |
pipelines |
Analog Devices |
ADI |
semiconductors |
McCormick |
MKC |
packaged foods |
Buckeye Partners |
BPL |
pipelines |
Williams Partners |
WPZ |
chemicals |
Cracker Barrel |
CBRL |
restaurants |
Balchem |
BCPC |
meat products |
Coca-Cola |
KO |
soft drinks |
Accenture |
ACN |
outsourcing |
Becton, Dickinson |
BDX |
medical supplies |
Rockwell Collins |
COL |
defense |
Hormel Foods |
HRL |
meat products |
MEDNAX |
MD |
health services |
Cooper Cos |
COO |
medical supplies |
Allied Nevada |
ANV |
gold mining |
Genoptix |
GXDX |
medical research |
Bristol-Myers |
BMY |
Big Pharma |
PNC Financial |
PNC |
bank |
HJ Heinz |
HNZ |
packaged foods |
DaVita |
DVA |
health services |
Dollar Tree |
DLTR |
dollar stores |
TAM |
TAM |
airlines |
Plexus |
PLXS |
circuit boards |
Williams Pipeline |
WMZ |
pipelines |
Quicksilver Gas |
KGS |
oil & gas drilling |
Medtronic |
MDT |
medical devices |
Express Scripts |
ESRX |
pharmacy mgmt |
Campbell Soup |
CPB |
soup |
Varian Medical |
VAR |
medical devices |
Eastman Chemical |
EMN |
chemicals |
Health Net |
HNT |
health insurance |
Progress Software |
PRGS |
software |
ION Geophysical |
IO |
technical devices |
BNSF |
BNI |
railroads |
Covidien |
COV |
medical supplies |
ConEd |
ED |
utilities |
CareFusion |
CFN |
medical supplies |
Am Water Works |
AWK |
utilities |
Sunoco Logistics |
SXL |
pipelines |
Medivation |
MDVN |
biotech |
Forestar |
FOR |
property mgmt |
|
| Company |
Sym |
Industry |
Brazilian Telecom |
TBH |
telecom |
Cogent |
COGT |
outsourcing |
Smithtown |
SMTB |
bank |
Synovus |
SNV |
bank |
Citizens & North |
CZNC |
bank |
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