The Oil Drum: Australia/New Zealand

Both the SMH and The Age lead today's editions with a front page article quoting the head of General Motors saying that peak oil has occurred and the time to switch electric cars is upon us. I wonder if he has watched the movie "Who Killed The Electric Car ?" ?

THE world's biggest car maker, General Motors, believes the global oil supply has peaked and a switch to electric cars is inevitable.

In a stunning announcement at the opening of the Detroit Motor Show yesterday, GM's chairman and chief executive officer, Rick Wagoner, said ethanol was an important interim solution to the demand for oil, until battery technology gave electric cars the range of petrol-powered cars.

GM is working on an electric car, the Volt — due in showrooms in 2010 — but delays in battery technology have slowed its development.

Mr Wagoner cited US Department of Energy figures that showed the world was using about 1000 barrels of oil every second and demand was likely to increase by 70% in the next 20 years.

"There is no doubt demand for oil is outpacing supply at a rapid pace, and has been for some time now," Mr Wagoner said. "As a business necessity and an obligation to society we need to develop alternate sources of propulsion.

Send us a link of your own creations or favorites. I wonder when they will realize what a monster they've created.

Like the elephant in the living room, the decline of General Motors is a problem that investors don't want to think about but can't ignore.

The world's largest automaker, whose debt is close to the gross domestic product (GDP) of Belgium, lost more than $10 billion last year and is facing a bankruptcy that would reap devastation in the financial markets.

GM's (GM.N: Quote, Profile, Research) share price has halved in the past year, while its $100 billion of bonds have been cut to junk, confronting investors with the prospect of never getting their money back. Others in the highly-leveraged derivatives market face incalculable losses should a bankruptcy occur.

"A GM default would be absolutely huge," said Jonathan Loredo, of credit manager Cairn Capital. "It would be the biggest thing to hit the market in terms of losses and operational stress."

The US auto industry has not been particularly good at building car models that are well suited for fuel efficiency. The cheap oil boom they experienced in the 1990s combined with the easing of truck fuel economy standards created Minivan and SUV lines that are distinctly ill-suited for rising oil prices. As a result, a peak oil related economic transition is already underway the auto-industry. President Bush added today that they should not look to the Federal government for assistance.

In an interview with The Wall Street Journal published today, President Bush said that G.M. and Ford executives have not asked him for federal aid and that he would not look favorably upon such a request. Mr. Bush said he would instead encourage the automakers to build "a product that's relevant. I would hope I wouldn't be asked to make that decision," he told The Journal.

We'll see about that when the moment comes that Ford or GM has to file some sort of backruptcy, which could be as early as this year.