Phil Flynn: Without Electric Cars, Gas Prices Could Rise Exponentially

Noted energy commodity expert Phil Flynn told us that if America’s “desire for electric cars goes away,” gasoline could be selling for $10 a gallon by 2013.

Flynn, who heads Alaron Energies’ futures brokerage division, doesn’t expect any near-term spike in oil or gasoline prices. In an interview, Flynn told EnergyTechStocks.com that even when the overall economy recovers, oil futures traders will no longer have access to the easy credit that he says led to 2008’s summer of sky-high oil prices.

Nevertheless, Flynn does expect spot oil prices eventually to climb back above $100 a barrel. While he said it could happen in as little as 12 months time, “more than likely” it will take at least five years.

What Flynn said his crystal ball can’t yet see is the extent to which all-electric and plug-in hybrid electric vehicles (PHEVs) will be in demand. Should demand be strong, it would lessen the need to exploit high-cost oil supplies from such areas as the Canadian tar sands region. If demand fails to materialize, rising costs and limited supplies could send pump prices up to $10 a gallon in 2013.

Flynn went on to discuss the one commodity he would most like to trade over the next 10 years. His choice – as we’ll get to tomorrow in Part 2 – suggests that Flynn would not be surprised if Americans’ desire for electric cars proves to be permanent.

Comments

[Tom B:]

Well, of course oil will shoot again when people again have jobs: supply and demand, and the supply is diminishing. As for oil sands; that is a dirty fuel. Of course, so is coal and that is widely used. But from an ethical point of view, oil sands are better left alone.

2008 Dec 17 09:04 AM

[Paul Killinger:]

Unfortunately, when you add up the numbers even the current generation of hybrid electrics don;t work. Indeed, Toyota has cancelled plans to open its new $1 billion Prius plant in MS indefinitely. It's amazing what a little demand destruction can do, isn't it?

As for pure EV's like the proposed Chevy Volt, they have the same problem as the original EV, the 1909 Baker Electric. The batteries are too expensive. Chevy says the Volt will cost around $45K, including its $15K REPLACEABLE battery pack.

However, this doesn't mean that we won't find a viable substitute for gasoline to fuel our nation's transportation sector. We already have, actually. It's called natural gas, and between it and its cousin, gas hydrates, it will provide us with enough domestically produced, clean burning and affordable energy to power our transport economy forever.

2008 Dec 17 09:10 AM

[yank:]

Oil sands represent the 2nd largest source of oil reserves on the planet. With production declines from Mexico to Russia in the face of rising global demand, we do not have the luxury of saying they should be "left alone." Alternative energies like solar, wind even if fully developed (and subsidized by the Govt) will not be able to provide meaningful energy supplies for 15-20 years. By then global oil supplies (without the oil sands) will be pretty much exhausted. The oil sands are essential for the continued growth of the global economy.

2008 Dec 17 09:11 AM

[Ferdinand E...:]

Hmm, I seem to remember an acid discussion in this site recently about the use of natural gas to fuel vehicles. The word I should have used in that discussion was 'expenentially'. To be precise, If natural gas was installed as the fuel of choice for vehicles in the US as Mr Pickens and several other people want, its price would rise exponentially. This of course is a complicated issue, and let me use this opportunity to suggest that the 'energy team' that will soon be installed in Washington is probably incapable of sorting it out.

Ferdinand E. Banks

Ferdinand E. Banks

2008 Dec 17 09:18 AM

[Paul Killinger:]

As for the charge that EV's are more environmentally friendly than NG powered vehicles, think about that idea for a moment. Why is it NG is the fuel of choice to power our nation's electric grid? It's because it's the CLEANEST burning fuel there is (other than nuclear reactors).

And if EV's ever hit the road en masse, they'll need to plug in somewhere. That would mean HALF their fuel source is derived from COAL, wouldn't it? The problem with EV's is identical to the one substituting e-85 for gasoline, it's simply NOT economically viable in the REAL WORLD.

2008 Dec 17 09:26 AM

[Paul Killinger:]

Fred,

You and Yank both make excellent observations.

As regards future NG prices, they may well rise exponentially, esp. as its use as an environmentally acceptable fuel increases. It will be interesting to see if NG retains its historic 40% price discount to oil in coming years.

That doesn't mean Boone isn't right, however. His idea is to substitute wind (and even solar) for NG to make electricity. Others would have us increase our use of nuclear reactors dramatically to achieve this end.

Until we commercially develop our store of gas hydrates (est. to be in a decade or less now), the danger is we will increasingly rely on NG for ALL our energy needs. Even with our est. 120 years of proven reserves at current rates of usage, that could cause prices to escalate sharply.

But it's still the best economic (and environmental and security) solution we have. And don't forget about the 250 million ICE's we already have in operation. The cost of replacing them in any meaninful numbers would make our present economic problems look like kid's stuff by comparison.

2008 Dec 17 09:50 AM

[Paul Killinger:]

Yank,

I think I would agree that oil sands area safe investment over time, esp. if there is some sort of supply disruption with oil.

By the way, what is the largest single store of known oil reserves in the world? I believe it's the oil shale in the U.S. Rockies, isn't it?

Not that it matters, however. I'd venture it's safe to say that we're not going to see significant amounts of this product in our gas tanks anytime soon, if ever.

2008 Dec 17 10:06 AM

[Paul Killinger:]

Can you imagine, the Senator from CO is giving up his Senate seat to become the new Secretary of the Interior. I would suggest he's doing this at least in part to attempt to lock up the oil shale in the Rockies forever. Whether you agree with his views or not, you have to admire his commitment!

2008 Dec 17 10:14 AM

[Paul Killinger:]

So at least we don't have to worry about higher energy prices ahead, that's now a GIVEN. By way of example, it costs $600 to convert an ICE to run on NG instead of gasoline in Brazil, but our EPA has made it so costly here you can't do it (legally) at almost any price.

I would suggest that this continued (and now surely EXPANDING) distortion of pricing in our domestic energy markets doesn't bode well for our future economic well being. Add to this the pledge of our President-elect to artificially dramatically increase electricity prices, and you have a recipe for economic Argameddon.

It will be interesting to see what effect the coming consumer blowback that will certainly result has on this strategy, if any.

2008 Dec 17 10:36 AM