Tuesday, September 8, 2009

Fuel Prices The Next Paradigm Shift

The automobile business is a difficult business at the current time due to paradigm shifts that are happening today. The world was shocked by the sky high oil prices in the summer of 2008 announced that a new paradigm shift was happening. The signs had been there before with the prior Oil Crisis of 1973 and 1979. It is projected that gasoline will cost $10 per gallon USD by the year 2015. A new Business Week article outlines our susceptibility to a new oil crisis.

Fuel saving technologies have been put on the front burner to get ahead of the increasing fuel prices. Automobile companies are spending billions of dollars on new technical developments to deal with expensive fuel costs. If they are caught with an inefficient fleet they may be doomed to obsolesce.

The current fuel saving technology that is currently being marketed is the gasoline-hybrid technology. Gasoline-hybrid technology uses electrical motors along with a combination of batteries to carry some of the load along with a fuel efficient gasoline engine. Toyota leads the world in production of gasoline-hybrids with sales of their Synergy Drive System.

The second fuel saving technology will be electric cars, which includes plug-in hybrid vehicles. GM was at the forefront of the electric battery powered car with its Saturn EV1, which is now called the GM EV1. GM did not produce the GM EV1 due to the limited battery technology at the time and the expense of producing the vehicles.

GM spent an amazing $1 billion dollars on the technology and then subsequently shelved the technology. GM had the label of one of the most progressive automobile companies with the GM EV1 in the U.S. If GM would have continued the battery development in coordination with other battery companies they would be the world leader in fuel efficient automobiles.

The third technology in development is hydrogen power either thru use in a fuel cell or using a standard gasoline engine converted to use hydrogen. Prime examples are the Honda Insight and the BMW Hydrogen 7. Honda is betting the bank that hydrogen will be the dominate technology.

GM picked up the development after they watched Toyota win the public relations war with the Toyota Prius and it's Synergy Drive Technology. The ability of Tesla Corporation to produce the Tesla Roadster and Model S was a major embarrassment for GM..... GM has subsequently developed the Chevrolet Volt, a plug in vehicle which will be able to go 40 miles on battery power before using a gasoline engine to recharge the batteries.

Toyota manufactured the first mass-produced hybrid vehicle the Toyota Prius. Their Synergy Drive system has been the leader in gasoline-hybrid technology. Toyota also was the first company to make money on their fuel saving technology Synergy Drive. Toyota started making a profit on the technology after starting development in the 1990's.Toyota introduced the first gasoline hybrid with its the Toyota Japan during 1997.....Toyota began world wide shipments in 2001...selling the Prius in more than 40 countries. The U.S. is the number one market for the Prius with 50% of 1.2 million units sold worldwide. The fuel economy of the 2010 Toyota Prius is 51 city and 48 highway.


Large corporations are like huge cargo ships that transverse the globe....the cargo ships hold a large value of goods....but the ships are hard to maneuver and changing direction is slow and time consuming process.

Toyota has decided to capitalize on it's major investment in gasoline-hybrid technology. Toyota has spent in excess of a billion dollars developing the technology....so they are looking for a return on their money.

I am of the opinion that gasoline-hybrids will continue to be popu
lar especially as fuel prices go up. If fuel prices skyrocket again.....people will be looking for the most fuel efficient vehicles available. Those vehicles in the short term will be electric cars!

Toyota has decided to focus on gasoline hybrids and virtually ignore electric cars for a number of reasons. But, Toyota's reasoning may leave them behind other manufacturers. GM is launching its Chevrolet Volt which has an announced fuel economy of 230 mpg. All the other major manufacturers are coming out with electric cars. The future belongs to the bold!


  1. Hello Peter,

    Glad that they are trying to do something to get better millage on cars. Thank you for the good information that you always place on the blog for the benefit of all of us. Have a good day.

    Dan and Deanna "Marketing Unscrambled"

  2. Hi Pete .. it's going to be interesting to see where we go with this - especially here in the UK where the country is smaller, but we have lots of congestion in the streets.

    I have to say I get really irritated by the big SUVs taking up loads of space!!! In my little neck of the woods.

    However our tiny cars are at the forefront of technology at the moment - commuters, school runs and shoppers ..

    BMW announced two new minis - I think for next year .. and I spotted a top of the range is it Mclaren .. a new car for the market ..

    brain is not 100% in gear at the moment .. to much else going on .. Mum ok, uncle not so well .. life goes on!

    All the best - Hilary Melton-Butcher
    Positive Letters Inspirational Stories

  3. Hi Dan & Deanna,

    Yes, I am aware that your a GM fan...but the new Volt is a game changer of a car. The posts that I have done on the Volt have not been popular...wait till gas prices shoot up quickly.

    The Volt will sell like hot cakes! Thank you for the comments!

    Pete Baca
    The Car Enthusiast Online

  4. Hi Hilary,

    This was my first post on my series Paradigm Shifts! There will be others! The automobile business is extremely challenging.

    We have seen the first smaller shocks to the system! There will be more!

    Hope all is well with your family!

    Best Regards

    Pete Baca
    The Car Enthusiast Online

  5. “this is very interesting. thanks for that. we need more sites like this. i commend you on your great content and excellent topic choices.”
    Jeep Brisbane