Prius Designer Says Industry Must Lose Oil Addiction

Bloomberg News
February 8, 2008
By John Lippert and Alan Ohnsman

Bill Reinert, who helped design Toyota Motor Corp.`s Prius hybrid, hovers in a helicopter 1,000 feet over Fort McMurray, Alberta. On this clear November morning, he`s craning for a look at one of the world`s largest petroleum reserves where there`s not an oil well in sight.

Instead, in a 2-mile-wide pit below, trucks head to refineries with loads of sand weighing more than Boeing 747s. Yellow flames shoot skyward as 900-degree-Fahrenheit (482- degree-Celsius) heat liquefies any embedded petroleum. Floating scarecrows and propane-powered cannons do their best to chase migrating birds from lethal wastewater ponds.

Eventually, nuclear reactors may surround the crater 270 miles (435 kilometers) northeast of Edmonton, Alberta, delivering the power required to wring oil from sand.

"This is what the end of the age of oil means," says Reinert, 60, who plans the vehicles Toyota will make in a quarter century as national manager for advanced technology at the U.S. sales unit in Torrance, California. "The car-based culture, the business-as-usual of building cars and trucks, is going to change dramatically."

Since Henry Ford introduced the moving assembly line in 1913, the world`s automakers have relied on a single source of power -- the gasoline-dependent internal combustion engine.

Under the Gun
Today, the twin threats of $100-a-barrel oil and global warming are convulsing an industry addicted to cheap, abundant petroleum. Auto companies, already hurt in 2007 by the lowest U.S. demand in a decade, are struggling to perfect cars that run on ethanol, diesel, natural gas, hydrogen and household electricity.

They`re under the gun from California and more than a dozen other states to cut carbon exhaust by 2020 with vehicles that must get 44 miles per gallon (19 kilometers per liter) of gasoline, about double today`s average. On Dec. 19, President George W. Bush signed a law that mandates fuel-efficiency of 35 mpg nationwide by that year.

Reinert says automakers are endangering themselves by basing sales and profits on the big, fast cars that many U.S. customers say they want in 2008.

In five years, as oil shortages and global warming intensify, car companies may be out of step with drivers` demands for fuel-efficient vehicles. Even worse, degrading stretches of the planet like Fort McMurray will only delay --not prevent -- the time when the world must function in a post-peak- petroleum economy.

`Sacrifice Zone`
Canada`s oil sands region may eventually provide a quarter of U.S. crude oil demand, currently at 21.3 million barrels per day, Reinert says.

"At that point, the environmental impacts are totally irreversible," he says. "You turn this area into an ecological sacrifice zone."

Toyota investors, whose shares tumbled 36 percent to 5,100 yen in the 12 months ended today, say the company`s priority must be weathering a weak U.S. market, not chasing breakthroughs in green technology. Last year, U.S. sales declined 2.5 percent to 16.1 million vehicles industrywide.

"There`s cake, and there`s frosting," says Jeffrey Scharf, president of Santa Cruz, California-based Scharf Investments, a fund firm that owns Toyota stock among its $700 million in assets. "Hybrids are more into the area of frosting."

Shareholder ambivalence about clean cars is only one hurdle to surviving the end of easy oil.

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