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Monday, Oct. 13, 2008

Charge up to the fast lane


During a recent visit to China's Zhejiang University, which honored me with the title of visiting professor, I was surprised to learn that faculty members drive their own cars, many of them expensive models by my standard. A professor in his late 40s was driving a ¥10 million Audi; a 30-year-old instructor had a ¥3 million Toyota Camry; and an assistant around 30 owned a ¥4 million Buick.

When did the annual income of Chinese professors surpass that of their Japanese counterparts? I thought intellectuals had become the target of criticism during the 1966-77 Great Proletarian Cultural Revolution and suffered declines in social status and salaries as a result.

During the past decade, the Chinese government has striven to promote art, science and technology, and a large number of Chinese scholars have published academic papers on a wide variety of subjects in international journals.

Although a large majority of universities in China are run by the state and professors' base salaries, uniformly fixed nationwide, are as low as those of Japanese academicians, Chinese scholars receive additional remuneration when their papers appear in international publications or when they give a keynote address at an international conference. As a result, the wage disparity between the highest- and lowest-paid Chinese scholars has climbed as high as 10 to 1.

Even so, it was difficult for me to comprehend how an instructor or assistant in their 30s could afford to drive these automobiles. It didn't take long to find the answer: Chinese corporations often commission entire research and development projects to universities because, unlike Japanese companies, they do not have large-scale R&D facilities. Professors who undertake relevant corporate research leading to a patent normally receive 50 percent of the royalty revenue even if the patent doesn't involve a state-of-the-art achievement by international standards.

Moreover, those who teach at universities are permitted to launch and run their own companies with technologies they develop themselves. All of which got me thinking about advanced technologies for the cars they're driving.

Crude oil prices have fallen below $100 per barrel, but they're likely to shoot up to $150 or $200 by 2020, depending on how motorization progresses in countries like China and India. That's because production from existing oil fields will decline relative to expected demand, and new oil fields are not being developed fast enough.

Some oil is being put to "noble use" as the raw material for petrochemical products. Since the 1920s, materials synthesized from oil have replaced rubber, textiles and lumber. Human society has become so dependent on materials such as plastics, synthetic rubber, synthetic fibers and polyethylene that it could not survive without them.

As the price of crude oil rises further, greater efforts will be made to extract the maximum amount of naphtha, an essential petrochemical material. This will mean less gasoline and diesel fuel. It will become so expensive to drive gasoline- or diesel-powered vehicles that electric cars will become the most popular means of transportation.

Mitsubishi Motors Corp. is scheduled to put its electric car on the market next year. When its battery is charged for seven hours at 200 volts (or 14 hours at 100 volts), the car will be able to travel 160 km with a top speed of 130 km per hour. For 1 kilowatt-hour of electricity, which costs about ¥10 at night and ¥25 during the day, the car can travel 10 km.

Compare this with an ordinary car, which consumes 1 liter of gasoline to run 10 km at a cost of ¥170. Nissan Motor Co. is said to be preparing an electric car with even better performance characteristics for 2010. Honda Motor Co. will start selling an electric motorcycle.

Toyota Motor Corp., meanwhile, is expected to introduce a plug-in hybrid car in the not-so-distant future. After its battery is charged overnight, it will be able to travel a distance similar to that of an electric car. When the battery is completely discharged, car operation will switch to a gasoline engine.

These innovations are the result of technological advances in making lithium batteries smaller and their power capacity larger. In the near future the distance covered by an automobile with one charging is expected to double.

A fuel-cell vehicle currently under development runs on a motor powered by electricity generated when oxygen is combined with hydrogen. A major bottleneck is how to produce hydrogen in large quantities. Deriving hydrogen from natural gas or petroleum would inevitably cause CO2 emissions. Another alternative would be to extract hydrogen from biomass. The easiest way to mass-produce hydrogen is to electrolyze water.

At any rate, automobiles will sooner or later be powered by electricity, either directly or indirectly. According to 2006 statistics, generating 1 kilowatt-hour of electricity results in the emission of 410 grams of CO2 while 2.3 kg is emitted when 1 liter of gasoline is burned. With present technology, CO2 emissions from an electric car are about one-sixth of those in tailpipe exhaust from a gasoline-engine car.

Although the power source of an automobile may shift to batteries, airplanes and large oceangoing freighters will probably have to keep relying on jet fuel and type-C heavy oil, respectively. Unless suitable alternatives are discovered, these fuels will become another "noble use" of petroleum, and their prices will go up.

One reason globalization has made so much progress since the 1990s is the drastic cost reductions in moving people, goods, money and information. But cost hikes in transporting people and goods will inevitably put the brakes on globalization.

Japan, in particular, will suffer much from rising CIF (cost, insurance, freight) on the raw materials it imports, as the country must import much of its fuel and relies on the export of products manufactured from the imported materials. We must not forget that globalization itself has been enabled by the low cost of petroleum and the resulting low cost of transporting people and goods.

Takamitsu Sawa, a professor at Ritsumeikan University's Graduate School of Policy Science, is a specially appointed professor at Kyoto University's Institute of Economic Research.


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