TIME energy

U.S. Oil Could Rescue Iraq

A satellite image shows smoke rising from the Baiji refinery near Tikrit, Iraq, June 18.
A satellite image shows smoke rising from the Baiji refinery near Tikrit, Iraq, June 18. U.S. Geological Survey/Reuters

If civil war engulfs all of Iraq, oil prices are likely to skyrocket. But U.S. exports could change the game

Even though the conflict in Iraq still rages, with forces from the Islamic State of Iraq and Greater Syria (ISIS) just an hour outside of Baghdad while the Syrian military is reportedly bombing the insurgents, global oil markets have mostly calmed. Prices for Brent crude on June 26 had fallen below $114 a barrel, and have dropped more than 1% since hitting a nine-month high on June 19. The violence in Iraq’s north and west—including fighting around the country’s largest refinery in Baiji—hasn’t yet seriously affected oil production in the Shiite dominated south. Iraq’s Oil Minister Abdul Kareem al-Luaibi even promised in an interview with Bloomberg that the nation’s oil exports—which have averaged more than 2.5 million barrels a day—will actually accelerate next month. “Oil exports will witness a big increase, as recent events didn’t reflect negatively on Iraq’s crude output and exports,” al-Luaibi said. “International oil companies are working normally in Iraq.”

That doesn’t seem to be quite true, though—international oil majors like BP and ExxonMobil have already evacuated some of their foreign workers from Iraq. And if things do get worse, oil markets might not react so calmly. A recent report from the nonprofit Securing America’s Future Energy found that the loss of just a third of Iraq’s oil output could be enough to push global oil prices up as much as $40 per barrel. Even if production from Iraq stays steady, political turmoil in countries like Libya and Nigeria have helped remove some 3.5 million barrels a day of oil production capacity. That doesn’t leave much room for more trouble in Iraq, the world’s third-largest exporter of crude oil. And with Iraq projected to be the biggest single contributor to new oil production over the coming decades—at least before the ISIS insurgency revved up—what happens in the country will matter at the pumps for a very long time.

But it’s not so easy to predict the future of energy and oil. Case in point: the fracking revolution in the U.S., which has unlocked vast amounts of previously inaccessible crude, and which few experts saw coming. Between 2008 and 2013, U.S. oil production increased by 2.4 million barrels a day, to more than 7.4 million. And the growth hasn’t stopped—production hit 8.3 million barrels a day in April. Most of the new global oil production brought online over the past few years has come from the U.S. While the U.S. doesn’t export raw crude—aside from a few small exceptions, U.S. oil exports have been banned since 1975—more oil at home means fewer imports, which in turns leaves more oil on the global market for everyone else. Take away the fracking revolution, and global oil markets wouldn’t have been able to so easily shrug off the violence in Iraq.

In the years to come, the U.S. could play an even bigger role. As the Wall Street Journal and Reuters reported earlier this week, the Obama Administration has begun taking steps towards allowing U.S. crude exports. If that wording sounds confusing, well, it is. What seems to be happening is that the U.S. Commerce Department will allow a pair of oil companies to begin exporting what is known as ultra-light condensate to international markets, with only minimal refining. (The U.S. has long allowed exports of refined oil products.) That doesn’t mean U.S. oil companies can begin exporting all the crude they want; in fact, both Commerce and the White House, reflecting the political sensitivities around allowing domestic exports at a time when gasoline costs an average of $3.68 a gallon, have insisted that there has been “no change in policy on crude oil exports.”

But with domestic oil production approaching the capacity of U.S. refineries—and the oil industry putting all its considerable pressure on the government—it seems likely that U.S. oil will eventually be sold abroad. What effect that will have domestically is uncertain. A recent report by Goldman Sachs found that the ban on exports was a net economic positive for the U.S., at least until domestic refineries could no longer handle growing production of oil. But it seems clear that lifting or at least modifying the ban would likely lead to more production, as oil companies wouldn’t have to worry about their product being landlocked in the U.S. A report by the research firm IHS found that lifting the ban would lead to more than $700 billion in additional investment in oil extraction between 2016 and 2030, and would increase oil production by an average of 1.2 million barrels a day. And given that global crude demand is expected to rise by about that much over the next several years, that oil could be very useful indeed—especially if today’s fighting in Iraq is only the beginning.

TIME

This Is Where America Loves to Get Gas

Sharp Uptick In Gas Prices Forcing Some Gas Stations To Temporarily Close
Customers gas up their car at Costco Wholesale Corp. on October 5, 2012 in Burbank, California. Kevork Djansezian—Getty Images

Drivers are turning to grocery stores and retailers to fill their gas tanks

Your favorite gas station is also likely your grocery store, according to a new study.

Consumers prefer filling their gas tanks at grocery stores and wholesale clubs, not traditional gas stations, Market Force Information found in a study. Grocery and wholesale retailers have figured out that competitive pricing can lure customers away from traditional gas pumps.

“The rise of grocery and wholesale clubs is formidable in the petro-convenience sector, with the ability to use loyalty cards and point systems driving consumers to fuel where they perceive they get better value,” said Market Force CMO Janet Eden-Harris in a statement.

Researchers asked consumers how likely they were to return to the gas station they most recently used, and found that Kroger ranked first in satisfaction with a score of 79%. Costco and QuikTrip tied for second with 78% and Sam’s Club ranked third with 76%.

While location is the biggest factor in attracting customers to the pump, over a third of drivers (37%) said they were willing to drive past a gas station to go to their favorite brand. That said, Shell is the most frequented gas station in the country, likely because the company’s gas stations are so ubiquitous.

Market Force surveyed over 5,300 respondents across the United States and Canada for the study.

MONEY Gas

Gas Prices Hit a High for 2014—but the News Isn’t All Bad

Steven Puetzer—Getty Images

Right now, prices at the pump are as expensive as they've been all year. With any luck, though, it'll be all downhill from here.

According to the federal Energy Information Administration, as of Monday, the national average for a gallon of regular gasoline reached $3.70. That’s 13¢ higher than a year ago at this time, and it matches the previous high thus far in 2014, set in late April.

The bad news, beyond the obvious—you know, having to pay more to fill up and all—is that prices have been creeping upward just at a time the opposite was supposed to happen. The expectation was that gas prices would actually decrease in June, as they have in each of the past three years. The summer forecast from AAA called for a 10¢ to 15¢ per-gallon drop in prices at the pump this month, and predicted that the national average would remain in the vicinity of $3.55 to $3.70 through the summer. We’ve already hit the high end of the predicted price range long before anticipated—and gas prices have tended to rise toward summer’s end in recent years.

That said, prices at the pump aren’t exactly spiking. Nationally, the per-gallon price is only up a few pennies compared to a week ago, or even a month ago for that matter. Still, because everybody was expecting a significant decline this month, drivers are justified in feeling like they’re paying a lot more than they should to gas up right now. Turmoil in Iraq is being blamed for the persistently high gas prices.

So what’s the good news here? While drivers in 41 states and Washington, D.C., are currently paying more for gas than they did at this time last year, a handful of states are starting to see price breaks. According to the gas-pricing monitoring site GasBuddy, Indiana, Ohio, and Michigan drivers have all seen a per-gallon price decrease of 9¢ to 12¢ over the past week. And areas that have experienced a gas price hike lately can expect prices to flatten out going forward. “Many areas that saw gains over a nickel should see a calmer, cooler week at the pump,” a GasBuddy post on Monday explained. “So far this morning, oil prices are down 55 cents a barrel while gasoline spot prices are generally negative, a good sign for motorists.”

What’s more, the analysts generally say that it’s extremely unlikely the national average will reach $4 per gallon, or even close to $3.90 as happened in September 2012.

Then again, the analysts have been wrong before. Like when they were making predictions just a few weeks ago, for instance.

MONEY Gas

WATCH: Iraq Conflict Could Lead to Higher Gas Prices

The latest conflict in Iraq — the world's second-largest oil producer — could result in your paying more at the pump for gas.

TIME Autos

The Incredibly Simple Way to Get Drivers to Buy Fuel Efficient Cars

Japan Nissan
Itsuo Inouye—AP

The secret lies in making it crystal clear how much they’ll save in gas costs over the long haul.

In every car dealership, a new vehicle for sale is required to have an EPA car label slapped on the window. The labels are loaded with numbers and ratings and have a dozen different features, including the estimated fuel economy (with city and highway breakdowns), the estimated annual fuel cost for operating the car, a fuel economy and greenhouse gas rating, a smog rating, and a smartphone QR code that can be scanned for additional information.

But a new study by Duke University researchers makes the case that one critical bit of information is missing from the labels. The labels today show how many gallons of gasoline a vehicle uses over the course of 100 miles of driving, and they also provide an estimate for annual fuel costs, based on a rate of $3.70 per gallon and 15,000 miles of driving per year. Researchers say it would be helpful—for consumers and the environment alike—to do some more math for potential buyers and show how much owners can expect to spend on gas for the long haul. Like, say, 100,000 miles.

In the study, participants were presented with a variety of different scenarios and asked to pick the vehicle they preferred. For instance, one group was asked to choose either: Car A, which costs $18,000 and $20 in gas over 100 miles of driving; or Car B, which costs $21,000 and $16 in gas over 100 miles of driving.

Another group was asked to choose either: Car A, which costs $18,000 and $20,000 in gas over 100,000 miles of driving; or Car B, which costs $21,000 and $16,000 in gas over miles of driving.

Both scenarios are essentially the same: The upfront costs and fuel economy in Car A and Car B are the same in both scenarios. But guess which scenario resulted in way more consumers choosing Car B, the more fuel-efficient and cost-effective option? Yep, the second hypothetical, which did the long-term math for consumers and demonstrated that an owner would save $1,000 over the course of 100,000 miles by choosing Car B over Car A.

In fact, in the many scenarios presented—including several instances when the vehicle with better mileage didn’t pay for itself in gas savings—would-be buyers were most likely to select the more fuel-efficient vehicle when the costs were shown over the course of 100,000 miles. That doesn’t mean that the average consumer would actually buy a fuel-efficient vehicle if it didn’t make financial sense.

“People are very sensitive if the vehicle paid for itself or not,” Adrian Camilleri, one of the study’s authors, said in a phone interview. “People don’t like cars that don’t pay for themselves. But they show the greatest interest in more fuel-efficient cars when they’re shown the gas costs over 100,000 miles.”

Overall, in the sum total of all scenarios—including, again, some in which the more fuel-efficient car didn’t pay off—among the participants who selected the more fuel-efficient car, 61.6% did so when shown the gas costs over 100,000 miles, versus 46.6% when gas costs were simply shown over 15,000 miles, like they are currently on new-car EPA stickers. Specifically, when given costs over 100,000 miles, participants chose the more fuel-efficient model 87% of the time when it paid for itself, versus 36% when the gas costs savings didn’t pay off. But when shown costs over 15,000 miles, participants chose the more fuel-efficient model 73% of the time when it paid for itself, versus only 20% when the fuel-efficient car didn’t pay off.

What may come as somewhat of a surprise is that showing consumers gas costs over 100,000 miles significantly increased the odds of someone choosing the car with better mileage even when the choice didn’t result in an overall cost savings. “What we found is that many people want to buy more fuel-efficient cars when they’re close to paying for themselves,” said Rick Larrick, a Duke management professor and one of the authors of the study, published in the spring issue of the Journal of Public Policy & Marketing. “That’s when their sense of environmentalism kicks in. They might not be willing to pay a large premium, but they realize how close the difference gets when they see gas costs over 100,000 miles.”

Larrick said that consumers may also do a little more math for themselves and see that if they drive the car well over that marker—the life of many cars nowadays extends well over 200,000 miles nowadays, after all—that the vehicle with better mileage will, in fact, make more sense financially.

As for the EPA stickers, Larrick thinks that instead of adding the estimated gas costs over 100,000 miles to the already clogged label, it would be best to substitute it in there for one or more of the other fuel cost data points. “They already have the annual fuel costs and the amount drivers would save over five years compared to the average vehicle, which is pretty redundant,” said Larrick. “There’s a way to simplify this. The cost over 100,000 miles is just a more important metric.”

TIME Autos

One of Life’s Annoying Regular Expenses Is Getting Cheaper

Prices are on the rise for everything from meat to limes, from rent to Netflix. But one of life’s commonplace expenses is surprisingly on the decline.

According to AAA, the average cost of owning and operating a sedan in the U.S. is now $8,876 per year, which is lower than it was in 2013 ($9,122) and 2012 ($8,946). The figures are all based on an owner driving 15,000 miles per year in an average sedan. Naturally, annual costs are much higher if you’re the owner of an SUV (average of $11,039 this year, versus $11,599 a year ago) or a minivan ($9,753 vs. $9,795).

Costs aren’t coming down because of decreases in purchase prices. The average price of a new car last summer hit a record high of $31,252, a figure that’s been topped lately with average prices over $32,000 in recent months.

(MORE: Could It Be? Gas Prices Have Probably Already Peaked for 2014)

Even so, the overall cost of ownership is down, and the largest factor bringing on the decrease is the fall in the price of fueling one’s vehicle. AAA estimates that the average price of regular gasoline is down nearly 6% this year compared to 2013. (In past years, it’s been fairly standard for gas prices to shift in only one direction: up.) Combine that with the fact that the average fuel economy for vehicles has been climbing (over 25 mpg lately), and the costs of gassing up one’s car are down over 10% this year. (In a somewhat ironic twist, the widespread improvement in fuel economy in today’s traditional internal combustion-run cars is one reason that consumers aren’t turning to even more efficient (but expensive) electric vehicles and plug-in hybrids in larger numbers.)

Costs related to tires, insurance, and depreciation are all also down slightly this year, though in most cases the effect on one’s overall costs is marginal: The average insurance premium, for instance, fell from $1,029 last year to $1,023 now. So a savings of a whopping $6.

TIME energy

Could It Be? Gas Prices May Have Already Peaked for 2014

We’re still weeks away from Memorial Day and the peak travel days of summer. But it looks like gas prices mercifully won’t go much higher in 2014.

The commonly held theory is that gas prices rise hand in hand with both temperatures and consumer demand. In other words, gas prices tend to inch up in spring and peak in the height of summer. Many years, this theory holds true. For instance, the priciest day ever for gas in the U.S. was in July 2008, when the national average spiked over the course of a few short weeks, eventually hitting $4.11.

In more recent years, however, the summer spike hasn’t been quite as reliable. In 2012, the national average for a gallon of regular reached a summertime low of around $3.35 in early July, before shooting to over $3.80 in mid-September, after the peak summer travel period had passed. And the peak time for gas prices in 2012 was actually reached in early April, when the average topped $3.90.

Last year, the trajectory was a little different. Gas prices rose in early winter, then took the nearly unprecedented step of retreating in March, remaining in the vicinity of 3.50 through mid-summer. In any event, prices at the pump didn’t inch up slowly and steadily as the days grew warmer and longer, like the theory holds.

Analysts say that 2014 is shaping up as yet another year that blows a hole in the theory. As a recent NPR story noted, warmer days are here, the nation’s peak road trip period is approaching, and “predictably, the price of gasoline is rising.” The national average for a gallon of regular shot from $3.53 in late March to around $3.70 a month later.

But drivers will be relieved to hear that gas prices have already plateaued. As of Friday, the AAA Fuel Gauge Report indicated that the national average was $3.683, which is 12¢ more than a month earlier, but also 1¢ less than a week ago.

Most importantly, the experts have reason to believe that, based on crude production and demand domestically and around the world, prices at the pump are only going to go down from here. The Energy Information Administration forecast calls for a national average of $3.57 through September, and an overall average for 2014 of $3.45, which would be lower than the last two years.

“Prices could inch higher another week, but we’re definitely near the top for the year,” Brian Milne, energy editor of industry tracker Schneider Electric, told USA Today.

Likewise, the experts at GasBuddy wrote this week that their best guess is that “we’re starting to see clearer signs that we’re closer to top,” and that “the rally that started in February is nearing its peak.”

For the sake of the family vacation budget this summer, let’s hope we already got there.

TIME Autos

Here Comes the Next Big Push to Get Drivers to Buy Electric Cars

Japan Nissan
Itsuo Inouye—AP

Everybody understands that one big upside of owning an electric car is that you’ll never have to spend a penny on gasoline. Now, you won’t have to pay for the electricity needed to charge the car either.

Thanks to a new “No Charge to Charge” initiative from Nissan, drivers who purchase or lease a new battery-powered Nissan Leaf will receive a special card that allows them to plug in at public charging stations at no cost whatsoever starting July 1. The program will be available in 25 U.S. markets, which have collectively accounted for 80% of all Leaf purchases thus far, and owners will be able to charge their vehicles for free for two years. Anyone who purchases outright or leases a new Leaf as of April 1 or later is eligible in the participating markets, which include many major cities along the West Coast, as well as Nashville, Houston, and Washington, D.C.

According to the U.S. Department of Energy’s FuelEconomy.gov site, a Nissan Leaf owner can expect to pay an average of $550 in “fuel cost” annually, based on driving 15,000 miles per year. So Nissan’s program would seem to be the equivalent of a $1,100 bonus for buyers. Whether or not an owner actually realizes such a return will depend a lot on how easy it is to use the public charging stations where plugging in is free. Most electric car owners charge their vehicles at home at night, and Nissan isn’t going to pitch in with any portion of your house’s electricity bill.

Even if “No Charge to Charge” offers less of a return that it initially seems like at first glance, the program obviously makes it more enticing—and more cost-effective—to buy a Leaf, so it could push some potential buyers off the fence. “The net effect here is it really increases the utility of the Leaf for the driver,” Norman Hajjar, research director for the electric-car app creator Recargo, said of Nissan’s new initiative, via the San Francisco Chronicle.

Nissan’s move comes at a muddled time in the electric car market, when Tesla is clearly the runaway success at the high end of the field, and when a wide range of less expensive EVs, plug-ins, and hybrids continue to vie for consumer attention. Despite the arrival of more and more plug-in models into the market, hybrids and electric cars remain a very small niche, representing around 3% of new car sales.

In a statement that’s about as definitive as you can get, Michelle Krebs, senior analyst with Edmunds.com, told the Detroit Free Press, “Plug-in vehicles aren’t going away, but how many will sell, at what price and using which technology, is yet to be determined.”

The Nissan Leaf ended 2013 on a high note, with its best sales month ever in December: 2,529 units sold, bringing the year’s total to 22,610, more than double the amount in 2012. But the disappearance of end-of-year incentives, combined with brutally cold weather that hurt all auto sales, resulted in a big electric car sale slump in early 2014. According to MarketWatch, there were 918 Chevy Volts and 1,252 Nissan Leafs sold in January 2014, compared to 2,392 Volts and 2,529 Leafs the previous month.

Leaf sales have rebounded with the onset of warmer weather, including 2,507 units sold in March, its second-best month ever, and a 12% increase over March 2013. For the first three months of 2014, meanwhile, sales of the gas-electric hybrid Volt decreased by 15% compared to the same period in 2013.

In any event, it’s clear that for any plug-in to achieve true mainstream appeal, some work needs to be done to convince the average driver of the cost-effectiveness of an electric car. Basically, the cars need to be cheaper to own and operate, or automakers need to do a better job of proving to consumers that these vehicles are indeed cheap to own and operate.

Throwing in two years’ worth of free charging, as Nissan is doing, certainly helps the equation. So does the tried-but-true practice of simply lowering the retail price. That’s what Nissan did in early 2013, which resulted in the automaker selling twice as many Leafs in 2013 that it did the previous year. And that’s what GM is planning for the next Chevy Volt, with the recent news that an entry-level Volt should hit the market for the 2016 model year with a list price starting at around $30,000—roughly $10,000 less than the base price of the original Volt.

TIME Autos

Beloved Little Car Amazingly Gets Smaller and Roomier at Same Time

Canadian International Auto Show
The all-new 2015 Honda Fit David Cooper—Toronto Star via Getty Images

The new version of the subcompact Honda Fit, hitting the market next week, is a little shorter than its predecessor. Somehow, though, there’s more space inside for passengers, including nearly five extra inches of legroom in the backseat.

The Honda Fit, introduced in the U.S. in the 2007 model year, has been redesigned in a third iteration that will go on sale in mid-April. There are plenty of improvements, including a bump up in horsepower (117 to 130), and a significant rise in fuel economy (averaging a class-leading 36 mpg, up from 31).

Perhaps the biggest change, however, is that this already small vehicle has gotten a bit smaller, at least on the outside. The 2015 Fit is 1.6 inches shorter than the previous model. At the same time, thanks to some creative design, there’s 4.9 more cubic feet of space in the passenger area, and the back seat is a whole heck of a lot less cramped, with 4.8 more inches of legroom.

How can a vehicle get smaller and simultaneously bigger? Well, it can’t. Essentially, the added passenger space comes at the sake of a decrease in the hatchback area. The wheelbase in the new Fit is 1.2 inches longer than the old model, and the new model has grown a smidge wider, both of which account for more passenger space. But the added space in between the tires means less room on either end, including a drop-off of five cubic feet of cargo space.

“Chalk it up to Honda deciding that seating space is ultimately more useful than cargo space,” a Car and Driver review said of why Honda made the change. The Fit’s signature “Magic Seat,” which lets owners fold seats flat and open up the space for bikes, suitcases, and such, remains in the new model and makes it easier to sacrifice some space devoted strictly reserved for cargo.

Speaking of reviews of the new Fit, most are glowing, with a few quibbles here and there. An Autoweek reviewer wrote that the 2015 Fit isn’t the most fun to drive or stylish vehicle in its category, but it’s the best value nonetheless. “For frugal practicality in a new car, the Fit remains your choice,” the review states, noting that anyone relegated to the backseat “will treasure their newfound legroom.”

WardsAuto played up the “positively luxurious proportions” of the new model’s expanded rear-seat legroom highlighted how comfortable it is to drive: “Steering feel is perfect: direct and heavy, but not so much that the wheel puts up a fight.”

USA Today is quick to point out that the Fit, like most Hondas, retains its value down the road better than its rivals. What’s more, the base sticker price of the new Fit is only $100 higher than the old version: The 2015 model starts at $15,525, plus delivery charges.

TIME

Report: U.S. Gas Prices Have Gone Up $4 Per Tank in The Last 6 Weeks

Gas pump
In thee past six weeks, gas prices in the U.S. have shot up by around $4 per average tank Getty Images

A new survey by industry analyst Trilby Lundberg finds the average price of gas is up 26 cents across the U.S. over the last six weeks—five cents just in the last two weeks—representing a nearly $4 bump on the typical tank

Regular gasoline rose five cents per gallon on average in the U.S. over the past two weeks to reach a price of $3.56.

A survey released Sunday by industry analyst Trilby Lundberg reveals prices have risen 26 cents per gallon over the past six weeks, representing a $4 bump on a typical gas tank.

Midgrade costs $3.74 per gallon on average with premium gas at $3.89 and diesel at $4.02.

Within the contiguous U.S., Los Angeles has the highest average price at $4 per gallon, while Billings, Mont., comes in lowest at $3.18.

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