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Brooks Wilson's Economics Blog

Friday, April 15, 2011


I love my new 2010 Prius. They are fun to drive slow, something I thought I would never say about a car, and there is nothing like a long glide after a short pulse to increase gas mileage.  I got 53.8 mpg on my last tank of gas and anticipate exceeding 55 mpg on this tank.  The hybrid technology used in the Prius is a technological wonder but it comes at a price.  It is more expensive than similarly sized cars.  I figure that at $3.50 per gallon I will need to drive the car about 60,000 miles to recoup the initial sales price but that is dependent on a high resale value in six or seven years. 

(HT Watts Up With That) Two new inventions threaten to knock the stuffing out of the resale value of current hybrids.  Both projects are funded by Department of Energy’s ARPA-E grants.  Researchers at the University of Minnesota have figured out how to combine carbon dioxide, sunlight and bacteria and turn it into oil (“The greens worst nightmare? A CO2 to Oil process”).  If oil can be successfully produced using this technological advance, the price of gasoline would at least stabilize and could potentially fall making cars powered by the internal combustion engine cheaper to drive and environmentally less threatening. 

The second invention is a new gasoline engine that was developed at the Michigan State University (“New gasoline engine design has 4x efficiency of pistons”).  The team that made the Wave Disk Generator believe that it will provide a driving range exceeding 500 miles.  They also believe that it will be 30% lighter and 30% less expensive than a plug-in hybrid, and that it will cut carbon emissions by 90% relative to gasoline engines. 

Often, the invention is the easy part.  The more difficult part is successfully producing a good in a market setting with the invention.  Economists refer to this step as innovation.  Let’s hope that these projects are successful innovations.  What I lose in value on my Prius will make up with reduced driving costs on my future vehicles.   Permanent Link

2 comments:

  1. The Prius is a great car to get! It is very fuel efficient and I had no idea that it was able to get up to 55 miles per gallon. When you talk about the "new inventions" and how they will knock out the current hybrids, a question popped into my head. Will the oil be as good for the car as it is now, or possibly better? It may not take as much money to produce the oil which in turn takes the price down, but is it as good? Will it allow you to go just as far as the other, or will it get used up more quickly?
    Maybe they are exactly the same, just one is more economically better. In that case, i hope for the best to these inventors/installers.
    --Kenna Kilgo

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  2. 55 MILES PER GALLON?! That is tremendous. Just tell that to the ladies and they will be impressed with that, regardless of how slow you are driving.Right Kenna? Haha
    With the rapid rate of new developments in technology, It seems like there is a new car out all the time. Also I'm sure you can get an idea of what will come out if you follow a manufacture's concept cars. I'm pretty sure there are also some 2010 hybrids that still get better gas mileage than some standard 2011 car with a new engine that provides "good gas mileage". You just got to make sure you buy the car sooner to start your savings. Either way you save loads of money at the pump, and it's unlikely that the average Joe will buy a new car often. If one buys a new car frequently, clearly gas is not an issue. But back to the fact of the increasing rate of technology, the cost of the new cars will also increase. Besides, by the time a 2010 car gets old, you'll eventually have enough money saved to buy a 2019 hybrid/solar powered/ flying car/ jet pack/ whatever the future throws at us in 2022.

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