Hybrids Could Continue to Dominate According to Exxon

Brittney Barrett |

electric car 2012According a recent prediction from Exxon Mobil (XOM), one out of every two cars will be hybrids or another type of alternative fuel vehicle by 2040 as the government continues to enact more stringent fuel efficiency policies. While many car makers have reached showroom standards by increasing the efficiency on engines of their traditional models, Exxon predicts that will become increasingly difficult as fossil fuels become more limited and regulations increase.

Today, Hybrids, in spite of their availability and midrange affordability, account for just 1 percent of vehicles on roads world-wide. But an ongoing rise in fuel efficiency standards should push that number up.  Unlike electric vehicles, hybrids rely on both fossil fuels and electricity, an advantage, according to Exxon, who may not be the least biased party to ask, is singular.

Changing efficiency regulations won’t be the only factor driving up the prevalence of hybrids in the coming years. Exxon believes that hybrids will begin to employ other types of energy besides gasoline, including natural gas, nuclear power and renewable energy sources like wind, allowing for their continued use without threatening the long-term petroleum supply. Additionally, William Colton, Exxon’s strategic planning chief believes that hybrids will continue to be cheaper than their electric vehicle counterparts, as well as more user friendly.

“One gallon of gasoline has enough energy to recharge an iPhone for almost 20 years,” Colton said to illustrate his point about the advantages of fossil fuels over battery powered options.

Colton’s statements support analyst predictions that the market share occupied by hybrids will increase over the next decade as fuel efficiency for the average U.S. vehicle reaches 54.5 miles to the gallon by 2025. At more than double the current average, the administration’s proposal for higher fuel efficiency is just one manner in which they’ve attempted to minimize American’s reliance on petroleum during the past three years.

While the current undertaking is predicted to have a significant impact on the cars Americans are driving and could lead to hybrid dominance, the reliance on petroleum is unlikely to wane in the coming years. Americans may begin to curtail their fossil fuel expenditures with greater integration of alternative sources, but the continued use of at least partially petroleum backed vehicles, alongside increased efficiency across the board is anticipated to lead to flat demand over the next 30 years.

As electric cars attempt to catch on, hybrid cars are working on their defense strategy, and it seems to be working both in favor of hybrid and our ongoing reliance on fossil fuels. Not only are hybrid vehicles being offerened in a range of styles with a multitude of options in order to compete with traditional vehicles but they remain more affordable, in most cases than their electric counterparts. Currently, Toyota (TM) is in the process of developing a hybrid race car to exhibit the competitiveness of the technology against traditional engines as well as its own dominance in the field. Electric cars seem to be entering the race, but if Exxon and Toyota are to be believed, Hybrids may be lapping them.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
LRAD LRAD Corporation 1.93 0.00 0.01 6,360
TM Toyota Motor Corporation 117.89 0.79 0.67 119,103
XOM Exxon Mobil Corporation 82.69 -0.37 -0.45 3,149,461

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