My Thoughts on Technology and Jamaica: Lower Oil Prices Good for Jamaica - How All-Electric Vehicles Sales benefit as Electricity Prices trend lower

Saturday, February 7, 2015

Lower Oil Prices Good for Jamaica - How All-Electric Vehicles Sales benefit as Electricity Prices trend lower

The fall in Oil Prices benefits consumers but punishes the Oil Producing companies represented by OPEC (Organization Of Petroleum Exporting Countries) and countries like Russia who's economies are heavily tied to Oil Production as noted in the article “Falling oil prices: Who are the winners and losers?”, published 19 January 2015 by Tim Bowler, Business reporter, BBC News.

But what's unknown is how consumers will respond as noted in the article “Where are oil prices headed from here?”, published 06.02.2015 by John W. Schoen, CNBC.

Like our American counterparts, the lower Oil Prices translate to lower costs of Goods and Services in Jamaica, according to the article “Precipitous Crude Oil Decline Should Benefit Jamaica...”, published Saturday, 7 February 2015, by Nigel Higgins, All About Jamaica View.

To maximize on the benefits of the lower price of Oil, the PSOJ (Private Sector Organization of Jamaica) is encouraging the GOJ (Government of Jamaica) to secure long term contracts for Oil Supply so as to ensure lower prices as noted in the article “PSOJ Urges Government To Buy Ahead To Lock In Fuel Prices”, Published Thursday February 5, 2015 10:21 am, The Jamaica Gleaner.

This question is especially important to the makers of All-Electric Vehicles. Turns out it also benefits their increasing sales projections as state by analyst InsideEVS as pointer out in my blog article entitled “InsideEVS stats says All-Electric Vehicles Growing Strong - 500,000 by 2020 is a potential Robotic Self-Driving Army”.

Lower Oil Prices Good for Jamaica - How All-Electric Vehicles Sales benefit despite

If this excess supply of Oil lasts any longer, many producers of All-Electric Vehicles manufacturers and Retailers might find themselves holding onto some huge loans now that fuel prices have fallen as low as US$2.06 per gallon, down from US$4.00 per gallon according to the AAA (Automobile Association of America) as noted in the article “Falling Fuel Resets Electric Car Equation”, Published Sunday January 25, 2015, The Jamaica Gleaner.

That'll mean lower Electricity Prices as well, making home charging of your All-Electric Vehicle an option. However, the numbers might appear a bit confusing, given the high cost of most All-Electric Vehicles. 

According to TrueCar:

1.      US$25,168 for the Ford Focus (Electric)
2.      US$16,695 for the Ford Focus (Gasoline)
3.      US$71,070 for the Tesla Model S

Because of Federal tax credits of US$7,500 and local dealer incentive to galvanize sales, these All-Electric Vehicles, purchased or leased, qualify for discounts along with additional State tax credits and incentives. An example of a state incentive is California which slashes some US$2,500 cash off the purchase of a new All-Electric Vehicles.

According to Irvine, California-based vehicle valuation and automotive research company Kelley Blue Book, the following incentives are offered for Vehicle purchases:

1.      US$4,159 average for All-Electric Vehicle in 2014
2.      US$2,791 average for all Vehicle, both Gasoline and All-Electric in 2014

With a 68% increase from 2013, it should make All-Electric Vehicles attractive purchases. That is, until you factor in the cost of the Gasoline and Electricity for charging and how long it takes you to pay off the premium for the electric version changes dramatically:

1.      27 years if Gasoline remains at US$2.06 per gallon
2.      8 years if Gasoline remains at US$4.00 per gallon

This may not be good news to some people, especially as one considers that All-Electric Vehicles don’t hold their value well over that period of time. By the time you've paid off the premium, reselling them may be a bit difficult as the technology may have changed to Hydrogen using PEM (Proton Exchange Membrane).

That’s the technology that Nissan may be working on for a Hydrogen Fuel Cell powered Car with NASA (National Aeronautical and Space Administration) as noted in my blog article entitled “Nissan, NASA and Self-Driving Nissan Leaf by 2020 - Little Progress made with Humans trusting Self-driving All-Electric Vehicles”.

Gasoline vs All-Electric Vehicles - All-Electric Vehicles will be more in demand than ever

Despite eight (8) year warranties, the incentives still hurt the images of All-electric Vehicles, reducing their resale value. Kelley Blue Book lists the vehicles and the percentage of their value that they retain after sixty (60) months:

1.      20% for All-Electric Vehicles
2.      50% of Trucks

So let’s consider a scenario where you lease the All-Electric Vehicle instead of buying one. Using the Nissan Leaf, an All-Electric Vehicle as an example, the lease would work out as US$199 for thirty six (36) months or three (3) years. To put that in perspective against a gasoline powered vehicle:

1.      US$199 for thirty six (36) months or three (3) years to lease a Nissan Leaf
2.      US$7164 in total for thirty six (36) months or three (3) years to lease a Nissan Leaf
3.      US$149 for thirty six (36) months or three (3) years to lease a Nissan Sentra
4.      US$5364 in total for thirty six (36) months or three (3) years to lease a Nissan Sentra

Clearly, leasing a gasoline powered vehicle works out cheaper. In fact, for the US$7164 in total for thirty six (36) months or three (3) years to lease a Nissan Leaf, you could purchase a gas-powered Ford Escape SUV or a Honda Accord sedan.

But remember that with lower Oil prices it also means Electricity is lower per kilowatt hour nationally. At the current average of US$2.06 for Gasoline thanks to cheaper oil, the cost of Residential electricity in the US of A hovers at around US$0.12 per KWh. At that price, the economics of an All-Electric Vehicle becomes clear:

1.      US$550 per year to charge the Nissan Leaf for 15,000 miles of driving
2.      US$950 per year to buy gasoline for a Nissan Sentra for 15,000 miles of driving

With the Nissan Sentra having a 33 mpg, which is fairly good for a small car but is lower that what the Obama Administration had stipulated back in October 2010 as noted in my blog article entitled “Alternative Energy and the President - Three Days of the Condor”, that would work out to a whopping US$1,816 per year to buy gasoline.

So albeit the All-Electric Vehicle might have a higher price-tag and a lower resale value, thanks to the lower rate of Electricity due to cheaper Oil, you can consolidate your living expenses into one manageable Electric Bill....that is, if you live in the US of A.

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