We all know that gasoline has several disadvantages. Oil is a finite resource, and can sometimes be very costly. It empowers totalitarian regimes around the world to spend billions of dollars on their murderous schemes. It pollutes the air. And, with economic development is Asia and elsewhere, more and more people are starting to buy cars and other luxuries that require oil. It does not take a Mises to figure out that when demand doubles and supply stays put, the price will go through to roof in the years and decades ahead.
Other fuels have more potential. Ethanol, for example, is carbon-neutral, cheaper than gasoline, and has higher octane than gasoline. Hydrogen is the world's most common element and produces pure water when consumed. Hydrogen costs a little over a dollar per kilogram to produce. Hydrogen fuel cells are not subject to the same inefficiencies as internal-combustion engines, because they generate electric current from chemical reactions and are not thermodynamic devices.
The trouble is, nobody is going to produce ethanol or hydrogen vehicles when there are no hydrogen or ethanol fuel stations. And, nobody is going to create hydrogen or ethanol fuel stations where there are no hydrogen or ethanol vehicles on the road.
Brazil successfully switched to efficient sugar-based ethanol--by government fiat. How would a free market economy make that transition?
"As long as there are sovereign nations possessing great power, war is inevitable."
ama gi:Other fuels have more potential. Ethanol, for example, is carbon-neutral, cheaper than gasoline, and has higher octane than gasoline.
Although you do have a good question that does have a good answer, I just wanted to highlight your statement here first. This is not to insult you, it is simply to correct a factual error in a statement. And it's because the whole "ethanol" thing is a pet peave of mine. The idea that ethanol is a better fuel is flat out false, the combustion reaction for ethanol is as follows:C2H5OH(g) + 3 O2(g) → 2 CO2(g) + 3 H2O(l); (ΔHr = −1409 kJ/mol)It produces carbon dioxide. Ergo, it cannot possibly be "carbon neutral". Furthermore, it produces large amounts of water vapor which is an even more potent green house gas than CO2.Even the idea that ethanol somehow has more potential (through handwavium, I suppose) is tripe, since ethanol has an energy density of only 31.1 MJ/kg. On the other hand, regular gasoline has an energy density of 44.4 MJ/kg. Ethanol is only more efficient when it forms a 90/10 mixture (90% regular gasoline, 10% ethanol), which then produces a 47.1 MJ/kg energy density. On the other hand E85 (the magic wand of many ethanolites) has an energy density of only 33.2 MJ/kg. Are there more efficient fuels than gasoline? Yes, absolutely, but ethanol is not one of them.
Source: http://en.wikipedia.org/wiki/Ethanol or any good university chemistry textbook.
ama gi:Hydrogen is the world's most common element and produces pure water when consumed. Hydrogen costs a little over a dollar per kilogram to produce. Hydrogen fuel cells are not subject to the same inefficiencies as internal-combustion engines, because they generate electric current from chemical reactions and are not thermodynamic devices. The trouble is, nobody is going to produce ethanol or hydrogen vehicles when there are no hydrogen or ethanol fuel stations. And, nobody is going to create hydrogen or ethanol fuel stations where there are no hydrogen or ethanol vehicles on the road. Brazil successfully switched to efficient sugar-based ethanol--by government fiat. How would a free market economy make that transition?
The same way that gas stations got their start. This site may help give you a starting point. The gas station came into existence during the early 20th century through the spontaneous order of the market. There was a demand which was constituted in a source of supply. Originally people would just use buckets. Then they started using underground pumps. It simply went from there. Hydrogen stations can, and should, originate the same way.
WikiPedia has the following to say:
WikiPedia:The increase in automobile ownership after Henry Ford started to sell automobiles that the middle class could afford resulted in a greater demand for filling stations. The world's first purpose built gas station was constructed in St. Louis, Missouri in 1905 at 412 S. Theresa Avenue.[1] The second gas station was constructed in 1907 by Standard Oil of California (now Chevron) in Seattle, Washington. Reighard's gas station in Altoona, Pennsylvania claims that it dates from 1909 and is the oldest existing gas station in the United States. Early on, they were known to motorists as "filling stations". Standard Oil began erecting roadside signs of their logo to advertise their filling stations.
Another site is Gas Stations History from bookrags.com.
Seriously, do a google search on "History of Gasoline" or "History of Gas Stations." It's actually pretty fascinating.
History of gas stations aside, the free market has solved problems like this before, it can do it again. That is as long as the government does not decide to "protect jobs" in the gas station industry. :p
I was thinking about this question earlier today. I think it's always useful to take a "societal" problem and try to backtrack to the government regulations that may or may not be responsible for it. My thinking on this started from the following site http://running_on_alcohol.tripod.com/ where the authors claim that they make their own ethanol in their backyard for about 60 cents (1 dollar cost to make the ethanol and 40c profit from selling the remains for feedstock). Why is ethanol not then cheaper than gasoline? Surely an industrial application could support even further cost advantages. I'm planning on making my own ethanol in order to confirm that the economics are in fact true. Luckily I own a small farm and by pure coincidence a flex-fuel Ford Ranger...
This got me thinking about what regulations might be at work. The first is clearly taxes. Once taxes are added then the cost goes up. One such tax is the alcohol tax. Even though pure ethanol is fine in your car it is illegal to produce it because you can also drink it. You must by law denature the alcohol (render it poisonous). That adds cost.
Consider also the difference between corn for food and corn for fuel. Corn for food is high quality. It requires good water, good soil, good seed. Corn for fuel can be lower quality. Here's where subsidies muck things up. Subsidies incent farmers to grow fuel corn on land that is better suited for food corn. The result is that lower quality arable land that might support fuel grade corn is left unproductive.
I don't think this sufficiently explains the economics but I'm sure there is more involved.
On to oil. One for the oil monopoly is that oil is subsidized by our foreign service and defense department. Consider how much oil would cost if the terrorists were not kept at bay by US forces. A significant amount of your tax money ends up keeping the price of oil down. This is not to say that oil is the "reason" for our foreign policy but it is no doubt a result.
Another free market impediment is regulation of automobiles, fuel transport and fuel stations. One can't simply roll out a new automobile or new infrastructure. There are serious regulations that need to be met. All of these work to enforce the status quo.
One wonders why GM killed the EV1. It is simple to say that it wasn't economic to produce but hard to refute the fact that demand existed. Possibly the economics of the labor unions prevented GM from innovating. Possibly they were just short sighted. Hard to say. Capitalism makes no claims on the varying abilities of people who run companies.
An interesting article to read is: http://www.setamericafree.org/Rnichols.pdf. This is written by an ex Ford engineer and details the history and viability of methanol which appears to be a very viable fuel which can be derived from (now cheap) natural gas. The most interesting part is where methanol was about to displace gasoline. The gasoline industry in the nick of time derived a reformulation that allowed it to meet emmissions standards. I think most people are unaware that we really came that close to a multi-fuel economy.
Anyway, I guess the advice to the questioner would be to examine the government interference that created the conditions in the first place. Austrian theory suggests that in many circumstances where the solution looks to be a new regulation that in fact you will find a preexisting regulation that would accomplish the same end and in better fashion.
It may simply be true that oil is *just* cheaper. In which case the gasoline car "problem" is solved by growing aggregate aesthetic demand. We sell more blue shirts than red shirts because the color blue has a greater marginal utility than red to more people. In the same way, "green" cars will sell more when they have a greater marginal utility than regular cars. There is nothing inherently wrong with environmentalists advocating to build this demand among constituents so long as it does not happen through forceful means, and certainly nothing wrong with environmentalists pooling their money to build a new car company from scratch...
ama gi:We all know that gasoline has several disadvantages. Oil is a finite resource, and can sometimes be very costly. It empowers totalitarian regimes around the world to spend billions of dollars on their murderous schemes. It pollutes the air. And, with economic development is Asia and elsewhere, more and more people are starting to buy cars and other luxuries that require oil. It does not take a Mises to figure out that when demand doubles and supply stays put, the price will go through to roof in the years and decades ahead.
It is still cheaper and more efficient than other fuels.
Other fuels have more potential.
Not really...
Ethanol, for example, is carbon-neutral, cheaper than gasoline, and has higher octane than gasoline.
All the corn in America could only supply 4% of the fuel market at current. Even if we used sugar cane ethanol, we would have to face skyrocketing food and fuel prices if we switched.
Hydrogen is the world's most common element and produces pure water when consumed. Hydrogen costs a little over a dollar per kilogram to produce. Hydrogen fuel cells are not subject to the same inefficiencies as internal-combustion engines, because they generate electric current from chemical reactions and are not thermodynamic devices.
Hydrogen fuel cells cost a lot.
The trouble is, nobody is going to produce ethanol or hydrogen vehicles when there are no hydrogen or ethanol fuel stations.
There are ethanol fuel stations. If you really want an ethanol, hydrogen, natural gas, etc. as fuel then you can also get your own fuel station. The problem is that none of these are as efficient as oil for fuel. Only CNG has any future prospect, I believe.
And, nobody is going to create hydrogen or ethanol fuel stations where there are no hydrogen or ethanol vehicles on the road.
So you believe that there isn't a single ethanol, hydrogen, CNG, or electric car in all of America?
Brazil successfully switched to efficient sugar-based ethanol--by government fiat.
If by "successful" you mean "the destruction of millions of acre of food crop in order to grow sugar cane for ethanol."
How would a free market economy make that transition?
If there were a genuinely profitable fuel - like I think CNG might become in the future - an increasing number of people would begin buying cars that use this fuel, stimulating their production. As more people see its profitability, gas stations might start adapting pumps to the new fuel.
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Fuel distribution companies have operations worldwide. If they wanted to switch technology, they could easily do so in cooperation with the similarly worldwide car companies. The reason they don't is that it is an inferior technology you want them to switch to.
Look at how the electronics industry switched from CD to DVD and now to Blu-Ray.
The fallacies of intellectual communism, a compilation - On the nature of power
Where there is a demand, the market will faciitate a supply in ways that are often so genius and innovative that none prior, otherthan futurist writers, could have predicted. As of now, there is little demand fof an oil-substitute for such fossil fuels are extremely efficient and are still in enough supply that there is still enough to last in the short-term without its price skyrocketing; however, once such factors begin to chance than there will emerge a demand for alternative fuels that the market can accomidate. Its economics 101.
Abstract liberty, like other mere abstractions, is not to be found.
- Edmund Burke
krazy kaju:It is still cheaper and more efficient than other fuels.
Right now. Maybe ten years from now you'll be lucky to get a gallon of gas for less than six dollars. In the meantime the auto industry can keep building gas-guzzlers, or switch to something better.
krazy kaju: Other fuels have more potential. Not really...
Maybe you should catch up on physics. The average automobile is extremely wasteful, compared to other options. The reason they stay in the laboratory is because of the cost of replacing existing infrastructure.
krazy kaju:All the corn in America could only supply 4% of the fuel market at current.
Everybody knows that corn ethanol is nothing more than a ridiculous political perk for midwestern states.
krazy kaju:Even if we used sugar cane ethanol, we would have to face skyrocketing food and fuel prices if we switched.
We wouldn't have sky-rocketing fuel prices because, like I said, ethanol cost less than gasoline and has more energy in each gallon. I don't foresee sky-rocketing food prices, either; they would just have to stop putting sugar in everything.
krazy kaju:Hydrogen fuel cells cost a lot.
Priuses cost a lot, too, and people still buy them.
krazy kaju:If there were a genuinely profitable fuel - like I think CNG might become in the future
I agree. It's already powering busses and UPS trucks.
laminustacitus:As of now, there is little demand fof an oil-substitute for such fossil fuels are extremely efficient and are still in enough supply that there is still enough to last in the short-term without its price skyrocketing
When oil went up to $4 you couldn't build Priuses fast enough. What do you think will happen when the wealth in the industrializing nations trickles down to the bottom and everybody in the world starts buying cars and iPhones?
ama gi:How would a free market economy make that transition?
Peter Schiff will buy all of the petrol powered cars after the dollar collapses. He'll fund it through his enormous wealth stockpiled in Hong Kong $s.
ama gi: laminustacitus:As of now, there is little demand fof an oil-substitute for such fossil fuels are extremely efficient and are still in enough supply that there is still enough to last in the short-term without its price skyrocketing When oil went up to $4 you couldn't build Priuses fast enough. What do you think will happen when the wealth in the industrializing nations trickles down to the bottom and everybody in the world starts buying cars and iPhones?
I on't know what will happen and nor do I need to know. One of the glories of the market economy is that it enables the most efficient utilization of knowledge; rather than needing to centralize all the facts in one center, in one "brain-trust" so that they may engineer everything the way they see fit, which is impossible due to the nature of the world and resuts in disaster, the markets enables all economic actors to do what they know best in synchronization with everyone else. Anyone, even the most intellegent economists in the entire word, when faced with this question, and with a question about the future in general can only reply in conjectures that often don't even resemble what is to come. Rather than trying that, I shall plead ignorence, but I know that the actors who all have a pieces of the infromation that I would need to accuratly hypothesize will be able to yield the best possible result with the given conditions.
ama gi:Right now. Maybe ten years from now you'll be lucky to get a gallon of gas for less than six dollars. In the meantime the auto industry can keep building gas-guzzlers, or switch to something better.
Yes, maybe 10 years from now a gallon of gas will be $6. The problem is that there is no reason to believe that the inflation-adjusted price of gasoline will rise above $6 a gallon. Considering that there is already "bug" produced crude oil that can be produced at $50/barrel, I don't see us paying $6 a gallon gasoline any time in the future.
Maybe you should catch up on the news. Never heard of ethanol-powered cars? Or electric cars? Or CNG-powered cars? All of these exist with a very minimal infrastructure... hmmm, but you just said that that's impossible! I wonder how.
Yet you mentioned it as an example of a good alternative fuel that could replace crude oil... Interesting.
Yet again, all of America's corn could only produce 4% of America's fuel needs. Only America's fuel needs. And this isn't about "using less sugar." When you divert land from growing corn, barley, wheat, potatoes, etc. to growing corn or sugar cane for ethanol, you are by default raising food prices by reducing supply.
They also cost less than hydrogen-powered cars. Take this for example:
The Shelby Cobras start at $149,000, the pickup is $99,995 and the Hummers run $60,000 for the conversion alone — you supply the Hummer.
Unless you want to force everyone to buy super-expensive automobiles, you won't get what you desire.
Krazy kaju, the question is how would the free market phase out gasoline power. 150 years ago people would have laughed at the idea of using petroleum products to make a 2-ton object safely move people around at 60 miles per hour. Today you are laughing at the idea that ethanol could do it better. You are arguing as if the free market has nothing to do with the situation. Your pessimism is warranted only so long as the state has a stranglehold on the industry, which is not a condition of the hypothetical question asked by the OP.
Pro Christo et Libertate integre!
Krazy Kaju, must I justify every word I write?
krazy kaju:Yes, maybe 10 years from now a gallon of gas will be $6. The problem is that there is no reason to believe that the inflation-adjusted price of gasoline will rise above $6 a gallon. Considering that there is already "bug" produced crude oil that can be produced at $50/barrel, I don't see us paying $6 a gallon gasoline any time in the future.
The fact that crude can be synthesized from biological sources does not comes as any surprise to me. I think it would be better to use, say, hydrogen, which is cheaper to produce and does not have to be processed as much.
krazy kaju:Maybe you should catch up on the news. Never heard of ethanol-powered cars? Or electric cars? Or CNG-powered cars? All of these exist with a very minimal infrastructure... hmmm, but you just said that that's impossible! I wonder how.
The reason that they are not filling up the auto malls is because of a lack of, what do you call it, infrastructure. There are only about 800 CNG service stations in this country. Maybe that is why CNG vehicles are not so popular.
krazy kaju: Everybody knows that corn ethanol is nothing more than a ridiculous political perk for midwestern states. Yet you mentioned it as an example of a good alternative fuel that could replace crude oil... Interesting.
Don't be silly. I meant sugar-based ethanol (and, possibly, some other source of ethanol that has not yet been discovered).
krazy kaju:And this isn't about "using less sugar." When you divert land from growing corn, barley, wheat, potatoes, etc. to growing corn or sugar cane for ethanol, you are by default raising food prices by reducing supply.
The idea is that any slight increase in food prices will accompany a greater decrease in energy prices. Sugar-based ethanol fits the bill because it is cheaper per gallon than gasoline and packs more energy per gallon.
"How would the free market phase out gasoline-powered vehicles?"
Stop subsidizing roads.
Wars and rumors of wars will always be with us, regardless of the currently valued resources.
Imagine all these alternative fuel sources already being in use. Now imagine oil/gas is newly discovered. Oil would be said to be our new hope.
"The best way to bail out the economy is with liberty, not with federal reserve notes." - pairunoyd
"The vision of the Austrian must be greater than the blindness of the sheeple." - pairunoyd
MacFall: Krazy kaju, the question is how would the free market phase out gasoline power. 150 years ago people would have laughed at the idea of using petroleum products to make a 2-ton object safely move people around at 60 miles per hour. Today you are laughing at the idea that ethanol could do it better. You are arguing as if the free market has nothing to do with the situation. Your pessimism is warranted only so long as the state has a stranglehold on the industry, which is not a condition of the hypothetical question asked by the OP.
I already explained how the free market would phase out gasoline power:
krazy kaju:If there were a genuinely profitable fuel - like I think CNG might become in the future - an increasing number of people would begin buying cars that use this fuel, stimulating their production. As more people see its profitability, gas stations might start adapting pumps to the new fuel.
Maybe you should read the posts you critique before you critique them, MacFall.
ama gi:Krazy Kaju, must I justify every word I write?
If you're critique ultimately doesn't make sense, then yes.
Yet the reason hydrogen isn't used is because of the incredible costs of production of hydrogen-using cars. Only because hydrogen fuel is cheaper doesn't make hydrogen-using vehicles superior.
The reason that they are not filling up the auto malls is because of a lack of, what do you l it, infrastructure. There are only about 800 CNG service stations in this country. Maybe that is why CNG vehicles are not so popular.
Most people who own CNG vehicles actually have their own filling stations. The problem is that, like with electric vehicles, it takes a considerable amount of time to fill a car with CNG. Also, CNG takes a large amount of space to store.
Using your logic that alternative fuel cars won't become popular because the "infrastructure" for them doesn't exist, you might as well argue that no petrol based vehicle exists. After all, how could gas stations ever be created without government intervention? There obviously is a free market solution to the problem IF the fuel is actually efficient. If it isn't, don't expect it to permeate the market.
All ethanol is sugar-based ethanol. Yes, there is sugar in corn. Regardless, by diverting land from food production to fuel production, you will cause food prices to skyrocket due to our huge demand for fuel.
The problem is that "the idea" is not going to work in the forseeable future. We just had a huge energy crash. As energy prices increase, exploration is incentivized as is the use of marginal oil fields. Likewise, "renewable oil" will probably be the replacement, considering that alternative fuels like hydrogen, CNG, and ethanol all come with their own problems (e.g. expensive vehicles, large necessary storage place, etc.).