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Katrina's message for the auto industry

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Link: http://www.detnews.com/2005/insiders/0509/...auto-300059.htm

Katrina's message for the auto industry

By John McCormick / Autos Insider

The catastrophe on the Gulf Coast raises many concerns. Beyond the tragic loss of life and sheer scale of human misery caused by the Hurricane Katrina, there is the widespread economic impact of the storm.

The effect is already being felt by Michigan consumers, who are seeing gas prices spike steeply well into the three dollar per gallon range as fuel supplies tighten from the ravaged Gulf states, which are responsible for 25 percent of America's oil supply.

What this crisis will mean for Detroit's automotive business is unclear so far, but it's safe to say it will not help an industry already struggling with several major problems, not least being the effects of sustained high gas prices on sales of larger vehicles. Consumers were already balking at fuel prices in the mid- to high two dollar range; now the prices are heading higher, possibly much higher.

Until now, some had taken comfort in the fact that crude prices, when adjusted for inflation, had still to reach the highs of the 1970s oil shock. But that may not be true much longer.

On the wider front, the potential consequences of Katrina for the US national economy and by extension, the world's financial system, are disturbing to say the least.

All this will not come as much of a surprise to one of the smartest and most visionary automotive executives in Detroit, Larry Burns, vice-president for research and development and strategic planning at General Motors Corp. For years, Burns, an unabashed promoter of a gradual switch to a hydrogen-based economy and hydrogen fueled vehicles, has predicted that world events will force the issue.

In the past, Burns has pointed to the hugely expensive wars in the Middle East, the 9/11 World Trade Center attacks, the 2003 Northeast states electrical black-outs and China's growth as prime examples of developments with the potential to change energy strategy. Now that Mother Nature has weighed in with a hammer blow at America's major domestic source of crude oil, Burns has every right to say I told you so. The question is, how many more man-made or natural disasters will it take before the US government, and others around the world, wake up to the need for a long term shift towards new energy policies?

Detractors of the hydrogen economy always point to the established infrastructure of the oil industry and its relatively inexpensive product as unbeatable barriers to progress. However this week's events show how vulnerable that infrastructure is and economic arguments in favor of gasoline are quickly going up in smoke.

The current administration, with its close ties to the oil industry, is scrambling to find a quick fix to surging gas prices, by releasing reserve stocks of crude, but surely the better answer is to pay more than lip service to the long term potential of hydrogen. Critically important is the fact that as an energy carrier, hydrogen, unlike crude oil, can be derived from many diverse sources around the world. Today, as we face another potential energy crisis, with few, if any, easy solutions, wouldn't it be good to have an attractive alternative?

John McCormick is a columnist for Autos Insider and can be reached at jmccormick@detnews.com

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