In T. Boone Pickens’ latest TV campaign, the aspiring compressed natural gas kingpin patriotic oil addiction interventionist points out that most Iranian autos run on CNG. According to T., that’s because they save the oil for export to saps like us. It is a shameless, outrageous manipulation of the facts. The former Texas oilman forgets to mention that Iran imports some 40 percent of its gasoline– which still isn’t enough to satisfy demand. The Iranian government has rationed gas since last year, with predictable consequences. The New York Times reported on the result back in June of ’07: “Unrest spread in Tehran on Thursday, the second day of gasoline rationing in oil-rich Iran, with drivers lining up for miles, gas stations being set on fire and state-run banks and business centers coming under attack.” In fact, according to Iranian analyst Saeed Leylaz, “We are importing gasoline from 16 different countries. The country would be on the verge of collapse if they suddenly decide not to sell us gasoline. The government has to find a way to lower the consumption.” Which leads us to the aforementioned CNG and dual-fuel vehicles. Green Car Congress confirms the country’s switch to natural gas, reporting a sales jump from 20k to 429k CNG-powered cars per year. Even if you trust those numbers (courtesy Iranian Minister of Industries and Mines Ali-Akbar), do we really want to imitate a state-controlled automobile industry? And by you I don’t mean Detroit or T. Boone Pickens, obviously.
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As someone whose been to Iran I have to say, their car industry reminds me of the Soviet Union, where there are waiting lists for cars and everything is done so labor intensively because the government wants to keep people employed. And I’ve been told there are rumors that some of the profits from the sale of each car go to fund Iranian “special forces.”
The 429K cars per year figure is accurate. Of course the program has had a ramp-up time.
The manufacturers are mandated to install the CNG system in the car. So the car is sold as bi-fuel.
I think, you’re omitting a lot of information too.
Yes it’s mostly state owned, the biggest one, Iran Khodro is, the second one, Saipa, partially (mostly private). Then you have a bunch of other companies.
In a country economically blocked, which other way do you expect. About 4 years ago they stopped making the Paykan, which was based on the old Hillman Hunter.
To develop the industry, the government had to protect the local industry for years with mostly brutal taxes on CBU cars and imports restrictions. They’re opening the market now. But such measurements were taken to allow the industry to grow and reach mass production levels.
Also, without foreign many companies investing there, and limited access to goods… it’s obvious that the government took charge of the HUGE investment required to develop the industry.
I agree partially with you in that you should not imitate all those practices. But you have to recognize, that US cars DON’T have the same “free” access in other countries the imports do in USA. In other parts of the world, countries imposes a minimum of local content in the vehicles assembled. In Iran, that is about 80% of the car. So, maybe the USA should put some restrictions on the imports ;).
I hold my position that is good for your country to keep a US owned domestic auto industry. It keeps the engineering skills in your country, the property of the desing, jobs, and a large etc…
I will copy this same comment in your editorial after I read it.
I’ll add, since I can’t edit my comment:
When I say mass production I mean, they have plants with 2K cars per day capability… Camry like production levels.
And are the BIGGEST car producers of the Middle East, with more than 1 million units per year.
How is what the Iranians do relevant to whether or not there is a case for CNG in the US?
You probably blogged this NYT article before about the Peoples Soviet of Utah where the use of market manipulating incentives and regulations means CNG is available at the equivalent of 85c a gallon…
http://tinyurl.com/nytutahcng
Iran’s economy is still wiped out from the 1980’s. Their 1980’s war with Iraq makes the current conflict look like a paper cut. So they are behind…way behind.
Pickens doesn’t mention his new wind power farms are conveniently also going to have a large water pipe built underneath them. The only way to drain a huge aquifer to become the water baron in Texas is to sell the pipe as being environmentally friendly since it has solar power on top of it.
The truth is the guy is using the green cover to make a lot of green by controlling the water supply in Texas to Dallas and other major cities.
Iran was doing fine until the US mint started printing new $100, damn North Korea and Iran for making fake “super-notes” on their multi-million dollar swiss printing presses.
Iran is a rotting house. You kick the door and the whole thing will come tumbling down. Rrr, that was what Hitler said about Russia. Not that Iran is big but it still is a lot bigger than Iraq in terms of population. Our army is already costing 100 billion a year over there. We can’t fuck with Iran without a draft.
Iran and CNG. Yeah what a situation.
I would expect a country as modern as Iran to be able to figure out how to refine enough gasoline.
Instead, they are spending their funds on nuclear bombs. We just took out their main antagonist in the world, and let’s be real, the ONLY reason they should feel threatened is because of their nuclear program.
Law Stud, got any back up on this steel the aquifer plan? I don’t see the connection to having a windmill farm and legally being given rights to drain the aquifer. I know T. is a bit of a nut, but that’s a wild story.
Landcrusher:
I would expect a country as modern as Iran to be able to figure out how to refine enough gasoline.
Building and operating a refinery requires a lot of smarts and capital. Who’s gonna dump capital into places (like Iran and Venezuela) where property is insecure?
Exxon-Mobile has Chavez’s Venezuela by the short hairs when it comes to refining. XOM has the only nearby refinery that can handle Venezuelan crude.
trees,
Be real. We are talking about Iran. Not Afghanistan. They do have refineries already, just not enough. The only problem they have is their economy is run by the government which is partially a theocracy to boot. They spend billions to destabilize their neighbors and to try to build nukes.
“The only problem they have is their economy is run by the government”
As opposed to what?
Unfortunately, I am no longer surprised with responses like that.
<Landcrusher:
They do have refineries already, just not enough.
Ok. I was unclear. Iran lacks capital to expand refining capacity to meet (artificially high subsidized) demand. Or they’ve priced the expansion of refining and found that the CNG route is cheaper.
Landcrusher – we regularly spend billions to destabilize other countries that are not in our backyard and have spent billions on nukes.
With regards to Iran, it has a piss poor managed economy which has been hobbled by the straight jacket of religious conservatives and thirty years of economic sanctions. It has a fair sized population for the region, around 65 million, dependent on state subsidies. The only thing keeping them afloat is the rising price of petroleum.
Their switch NG or propane is nothing more, nothing less, than an admission that they need to stop importing gasoline at a high cost – then subsidizing it so that it can be consumed at a ridiculously low cost.
Why would anyone build refineries in a country that keeps gasoline and diesel fuel prices below the price of production?
Living in Venezuela, I can tell you this
Gas here is 0.17 US$/gall and CNG is almost free, as an example, I can fill the tanks for a V6 F-150 with 1 cent and drive for about 150 kms.
I don’t have to explain that is quite OBVIOUS the oil company has massive losses subsidizing gasoline and diesel. It’s about US$ 10 billion per year.
So… replacing liquid fuel consumption with CNG makes perfectly sense.
In Iran case, they don’t have enough refining capacity. But also have a lot of CNG. So it makes sense using it to fuel cars.
I don’t know how is the US CNG supply. But other countries are embracing CNG as alternative for gas, the examples that come to my mind are: Argentina, Brasil, Colombia.
In Argentina and Brasil case, CNG comes from Bolivia. Colombia has CNG.
Other people is using alternative fuels, and working to establish supply networks for them. What is USA doing?
OldandSlow :
Why would anyone build refineries in a country that keeps gasoline and diesel fuel prices below the price of production?
To export them to “rich” or “first world” countries and make a very nice profit =)
I’m not sure what “truth” is being revealed here. So TBP is claiming that Iran is using CNG because they’re outwitting us, selling us expensive oil while using cheap stuff themselves. In reality, you’re saying that they’re using CNG because they have oil, but no refineries, and it’s cheaper to use CNG than to import refined gas.
OK, you got him, exposed in a half-truth or something. But so what? His point remains valid. They’re using a natural resource that they posess so that they don’t have to import a natural resource that they don’t posess. TBP is suggesting the same thing for the US. It’s a valid argument, even if it is clouded in a bit of fear-mongering over Iran’s intentions. If it looks promising, then we should try it, regardless of what Iran is doing. If it looks dumb, then we should leave it be.
The third world countries such as Iran and Brasil have the wherewithal to understand at least at the level of the government that it makes sense to rely on yourself for your own life-supporting needs such as liquid energy instead of on your (un)friendly neighbors. Yet somehow the American government can’t grasp it and the aspiring American leadership (McCain and Co) revels in chanting “Drill, baby, drill” as the new energy policy.
You can drill your way to Australia and you still won’t find more oil than a few years worth of supply.
steronz
You’re missing the point, as are many here.
THE point is free market.
I am constantly shocked by how little we understand what free is.
The best freedom is the freedom allowed me to vote with my feet or wallet.
When allowed this right I, and all of us, do remarkably well as consumers.
And one more point.
I have traveled an awful lot.
But the ONE reality that always stays with me is this USA is the best place to be at at this time in history.
And for anybody to use as another country as an example of a better way by which to do things swings between deception and ignorance.
Deception because to nit pick the few good ideas and leave out the overwhelming wrongs is deceptive.
To not know this, thats ignorant.
Iran…my ass.
Refininy hasn’t been the most profitable enterprise in the last few decades. So importing gasoline instead of refining it yourself isn’t that dumb. Another issue is that gas is very cheap in Iran and smuggling it is big business. CNG will also be cheap but smuggling it is much harder. Add this rationing gas and the problem of gassmuggling will be smaller.
Landcrusher: Iran has been invade 3 times in the last 70 years so i doubt that nukes are really the reason why they have a problem with the US
ppellico
You really want to tell me that absolutely everything is better in the US and that you can’t learn anything from how things are done in other countries?
OMG.
Law, Iran is a speed bump for our military. I am really tired of people with no military experience (and former corporals) whining about what our military can’t do because we are “overextended”. The military is not the problem. We can virtually destroy Iran without using nukes in less than a couple months with low casualties. Almost all the problems we have with force strength can be easily cured by telling the soldiers and their families that the rotations won’t be happening soon. They will all be happy to comply in the face of a real threat.
The whining you hear now is due to families being upset with Congress being cheap at the expense of the soldiers and families. The reaction from the Congress is then predictably to blame the administration and the military leaders.
Old and Slow. We are not Iran. Equivocating the two doesn’t help anything. Also, the cold war is over, so I think your statement is out dated. Over the past few years, I would bet Iran outspent us in this area.
Iran’s problems are ALL due to the lack of two things – Freedom and Justice. No freedoms, no rights, then no economy.
The last time Iran got in a tussle was with an Iraqi regime that we destroyed. Iraq can’t control inside it’s borders, nevermind attacking Iran. Once again, who is it the people of Iran feel threatened by, us? Be serious. The only reason they have to fear us is their bellicosity and EVERYONE knows that.
Landcrusher, I believe you are quite wrong.
Freedom and justice are important for a free market economy, you are right.
But you don’t need a fre market economy to be economically advanced. Soviets were just a farming country before 1930’s, but in WW2 Soviet industry was producing more stuff than US. There was no freedom or justice, but industry was better.
A really well controlled economy may be more efficient and productive than a free market economy.
K,
That’s great. If you want more “stuff” go with the controlled economy. Be aware that the “stuff” you are getting is mostly propaganda. Your “fact” is incorrect anyway. Someone sold you a very specific peice of data that ignored whole sectors of our production (like aircraft, ships, food, etc.)
It has never happened over the long term that a controlled economy outperforms. It just doesn’t. A controlled economy could, in theory, but it doesn’t because we don’t live in theory.In the short term it can work, but in less than a decade the trend turns south.
Controlled economies are simply parasitical beast that have to rob resources and innovation to succeed. Without continued ability to steal resources and slave labor they all fail. You did know that the Soviets used slave labor even through the fifties?
in korea they run all the taxicabs and rental cars on lpg (which is basically the same as cng i think). i drove a rental sonata and didn’t even realize it wasn’t gasoline based until i had to fill the tank. doesn’t seem to require a whole lot of technology to add this to the mix. i believe some government fleet vehicles have been running on it here in nyc for a long time. there is a city owned ten year old cng taurus parked on the street near my office. why shouldn’t we try this?
also, does anyone know how clear diesel fits into this mix? it’s a liquid form of natural gas that runs on unmodified diesel engines. supposed to be quite clean, too. i believe there is a refinery in the middle east somewhere that makes it.
Iran subsidizes their petrol, big time. This causes some problems… (a) there is zero incentive to conserve petrol, (b) the price difference is a great incentive to smuggle petrol to neighbors, (c) there is no incentive for investors to build refineries. Over time, these problems cause what we see in Iran today… an oil producing nation that has to import fuel from neighbors.
Other countries have similar problems. Egypt and Venezuela come to mind.
Perhaps Iran mandated CNG motors because they plan to stop the petrol subsidies in the future. On the day they do, then Iranians can fill up with CNG instead.
LPG is propane/butane, CNG is methane which means that under high pressure LPG is liquid propane gas which is much easier to handle.
Landcrusher:
You don’t have to tell me that a market economy is more efficient in the long run but Khutuck is right that the USSR had a fantastic growth rate under stalin
(c) modern refineries are so expensive that they only are build with the blessing of the state.
The Iranian state buys the imported gas so why wouldn’t they buy the output of the local refinery for a price that is high than they will sell it for?
Khutuck
You just amaze me.
To tell this B&B that the Soviets produced more than we did is, well…stunning.
I just don’t understand how this kind of thinking gets passed around.
Is this per capita?
Is this per square mile?
What the hell are you talking about?
“A really well controlled economy may be more efficient and productive than a free market economy”
May be?
Really well controlled…!
WTF!
The Iranians are paying the price for having a command economy in their oil sector. The money they have plowed into their nuclear adventures has been a massive drain. Even if you take the bait that the Iranian nuclear program is to generate electricity so that they can export more crude (kinda like Picken’s claim, but with nukes instead of CNG) it’s still a wash.
The Iranians do not have the refining capacity to meet their own citizen’s demands for automobile fuels. The Iranians exacerbate the demand by subsidizing gasoline; I think the typical Iranian is paying something like eighty US cents a gallon or something like that.
So the Iranians export X amount of crude, at wholesale crude market prices, and then import gasoline, diesel, etc. (some of it probably made with Iranian crude they exported, no less) at spot market prices, which have a considerable premium over crude prices, given that they are “finished” products.
The Iranians then sell this stuff to their own people at the subsidy price. In other words, the Iranian government is taking an epic bath in the refined petroleum business. This is why the Iranian government rations gas to their own people, not because of some embargo or anything like that, but because the Iranians’ own self-subsidy would bankrupt the country. This also applies to Hugo Chavez’s Venezuela. Both Iran and Venezuela would like to get rid of the subsidies, but that seems to be the one thing that actually will set people off against those governments. When either one of those regimes even hint at a price-hike in the subsidy, their people go absolutely bonkers. As a distant observer in a much freer country, I chuckle at such socialism-lite antics and their inevitable outcomes.
WIth such a brilliant plan in place, the Iranians probably lose more than half the revenue they get from exporting oil just to eat the cost of importing gas, even rationed. A rational observer would recommend investments in greater refining capacity – a capital and logistics instead of technological problem – with every additional barrel of refining capacity translating into big bucks into the Iranian coffers. If the Iranians had not for fifteen years been plowing dough into their nuke program and instead into refining capacity, the Iranians would be self-sufficient that way and making some SERIOUS BANK on their exports. Nuke program would make more sense now, no matter its ultimate purpose. A lot more money and political stability would be there for such an endeavor as well.
Instead, the Iranians live in embargo-land over their nuke program, lose more than half the revenue they otherwise would realize because they can’t refine their own oil, and are as dependent (if not more so) on oil imports than the United States! Ahhhh, Mullahnomics. Politicians are morons with money no matter where you go!
I say we grind up that snake oil salesman swift boat ad sponsor two-bit con artist CNG proponent T. Boone Pickens and run cars on that. Sure he’s mostly water, but there’s some carbon there. It could be used as an additive; instead of E10 we could have T.10.
Right now CNG might be cheaper than petroleum, but if we double or triple the demand for natural gas by running a substantial number of cars on it the price sure as hell won’t be low anymore. As a substantial investor in various natural gas enterprises this is something that Pickens is quite well aware of.
Only steers and queers hustlers looking for subsidies come from Texas, T. Boone Pickens. And you don’t look much like a steer to me so that kinda narrows it down. Do you suck lobbyist dicks?
Gasoline, diesel etc don’t have a considerable premium over crude oil and Chavez didn’t start with subsidezing gas. It is a legacy of the previous regime. There is also the question if building more refining capacity 15 years ago would have been the most ecomical thing to do. Don’t forget that refining wasn’t exactly profitable during most of those 15 years. Also most of thre Iranians live up north while the oil is mostly near Basra so they probably import gas from the Stans and export it to designed for Iranian oil refineries in Japan.
Churly:
Chavez can’t kill gas subsidies because he would be out of a job, quickly. Also, “profitability” in refining isn’t the point for a state-controlled business. If the Iranians refined their own fuels, they would be paying state marginal prices instead of market prices. Exporting a barrel of oil for $110 and then importing the equivalent gasoline content of the barrel (~20 gallons) at $60 leaves you a profit of $50, This is because the Iranians are essentially giving that gas away and not recovering any revenue from it. That’s a hit, no matter how you cut that pie.
If it wasn’t, the Iranians wouldn’t be rationing the stuff, now would they?
The Iranians are all about the CNG because they do have natural-gas resources, and it essentially comes out of the ground ready-to-burn (that’s why they used to burn it off the top of oil-rigs, to get to the more profitable oil below) assuming you don’t care about environmental considerations, which I doubt the Iranian government does.
@People
In the long run we’re all dead :P
Also, I guess the life in China was just and free for the last three decades, as they achieved an average growth over 8 percent annually in GDP for that three decades?
China is producing cheap “stuff” through kinda slave labor, but many of us will see the days that China will be economically superior against US.
Charly,
It’s not correct at all that Russia had fantastic growth under Stalin if you look at the whole picture. If you take out what they stole it won’t look good at all. They may have been entitled to take whole factories from Germany and ship them back to Russia, but that won’t make me give points to Stalin for economic growth. He may have been able to greatly improve the country technology wise, but he did it like the Czars before him, using slave labor and diversion of resources, not by growing. How do you account for the millions slaughtered on the balance sheet? It did catch up with them in the end, and the whole thing collapsed so when you do the books, it’s not going to be pretty.
I was talking about the growth until 1941 which was very high. I seriously doubt that those german factories were anywhere close to the destruction caused by WWII.
ps. What do you mean with stole? What they got from Germany and the other axis members or from the USSR
Charly,
If you look at ’41, the best case you can make is rapid advancement from almost nothing to a near modern level of production in a narrow choice of industries (tanks, planes, firearms). At the same time the rest of the economy stood still or retreated. Not a bad decision militarily, but it is misleading to look at 40,000 tanks and give someone an award for economic growth. The people building those tanks were starving, and had not seen material wealth increase at all. In fact, many of them had become slave or prisoner labor due to race or politics.
When I say stole, I mean stole. The state took property from individuals in country (an economic loss in most cases, but the commies added it to their books like they built it). The state took everything they could from lands the military liberated or conquered. Soldiers actually had a quota for how much looted goods they could ship home. They took whole factories apart, piece by piece and sent them by rail back to Russia. In many cases, they then had to get german and other prisoners to help them reconstruct them and operate them because they didn’t know how. Even when they learned how to operate them, they could not do so efficiently because the workers had to steal material from their jobs in order to have a decent income. Wonderfully inefficient.
When the USA entered the war it also stopped making as many consumer products. But i’m not interested in USSR 1941. I’m interested in the USSR 1940 and its enormous growth compare with the USSR 1925.
You could say that the regime stole but Britain and the United States did so on an even larger scale.
ps. You don’t have to tell me that communisme is inefficient compared with a market economy, i know. But that doesn’t mean that the USSR didn’t have impressive growthnumbers in the 1930’s.
About landtheft, bit rich for an American to talk about it but if you look at most countries you see that it is normal.