Investing, Thank You Sir May I Have Another

The Approaching Road Epidemic

Few of you old enough to read this could have missed the news reports about America’s crumbling infrastructure. Decades of corrupt politicians more inclined to line their own pockets and those of their largest bribery lackeys . . . errr campaign contributors has left the infrastructure of the country in a less than serviceable state. A recent article in the New York Daily News spelled some of it out.

We have watched time and time again as politicians opted not to do maintenance because the money could be “put to better use.” Anyone old enough to ride a bike without training wheels has figured out if you don’t paint steel it rusts. On those rare occasions when a bridge did get maintenance it appears to have suffered Wal-mart syndrome. For those of you who don’t know what Wal-mart syndrome is watch the 1989 movie “Armageddon” and listen for this line:

Did you know we are sitting on 2 million gallons of fuel, a nuclear weapon and a thing with 270,000 loose parts that was built by the lowest bidder. Kinda makes you feel good don’t it?

There is an even bigger problem less than two years out. The fuel taxes will continue to decline without a massive increase in the rate. I guess I knew this but it didn’t really hit me until I started doing some research on a new car. When my current contract ends in late summer or fall I’m considering trading off my 2006 Buick Rendezvous. It’s a nice roomy vehicle with AWD and a smooth ride. Even though it only has 65K on it right now, the thought of making the return 2,200 mile drive at 18-20MPG is weighing on me. When one starts to consider 130 gallon vs. the 50 gallon a hybrid would take the total cost of ownership for a pricey hybrid starts to come down. A simple bit of math calculating how much it costs to put 65,000 on a vehicle averaging 18MPG over all vs. 40MPG paints a grim picture.

American mindset has changed with gas prices north of $3/gallon. When I was a teenager cars which got 18-20MPG were the norm. Now most new vehicle buyers seem to be looking for north of 30MPG when they purchase a new car. There was a statement by the president not long ago talking about how America was both producing more of its fuel at home and using less fuel. While automakers grumbled about new higher mileage requirements, I think that grumbling has quieted. Now they are all touting their mileage because that is the biggest concern most customers have these days.

The downside of higher mileage vehicles may not seem obvious until you actually start driving them. Road and bridge repair is a joke. Everyone involved cries about the lack of funds, but the amount of funds available will continue to shrink as 30MPG becomes the new norm and 70MPG the bleeding edge of auto technology. Do you think we will get the politicians to stop reaching their hand into the till? I doubt it.

I have heard some municipalities requiring a 30 or 50 year warranty on all new roads and bridges. While that may sound like a great idea, I doubt it will work unless the warranty is enforced by both a bond and prepaid insurance policy. It is too easy for a corporation to declare bankruptcy one day and start right back up in the same location under a different name. Just look at the pension obligations GM was aloud to abandon.

Personally I wonder just how long it will be until we see hybrid semis. Most of the 18 wheelers on the road get 4-7MPG. Yes, it is pitiful, but, they are supposed to be hauling a lot of weight. The manual transmissions and pride of shifting which was once the realm of a driver is mostly over. Automatic transmissions have been slowly making their way into that world. It started with partial autoshift which could shift up down between two consecutive gears, especially between 9th and 10th. Then came the electric shift transmissions with buttons for up and down. Many on the road today have fully automatic transmissions. It won’t be long before CVT (Continuously Variable Transmissions) will be the norm. You can already find white papers on their design.

The current methods of improving big rig mileage revolve around removing the driver and adding aerodynamics. By removing the driver I mean reducing their decisions to steering and braking. Many vehicles on the road are even equipped to take the “idle option” away. By this I mean there is a different system which provides heat, air conditioning and electricity. While these systems are currently being developed for big rigs, in truth they got their start in the RV/motor home market. A much smaller engine which powers the comforts of home and uses fuel out of the same tank(s).

If they haven’t started already, most tractor manufacturers will soon be removing the alternator, air conditioner pump, and heater core from under the hood. In the not too distant future all of these vehicles will come with a built in cab power system. Removing the pull and weight of such things will reduce the required horsepower which will reduce weight even more both by removing engine weight and the additional cooling fluid. Yes, the power systems add back in some weight, but not an enormous amount.

All of those tweaks will happen in a couple of years. That’s all they are though, tweaks. A completely separate system providing HVAC and electricity combined with improved aerodynamics will at best get you to 11MPG depending on wind and weather. You cannot dramatically improve the mileage of a vehicle designed to pull 80,000+ pounds all the way up an 8% grade without a dramatic paradigm shift. That shift has already started.

It won’t be long before we see something along the lines of a Chevy volt in the big rig world. What do I mean by that? I mean that everything on the vehicle is electric. A small generator provides the electricity to run everything. Instead of a 500+ horse diesel monster guzzling fuel under the hood there will be a 40 something horsepower diesel generator sipping it. In a short few years that generator will change to E-85 or pure alcohol completely eliminating winter fuel gelling problems.

The major argument against alcohol as a fuel has been its low therm output. While I’ve had it explained to me many times, it isn’t worth going into now. Engines historically needed lots of thermal units from their fuel due to the long stroke. The fuel burn needed to last to push the piston all the way down its cylinder. Short stroke engines with light loads could make use of “big bang” higher octane fuel. No need to start arguing about this because the point is less than 5 years from being moot.

Why will the fuel debate become moot? Power trains are about to be history. The classic rush gear heads get when they hear a horsepower number will fade into folk lore. Moving forward all power trains will be electric drives which get their juice from a combination of batteries and generators. A 500 horsepower generator isn’t going to make a vehicle move faster than a 40-something horsepower generator because the electric motors ultimately spinning the wheels can only handle so much current.

Let me put it to you in a way anyone who currently drives can understand. Unless there is something dramatically wrong with your ride, it doesn’t go any faster or run any better on a full tank than half a tank. If the electric motors in new vehicles (even 18 wheelers) can only consume 10K watts, a generator putting out 50K watts isn’t going to make them run any faster or pull any more.

We will see this paradigm shift before we see 2020. It has already started. As soon as the rest of the trucking fleets start hearing about 25% and greater fuel reductions from other long haul fleets the upgrades will happen. Why? The average fleet truck which does over the road hauling gets roughly 250,000 miles per year put on it. In two years it has roughly half a million miles. With diesel prices north of $3/gallon do the math.

Before we see 2020 we will see big rigs powered by electric generators that can boast 20MPG or more. Auto makers are proving the technology out in lighter weight vehicles. Some companies are also selling kits people can use so those same vehicles can power their home during a power outage. Eventually these vehicles will become commonplace and the class 8 manufacturers will have enough data about what works and doesn’t in lighter weight vehicles to scale things up properly.

Just how much fuel tax money do you think there will be when big rigs start getting north of 20MPG instead of the 4-6MPG they get now? Our roads and bridges are really going to suck then. You just think they are bad now.