I’m a trucker, so I value fuel efficiency in vehicles. The less fuel we burn, the more money we make. So when it came time to replace my personal vehicle, a 2013 Toyota Prius which was totaled after an axis buck chose me to participate in its suicide, I settled on a Toyota Highlander which only gets 21 MPG on the highway instead of 48 MPG. It took me seven days to convince myself to buy a vehicle with less than half the MPG of the Prius because it took me that long to accept the conclusion from my research.
The reason oil is priced low is because we have more available than the market needs. The fracking revolution in the US shale patch is the cause for the glut of oil we’re experiencing. So much so that the US government is reversing its position and permitting domestic oil exports.
I checked the rig count and determined there’s barely any drilling action in the oil patch. Then I wondered who has the most shale oil in the world. It turns out the US Department of Energy knows that answer; China and Russia. It also turns out that the only country at present that knows the alchemy of fracking is the good ole US of A. I could find no reported fracking anywhere OTHER than the US.
By chance, I became aware of a presentation that was given back in April of 2015 by an analyst named Donald Broughton from Avondale Partners to the Transportation Intermediaries Association. In the presentation, he was clear that as Iran rejoins the world economy, it’s going to need to sell oil to stockpile the foreign currency it needs to reinvest in its national economy. Regardless of the price of oil, Iran is going to sell what it can. He also noted that the economy in China has slowed. Consumption, in general, is down for many reasons, but China was the most notable one.
I asked myself how long the price of oil could stay this low? With China consuming less, Iran and all of OPEC dumping its oil to prop up their government programs and the inevitable fracking that has yet to occur in China and Russia, I could find no reason to think that low oil prices were going to be temporary. In fact, I think this cycle of cheap oil could go on for ten years or better.
So I did the return on investment calculation on the 2016 Highlander Hybrid which boasts a highway MPG of 28 MPG and compared it to its combustion-powered brother who gets 21 MPG. The result was 6.5-year payback to recoup the premium associated with the hybrid – holding fuel constant at a price of $2 per gallon. When I ran the numbers at $3 a gallon, the payback was 4.75 years. Any finance guru will say it’s not the best use of money if it takes more than five years to get the payback.
I will still buy an Elio with an 84 MPG fuel efficiency rating, later this year. That return on investment works at any gas price. But not before I get a Toyota Highlander that seats seven comfortably, with a bull bar just in case another one of the four legged hill country residents decides to pick me to commit suicide. The 2016 Prius just does not look good with a bull bar on it, and that’s my reality. I’m going to miss my Prius, but I’m going to enjoy the spacious comfort of the Highlander.