Alkylate Shortage Will Impact 2008 Hybrid Car Sales

Alkylate is a little-known substance that could have a huge impact on hybrid car sales in 2008.  Referred to as “liquid gold” and the “magic bullet”, this expensive gasoline additive is about to be in short supply and high demand, just in time for the summer driving season.  Adding insult to injury are accusations that oil companies are purposely reducing the output of alkylate in an attempt to further increase profits.  Regardless of who’s to blame, if gas prices top $3.50 a gallon this year, expect to see a lot more people buying hybrid cars and suvs in ‘08.

Bigger than black gold? According to Citigroup analyst Doug Leggate, the alkylate shortage will be the most important driver of summer gas prices.  Without additives, gasoline doesn’t burn completely, increasing tailpipe air pollution. And untreated gas evaporates more quickly in hot weather, potentially causing vapor lock when it changes from a liquid to a gas and blocks fuel lines. The federal government long ago required refiners to boost the oxygen content of summer-blend gasoline to make it burn more completely, a problem that was solved by adding MTBE and, more recently, ethanol (full AP article here).

Hybrid car sales in 2007 topped 350,000, an increase of more than 100,000 compared to the previous year.  And while Toyota hybrids accounted for more than 70% of those record numbers, several other car manufacturers will be trying to grab a larger slice of the hybrid pie in 2008.  Probably the most important stat was that last year’s huge increase in hybrid sales happened with a shortage of available green options, and as gas prices hovered at or below $3 per gallon for much of the year.

With all the press about hybrids over the past few months, a jump in gas prices could be the primer for hybrid car sales to top the half million mark in 2008.  It remains to be seen if alkylate gets the blame or the credit.