Another Look at Hybrids

With gas below $4, and in some states below $2, I thought I would take another look at hybrids and their economic efficiency.

While I am not against hybrids per se, I still am not completely convinced that the value proposition is there.

In my previous column about hybrids titled "Hybrids, the Real Deal or Flavor of the Month" and "Hybrid Hummer Hums," I made a general statement about how to determine if the fuel savings of the hybrid is greater than the additional acquisition cost. Also, I recommended using the MPG calculator at http://www.fueleconomy.gov/feg/savemoney.shtml.

I decided to compare the Toyota Camry and Toyota Camry Hybrid. Here is a table I created using data from an auto buying service. The data surprised me.

2009 Toyota Camry 4dr Sdn V6 Auto XLE (Natl) vs. 2009 Toyota Camry Hybrid 4dr Sdn (Natl)

As configured, the MSRP is $2545.00 greater ($28695.00 vs $26150.00).
Engine Type 6 cylinders standard, versus 4 cylinders standard.
Fuel Economy City 14 mpg lower fuel economy in the city (19 versus 33).
Fuel Economy Highway 6 mpg lower fuel economy on the highway (28 versus 34).
Cruising Range City 216.1 less miles cruising range in the city (351.5 vs 567.6).
Cruising Range Highway 67 less miles cruising on the highway (518 vs 584.8).
Base Curb Weight 164 pound(s) less base curb weight (3516 vs 3680).

What does all of this mean? I couldn't believe that the non-hybrid was $2545 more than the hybrid. But the story doesn't end there.

In a recent article in The Wall Street Journal about small cars, the Journal reports that hybrids are more expensive to own. To me, that didn't seem possible until I read the article.

Insurance for hybrids is more expensive, as are repair parts and labor. "The 2009 Camry hybrid, for instance, costs an average $1,957 to insure for that 40-year-old male driver, while a similar conventional 2009 Camry costs just $1,302, according to Insure.com."

Also from the Journal, "Hybrid cars cost more to insure because they can't [always] use after-market parts, the labor charges per hour are higher, and the they take longer to repair," says Amy Danise, a spokeswoman for Insure.com.

Just when I thought I might buy a hybrid during the gas run up, I am glad I didn't. I had no idea about the insurance issue, but that is why I wrote this article.

I wanted to highlight the need for a smart consumer to perform comparisons based on all of the facts. Many people have bought hybrids to be "eco-chic" or some other non-measurable quality. Others only view the gas savings, but don't know about the insurance hit.

Ultimately, since its your money, you will decide the relative value of each option, but please, do so in an informed manner.

Corn and Sugar Cane for Ethanol?

Does the conventional wisdom about ethanol for fuel make economic sense? In general the answer is clearly "No!" If you are a corn or sugar cane producer, the answer is certainly "Yes!" With all economic analysis, measures of success vary among parties.

If one is just a consumer of gasoline in the US, which is mandated by law to have at least 10% ethanol, the answer is no. Ethanol, when blended with gasoline, is less fuel efficient and creates more emissions through incomplete combustion.

Although ethanol had been envisioned to reduce dependence on foreign oil, the opposite has occurred. It takes more fuel to plant, tend, and harvest corn and sugar cane, and then to process it, than the resulting ethanol saves. Additionally, ethanol blended gasoline is more expensive to purchase, and since it is less fuel efficient, it is less efficient to use.

Further, when existing crops such as corn and sugar cane are taken off of the food market to ethanol, the price of those crops goes up, as does the price of food. Higher food prices lead to both local and global insecurity. Is getting less mileage, creating more pollution, and spending more at the grocery store worth it?

From a farmer's point of view, using crops which are often subsidized, even sometimes subsidized to destroy, in a useful manner is good. Arguably, higher prices lead to higher output and that is better for the agriculture sector in general. A strong agricultural sector leads to greater food security.

So who is right? From an economic efficiency point of view, the consumer is right and the farmer wrong. The costs to the consumers far outweigh any potential and specific gains to farmers and the agricultural sector. Additionally, the detrimental impact of increased air pollution also tilts the scale in favor of the consumer.

Clearly, using corn or sugar cane to make ethanol for fuel doesn't make overall economic sense.

Here is some video discussing the issue further: