The Distribution of Fuel

The Distribution of Fuel

Not that long ago, to watch a new movie, one would first have to go to a merchant.  I spent many Friday and Saturday evenings in my youth perusing the aisles of the movie rental shop.  Movies were imprinted on physical cartridges, those cartridges were distributed throughout the world to physical stores, employees in those physical stores would loan those cartridges to individual users, and users would travel to and from the store to watch the movie.  All of this had a cost associated with it.

The process of movie distribution has been made much more efficient with online streaming; the cost of creating and distributing the movie cartridges along with the costs associated with establishing and manning the physical space have been eliminated.  The added convenience of being able to watch a movie without having to travel to a location to pickup a physical cartridge was significant enough that the streaming companies put the rental companies out of business rather quickly, even though the quality of the streamed video was not as good as the one rented from the store.

We are at the inception of a similar disruption in the automotive industry.  Electric vehicles have several benefits and drawbacks over other types of vehicles.  The ones discussed most often are the reduced emissions associated with electric vehicles [1], and their reduced ranges (over gasoline vehicles) [2].  Much like movies, though, the distribution of the fuel with electric vehicles is much easier and more convenient.  So much so that I think electric vehicles will soon dominate the market.

With gasoline, an oil reserve must be discovered, oil must be gathered from the earth, the oil must be refined, the refined fuel must be transported to gasoline stations (largely by train and truck), those stations must have tanks to store the gasoline (remarkably technologically advanced tanks [3]), and there must be fuel pumps and gas station attendants to help dispense the fuel to patrons.  How does this compare to electrically powered vehicles?

Electric vehicles can be charged in the home [4].  And there are charging stations for passing vehicles [5]; Tesla (a major electric car manufacturer) will soon be collecting solar power to store energy at charging stations [6].  I expect that other car manufacturers will create similar charging stations.  Effectively, the sun is performing the task of distribution and replacing the process of fuel recovery, fuel refinement, and fuel distribution.  And the charging stations are simple enough that personnel are not required to man them.  The added convenience of being able to power your vehicle in your home and the cost reduction due to the natural distribution of solar power are so great that, even with the drawbacks of electric vehicles, I expect that we will see them dominate the marketplace soon.

Other types of vehicles are also competing for the future marketplace.  Ethanol and liquid hydrogen have been researched for future vehicles.  Toyota has released a vehicle for sale, called the Mirai, that runs on liquid hydrogen [7].  Ethanol and Hydrogen do indeed have reduced emissions over those of gasoline fueled vehicles.  However, those fuels remain expensive to produce, distribute, and store.  Indeed, Hydrogen must be pressurized both in the storage tanks and in the vehicle to remain in its liquid state at atmospheric pressures.  Additionally, the system to transport the fuel from the storage tank into the vehicle must be pressurized in order to keep the fuel in its liquid state.  This makes the Hydrogen fueling station very expensive [8].  And though research is being done to reduce this cost, I don’t see it competing with the ease of distribution and storage of electricity.

So I’m calling it.  Electric vehicles are here to stay.  Gasoline engines, hydrogen fuel engines, and ethanol engines are either on their way out or won’t generate significant revenue.  But I guess it’s not that hard to see this future at this point.  Volkswagen just announced that they will attempt to become a major electric vehicle manufacturer [9].  So did Volvo [10].  Toyota and Tesla are making vehicles with solar panels included.  [11] And France has announced that it will ban the sales of gasoline vehicles by 2040 [12].  It makes me wonder, then, why Toyota is pursuing a hydrogen fueled vehicle.

Disclaimer: I own stock in Tesla.

 

[1]  http://news.mit.edu/2016/study-finds-low-emissions-vehicles-less-expensive-overall-0927

[2]  https://cars.usnews.com/cars-trucks/electric-cars-with-the-longest-range

[3]  https://www.youtube.com/watch?v=YsVdqqAizDI

[4]  https://www.tesla.com/support/home-charging-installation

[5]  https://www.tesla.com/destination-charging

[6]  https://electrek.co/2017/06/09/tesla-superchargers-solar-battery-grid-elon-musk/

[7]  https://ssl.toyota.com/mirai/fcv.html

[8]  https://www.hydrogen.energy.gov/pdfs/review15/st100_james_2015_o.pdf

[9]  http://fortune.com/2017/05/08/volkswagen-tesla-electric-cars/

[10]  https://www.nytimes.com/2017/07/05/business/energy-environment/volvo-hybrid-electric-car.html

[11]  https://electrek.co/2016/06/20/toyota-prius-plug-prime-solar-panel/

[12]  https://www.theguardian.com/business/2017/jul/06/france-ban-petrol-diesel-cars-2040-emmanuel-macron-volvo

 

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4 thoughts on “The Distribution of Fuel

  1. A comment from a reader:

    Read it on Facebook. Really nice.

    Bizarre and not addressed in your article, but lobbying and politics play a huge role in what energy takes off. The gov can essentially control the cost of fuel. IE tax electric cars for “road fees” at some crazy amount. That would ensure greater longevity for fuel. Just a thought.

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  2. I am currently researching to purchase an electric vehicle mostly due to ease of charging at night and environmental concerns. I am also concerned about the safety or lack thereof of gas stations starting with inhaling fumes, etc. Your article is timely.

    Like

  3. A comment from a reader:

    I have the impression that another major advantage of electric cars is that the engine design is much simpler, which could reduce manufacturing costs. A gasoline engine uses controlled explosions, which seems kind of crazy and inelegant. I could be wrong.

    Like

  4. A comment from a reader:

    You may be right about the ascendancy of the electric vehicle, but I’m going to hedge. The range and price may approach that of gasoline engines, but the refueling time probably won’t. That’s a non-starter for people who travel long distances, live in rural areas, want to drive cross country in three days, etc. A lot of people have a real fear of running out of power in electric vehicles. And not without good reason. Can’t hitchhike down the road for a can of gas. All you can do is call for a tow truck.

    That’s why I think a mix of gasoline, fuel cell, electric, and hybrids of all three will continue. And I don’t see why fuel cells won’t grow. Just need more filling stations and manufacturing will take off. I heard people trashing hydrogen because it is made from fossil fuels. But natural gas is mostly used and there is an abundance of that. The only rub with the global warming alarmists is that it produces CO2 but I don’t think that argument will affect the market much.

    Like

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