The True Price of a Hybrid
 

A firend of mine has a very interesting piece in The Freeman, a publication of FEE, the Foundation for Economic Education on the price system, using as an example environmental economics and the true price of hybrid vehicles.

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How do we measure the scarcity ratio between apples and oranges without a common denominator? In a barter economy with two goods, there is only one ratio that needs to be considered. In an economy with three goods, there are three ratios. With four goods, there are six ratios; and with five goods, there are ten ratios. In a complex economy like ours, there are too many ratios to count.
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However, in an economy that uses money, all we have to do is compare prices. They quickly show us the relative scarcities. If the price increases, the item is becoming scarcer. Not only does the price tell us if the item is becoming more or less scarce, it also tells us by how much. A 1 percent change is different than a doubling of the price. Since each item’s relative scarcity is expressed as a price, no one has to know all the relative scarcities of the various inputs unless he wants to look. In a world of barter, I would need to keep in my head the relative scarcity ratio between my toothbrush and magnesium. In a world of prices,we don’t have to know the price of magnesium unless we want to know. By simply looking at prices and comparing costs, entrepreneurs are able to calculate economic efficiency.

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Let’s look at the popular 2007 Honda Civic Sedan Hybrid and compare it to the nonhybrid version. The Civic Sedan’s average price is $17,760; the hybrid’s average price is $22,600, a $4,840 difference. Next we need to check the miles per gallon claimed for each car. The Civic Sedan gets 35 mpg, the hybrid 50 mpg. If the average person drives 15,000 miles per year, then the savings is 128.57 gallons a year, or $424.28 a year (assuming gasoline at $3.30 per gallon). Before we discount for the future, we see that it will take over 11 years to make buying the hybrid worthwhile. When we include a reasonable discount of 3 percent, the number grows to 14.5 years.

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It's a quick and easy read and very good to boot. <font color="white">Cue the bitching from people who haven't read the article in 5 . . . 4 . . . 3 . . . </font>

Re: The True Price of a Hybrid
 

except that price change is not always attributable to change in scarcity

the hybrid cost analysis has been done to death

Re: The True Price of a Hybrid
 

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then the savings is 128.57 gallons a year, or $424.28 a year (assuming gasoline at $3.30 per gallon).

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This assumes the only benefit to buying a hybrid is financial.

In Arizona, some hybrids qualify to drive in the HOV lane even with no passengers. Many people with long freeway commutes are buying Priuses just for the glorious feeling of zipping down the HOV lane when the freeway is jammed (or so I've been told).

Re: The True Price of a Hybrid
 

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then the savings is 128.57 gallons a year, or $424.28 a year (assuming gasoline at $3.30 per gallon).

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This assumes the only benefit to buying a hybrid is financial.

In Arizona, some hybrids qualify to drive in the HOV lane even with no passengers. Many people with long freeway commutes are buying Priuses just for the glorious feeling of zipping down the HOV lane when the freeway is jammed (or so I've been told).

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Then Az has it backwards. The gas guzzlers should get HOV rights so they dont it in traffic and burn that extra gas and contribute to global warming. Let the greenies open up their sunroofs and bask in the glory of nature.

Re: The True Price of a Hybrid
 

No, the use of the lane is an incentive to switch to a hybrid.

And has been covered, no one ever buys hybrids based on cost analysis - plus many costs are hidden and in many ways cannot be broken down into dollar amounts such as environmental effects.

Re: The True Price of a Hybrid
 

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No, the use of the lane is an incentive to switch to a hybrid.

And has been covered, no one ever buys hybrids based on cost analysis - plus many costs are hidden and in many ways cannot be broken down into dollar amounts such as environmental effects.

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I thought that hybrids usually have a larger carbon footprint than non-hybrids. So if it won't save you money and is more harmful to the environment, what is the reason to buy a hybrid?

Re: The True Price of a Hybrid
 

Im not aware that it does have a larger carbon footprint - i can only assume this is because of the carbon cost of developing the technology? Do you have a link for that?

If it does have a larger carbon effect, and ignoring the other crap that cars pump out their exhausts, then ill happilly concede the Prius is marketed really well and my knowledge is lacking.

For the record most hybrids can be outdone for MPG and other environmental figures by small engine light cars and modern efficient turbo diesel engines and ive said for a long time their green friendly credentials are lacking - especially since the quoted figures are often gross overestimates based on selective testing environments.

I dont own a hybrid, never have, but like i said it isnt about cost and it seems it is about incorrect perception they are greener - although im sure a lot of it is a fashion statement/publicity and perception as being pro environment.

Either way, im sure they are miles better than SUVs across the board.

Which reminds me of a cribs episode where some minor celeb showed us round his house, then showed us the two SUVs, a Merc of some kind a Prius he said he rarely drove.

Re: The True Price of a Hybrid
 

I've heard it mentioned elsewhere and this link supports the idea. Basically, the reason the carbon footprint is larger is because the specialized parts of hybrids often have to travel much further than conventional car parts.

Re: The True Price of a Hybrid
 

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plus many costs are hidden and in many ways cannot be broken down into dollar amounts such as environmental effects.

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price dilution/subsidization only occurs from government intervention. Whether its the fact that governments own the airspace, roads, courts/justice, etc. and distort the price of energy.

Re: The True Price of a Hybrid
 

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I've heard it mentioned elsewhere and this link supports the idea. Basically, the reason the carbon footprint is larger is because the specialized parts of hybrids often have to travel much further than conventional car parts.

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is the consumer driving of the prius vs. hummer taken into account in that calculation?

how many years must i drive the prius to make up for the mile energy cost differential?

Barron

Re: The True Price of a Hybrid
 

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When the full picture is examined, hybrids do not look quite as good as the environmental lobbyists would have us believe. According to the “Dust-to-Dust Automotive Energy Report” by CNW Research (link), the average energy cost per mile for the top ten hybrids (2006 models) is $3.65.The average for the industry is $2.95. (I happily report that my Chevy Monte Carlo is $1.61 and my wife’s Saab 9-3 is at $1.64 per mile.) The Prius, Civic, Accord, and Escape hybrids are $2.87, $3.40, $3.42, and $3.54, respectively.
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To efficiently use resources, we want the best combination of leastcost technology. Suppose a family is growing and badly needs a bigger vehicle. Surely a hybrid would be better than a minivan or SUV, right? Don’t run out to the hybrid dealer just yet. The average energy cost for upper-midrange SUVs like the Hummer H3, the Saab 9-7X, and the Range Rover Sport is $2.43 per mile, well below the hybrids, and the average for minivans is even better: $2.23 per mile. If we want to be good to the environment, we need to use resources wisely. The price system shows us how to act so we don’t waste resources.When people naturally minimize costs, they are conserving resources. No governmental interference is necessary.
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Some of my students point out that a tax credit helps offset the price differential of a hybrid, thus lowering the cost to the owner. While true, the credit doesn’t negate the evasion of the economic-allocation problem. It merely masks it. Just because the consumer does not bear the burden of bidding resources away from more profitable uses doesn’t mean those resources aren’t being misdirected.
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Environmental economics is a fascinating field. It attempts to assure that people confront the full costs of their decisions about what to produce and what to buy. Better than any government bureau, the price system communicates which methods of production are least costly. If we want to be environmentally friendly, all we need do is follow the market and compare total costs. The market abhors waste.

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Re: The True Price of a Hybrid
 

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I've heard it mentioned elsewhere and this link supports the idea. Basically, the reason the carbon footprint is larger is because the specialized parts of hybrids often have to travel much further than conventional car parts.

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is the consumer driving of the prius vs. hummer taken into account in that calculation?

how many years must i drive the prius to make up for the mile energy cost differential?

Barron

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I've read wildly different estimates on this. I think it's around 13 years if I remember correctly. Keep in mind that the tax credit for Toyota is about to expire, I think permanently, so for a Toyota hybrid you won't be able to factor the tax credit into the equation anymore.

Re: The True Price of a Hybrid
 

There's certainly a lot of truth to the hybrid hype. Like any newer technology, they are more expensive now than their competition. But look at the price of a VCR in 1985. Should people never have developed VCRs because they may have been more expensive early on than just buying a film projector and ordering films on celluloid? And who's to say gas won't be $6/gallon in 6 years? It's nearly tripled in price over the previous 6 years at its recent high.

That all said, I considered a hybrid and came to the same conclusion: Over a 6 year life-cycle (I figured I'd get a new car after that), it was more expensive even at higher gas prices than my compact choice which gets 39 mpg.

Unfortunately, too many see this hybrid hype and think it means that their 17 mpg SUV is as good a choice as any. I feel the same pity for them when they pay $50 to fill-up each week as I do for the 2-pack-a-day smoker who complains about the price of a carton.

Re: The True Price of a Hybrid
 

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No, the use of the lane is an incentive to switch to a hybrid.

And has been covered, no one ever buys hybrids based on cost analysis - plus many costs are hidden and in many ways cannot be broken down into dollar amounts such as environmental effects.

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Uhhhh....I was being sarcastic.

Re: The True Price of a Hybrid
 

I pay a $120 a year to offset the carbon footprint (source thanks to wacki) of my gas guzzlers. I got bumper stickers too showing how environmentally concious I am. Seems like a better way to go [img]/images/graemlins/smile.gif[/img]. Also I've read/heard that the disposing of the batteries in the hybrids is an environmental challenge in itself. Local utilitily just sent me a letter that for an extra $10.00 a month I can get my electricity from a wind generated source. Funny how I've got to pay extra to be environmentally conscientious.

Re: The True Price of a Hybrid
 

Hybrids for insterstate commuting did not make much sense when I looked into it a while ago, and I think there are more hidden energy costs to make the batteries that people are not aware of. I think there is a better than fair chance the past analyses may be blown out of the water by increases in the cost of oil due to rising demand and lack of refining capacity.

When you are dealing with City driving, you simply can't beat the hybrids, plus they are smaller and easier to park. The real potential for this technology is for buses. I ran into some guy who designs these for public transit, and the energy being saved is stunning, because it takes a ton of energy to stop a bus and they stop every few hundred yards.

Re: The True Price of a Hybrid
 

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I've heard it mentioned elsewhere and this link supports the idea. Basically, the reason the carbon footprint is larger is because the specialized parts of hybrids often have to travel much further than conventional car parts.

[/ QUOTE ]Isn't this an argument for MORE people buying hybrids?

To assume that the cars and parts would continue to travel such huge distances or the "specially designed" hybrid car parts would continue to suck up huge amounts of energy in production if the cars were more widely purchased is ridiculous. Scale efficiency will bring down this figure.

I don't understand the "cost per mile" figure, either. It must make assumptions about traveling distances, and people generally drive more efficient cars longer distances (ie for commuting). Thus if a grand average mileage were used to make the fixed costs and marginal per mile costs apples-to-apples, cars with lower marginal per mile costs would be at a huge disadvantage.

Apparently the 50,000 miles I've driven my hybrid have cost well over $150,000. That's news to me, considering the total spent on gas and purchasing the car is still only a miniscule fraction of that.

Re: The True Price of a Hybrid
 

T50,

If you take a look at the linked report on "Dust to Dust" energy costs, you'll see it is not the cost to you the original owner that the "Energy Cost per Lifetime Mile" represents, but rather the total energy costs of the vehicle from "dust to dust". The actual calculation is very complex, but to summarize (from the report):

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It is important to note that the original owner of the vehicle doesn't pay this amount. The purpose here is to calculate the total energy requirements in a cents-per-mile matrix over its entire lifetime. Some parts of this cost, as we'll see, are borne by the auto company in a way that leverages future products while other costs are passed along to support industries such as tires, batteries, replacement parts, repair parts and disposal/scrappage.
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Why doesn't the original buyer pay for this? We'll see in a subsequent chapter how second, third and other owners of this vehicle bear a large part of the cost. And the existence of such secondary sources of energy expenditures is justifiable because there is a market--a profitable market--for such goods and services resulting from the original buyer's vehicle selection.

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Rather than the absolute numbers, the important thing about them is their relative values.

The report points out that it is NOT that the hybrid costs the owner that much more in total cost of ownership (that is the other calculation that Dr. Cwik makes in the article linked in the OP), but rather the total societal energy cost when the buyer purchases that model. Since many buyers buy hybrids hoping to be environmentally friendly, this is a relevent statistic to look at.