Monday, September 14, 2009

first cost vs. lifecycle cost analysis

so i get an email today from an old friend who passes along some thoughts composed by someone i can only imagine is a kool-aid drinking, right wing nut job. after reading it a couple times, i felt compelled to draft a rebuttal. see the below exchange:


Original email
>
> I guess I must be on the wrong page on this "clunker" stuff ...
> A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.
> A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year.
> The average clunker transaction will reduce US gasoline consumption by 320 gallons per year.
>
> They claim 700,000 vehicles – so that's 224 million gallons per year.
> That equates to a bit over 5 million barrels of oil.
> 5 million barrels of oil is about ¼ of one day's US consumption.
> 5 million barrels of oil costs about $350 million dollars at $75 per bbl.
> So, we all contributed to spending $3 billion...to save $350 million.
> Hmmm! How good a deal was that?
>
> I'm thinking that they will probably do a great job with health care though!
>

And now it's my turn

Great analysis. But like most conservative and short term (instant gratification) mentality, the author is missing the point.

Lets talk about "first costs" vs "lifecycle costs", and do the same analysis. The basic premise for this analysis says your investment in the first 20% of your "project" (whatever it happens to be) determines the overall costs of the lifetime (remaining 80%) of the project.

For instance, by planning and spending wisely when constructing a house, building or other structure (efficient windows, roofing material, earth contact, insulation, appliances, hvac, smart grid circuits, geothermal/ground source, solar/battery/inverter, proper geographic positioning, good use of landscaping and shade, rainwater recovery, etc., etc., etc.), the overall costs of ownership in terms of utility, maintenance and other "operational" expenses are greatly reduced. Additionally, the resale value isn't dependent on market bubbles for increased valuation, but is inherently built into the property. And note, we haven't even talked about the GLOBAL implications such as reduced energy consumption necessitating less energy production and thus lower carbon emissions.

This mindset looks at overall sustainability of an effort and it's impact far beyond today's bank account balance and any short-term gain.

OK, now lets look at the clunker program in the same light.

The average age of the car being traded in was +/-14 years (http://www.autoobserver.com/2009/07/cash-for-clunker-trades-show-59-percent-fuel-economy-boost-hyundai-says.html)

So lets say the new, more efficient vehicle is going to be on the road for 14 years (not necessarily with the same owner, but at least for that many years.)

Note that one 42gal gallon barrel of crude oil yields 19.5 gallons of gasoline (http://en.allexperts.com/q/Oil-Gas-3147/Gallon-gas.htm)

So 19.5/42 = 46% yield.

Next, 14 years of better mileage * 224 million gallons = 3,136,000,000 gallons saved.

3,136,000,000 is 46% of what number? 6,817,391,304 (barrels)

At $75 per barrel = $511,304,347,800

So we spent 3 billion to save 511 billion over 14 years? Seems pretty good to me!!!

AND WE HAVEN'T EVEN CONSIDERED THE ENVIRONMENTAL (LIFECYCLE) SAVINGS OF BURNING 3.136 BILLION LESS GALLONS IN TERMS OF CARBON EMISSIONS...

AND WE HAVEN'T EVEN CONSIDERED THE ENVIRONMENTAL (LIFECYCLE) SAVINGS OF NOT HAVING TO FIND, EXTRACT AND REFINE 6.817 BILLION BARRELS...

NOT TO MENTION THE BENEFITS OF REDUCING OUR DEPENDENCY ON SAUDI ARABIA/FOREIGN OIL WHICH "CONSERVATIVES" SAY THEY ARE ALL ABOUT DOING!!!!

Now lets say that the buyers of the 700,000 new vehicles only keep them 5 years, then sell to someone who is still driving a clunker. But first, lets concede that 30% of these are taken out of commission due to wrecks and/or other salvage. This still takes ANOTHER 490,000 CLUNKERS OFF THE ROAD in 5 years! And since those 700,000 buyers will most likely need a replacement vehicle, you know they are buying one that gets at least as good or better MPG. Do the math, and that saves a bunch more gallons, barrels, emissions, and dependency on foreign oil!!!

HERE'S THE POINT...

TYPICAL SHORT TERM, NARROW MINDED AND INSTANT GRATIFICATION AMERICAN THINKING WILL KEEP US IN THE STONE AGES.

STOP A MOMENT AND CONSIDER SOMETHING BEYOND YOUR OWN DOORSTEP, AND YOU MIGHT SEE THAT THERE'S A WHOLE WORLD OUT THERE THAT IS YOUR RESPONSIBILITY TO PASS ON (IN GOOD SHAPE!) TO THE NEXT GENERATION.

And as for the comment about healthcare... before anyone points fingers, you better take a look within as to WHY we are in the shape (physically) we're in. The concept of "healthcare" in the US is the biggest BS of the century! We need "well care" in terms of promoting nutrition, eating locally and in season, physical fitness, clean environment, lower consumption and pollution, and REAL education standards/values that enable sustainable, common sense living in terms of these considerations.

Get it?

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