Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

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Friday, August 26, 2005

The Effect of High Oil and Gasoline Prices on.........

Platinum prices.

If, just if, hydrogen cells ever become economically feasible for automobiles (and other energy-using devices), there will be a huge increase in the demand for platinum [h/t to Jack for the information, adapted from this source].

The auto industry is preparing for the day when oil wells run dry by investing billions of dollars to develop clean and efficient hydrogen-powered vehicles.

But the new fuel comes with its own built-in commodity crisis. Today’s experimental hydrogen fuel cells use so much platinum that there is not enough of the precious metal to replace all the world’s gasoline engines.

As Kazuo Okamoto, head of research and development at Toyota Motor Corp., Japan’s biggest automaker, says: “With the current type of technology we know already that [platinum supplies] will not be sufficient.” And the problem cannot be solved by just digging up more of the metal in South Africa, which has the bulk of the world’s reserves.

The possibility of a platinum shortage is already a critical issue for manufacturers spending vast sums on hydrogen research. More pressingly, it is also a major cost issue as 60g of platinum adds almost US$2,000 to the cost of a fuel cell. The only way to make the new technology competitive with traditional US$5,000 gasoline engines is to cut precious metal use.

[O]nce fuel cells take off, the price of platinum could lead to short-term price spikes before new mine investment increases output, according to the U.S. study.
Any shortage is likely to be eased by recycling. Already more platinum each year comes from exhaust catalysts in old cars and other industrial uses than from any single mine, and recycling rates remain low.
Technologies will change and develop over the next 45 years. But surely speculators are including the possibly immense demand for platinum in their calculations. If you don't think they are, just Google "platinum + hydrogen cells". If, after reading the material there, you still think there is discovery value that has not been capitalized by the market, there is always the futures market...
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