Lexus: The hybrid debate blog

If the "hybrid dream" were realised and the UK really did cut its oil consumption significantly, the benefits for our economy could be considerable.

In 1999, the UK was the ninth largest oil producer in the world. A third of the country’s North Sea oil production was exported, delivering billions to treasury coffers each year. Since that peak, production rates have fallen dramatically. So far, in fact, that in 2006 the country was a net importer of oil for the first time since 1980. The treasury receipts have been replaced with a growing trade deficit. It’s a trend that is expected to continue, and to be exacerbated by increases in the price of oil. Ironically, the country’s large exports coincided with a period of very low global oil prices and, today, as we become a net-importer, oil is at record high prices.

Now we face a dilemma. The UK is growing increasingly reliant on imported oil, against a backdrop of tightening global supplies and in competition with the rapidly expanding economies and healthy trade surpluses of India and China. Maintaining our current oil consumption of 1.7 million barrels per day is becoming increasing expensive and will soon no longer be viable.

So could hybrids keep the country moving while reducing our consumption of (and therefore increased reliance upon) imported oil?

When we’re asked to consider the country’s oil consumption, it’s transport that springs naturally to mind. However, transport as a whole accounts for only 65% of the UK’s oil consumption, with road transport accounting for 47%. Today’s hybrid technology is only applicable to cars, further reducing the scope of possible savings. Cars in the UK consume just 27% of the total oil supply, the other large transport consumers being light and heavy goods vehicles (18%) and aviation (15%).

As a rule of thumb, today’s hybrid technology can increase the efficiency of a car by around 50%. This improvement delivered across the whole UK fleet could, in theory, save 13.5% of our current oil consumption, or around 230 thousand barrels per day with a value of £3bn ($6bn) per year at today’s prices. In a future where the UK is a net importer of oil, this value would come directly off the trade deficit. It could also be considered as the value to the economy of replacing the fleet of cars we have today with a fleet equipped with hybrid technology.

Taking the calculation one step further, if we divide this £3bn annual benefit by the 2.2 million cars sold in the UK each year, we find each new hybrid car will benefit the economy to the tune of £1,350 ($2,700). Today’s hybrid cars are a little more expensive than the equivalent conventional alternative. Comparing that price difference with this benefit should illustrate whether it is economically favourable to import hybrids, improve the fleet efficiency and forgo some imported oil, or stick with what we have and accept the increasing national fuel bill.

In the long term, hybrid technology is likely to become cheaper and imported oil more expensive. Thus, from a national economic perspective, it makes sense to switch.