Prices at the Pump Too High? There Are Alternatives to Gasoline

Driving an electric, hybrid or diesel vehicle, or converting your car to run on liquified petroleum gas, is a game changer.

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Gasoline climbed 43 agorot per liter this week, to within just several agorot of its all-time high in April. With the dollar's resurgence and mounting anxiety over a military strike on Iran, it's just a matter of time before gas prices set a new record high.

But you won't need to pay those high prices if you're using a power source other than gas, which can save thousands of shekels.

Yes, driving a car with manual transmission and turning off the air conditioning can save you some gas money. But driving an electric, hybrid or diesel vehicle, or converting your car to run on liquified petroleum gas, is a game changer.

Liquid petroleum gas: Save money, but park outdoors

Some 15,000 cars in Israel run on liquid petroleum gas, served by 68 filling stations across the country. This gas is essentially the same as the propane used for household cooking and is therefore subject to 1/36 the excise tax imposed on gasoline, so the price at the pumps comes to just NIS 3.80 per liter. Gas mileage with liquid petroleum gas is actually 5% lower than for gasoline, but you still end up saving money - NIS 3,790 a year, to be exact - because the cost of the fuel is 60% lower, at 40 agorot per kilometer for the average family-sized car.

Almost any gasoline-driven vehicle can be used for liquid petroleum gas, with no need to replace the engine. All that's required is installation of the fuel system, including a tank, by an authorized garage for about NIS 7,000. The tank takes up a good part of the trunk, though, often making this an unpopular choice for small cars.

Another drawback is that vehicles that run on liquid petroleum gas, which are required to have a special sticker on the front windshield, are banned from entering almost all underground parking lots due to fear of gas leaks. Some car models have also been prone to mechanical malfunctions after conversion.

If this fuel system catches on with the public, it could lead to its own undoing: Tax authorities have already suggested covering lost revenues by increasing the conversion fee or the annual licensing fee on converted vehicles.

Hybrids: Expensive to buy, cheap to run

The combination of an electric motor, charged through regenerative braking, with a gasoline engine for intercity driving makes hybrid vehicles efficient, mainly in the slow-moving city traffic faced by most Israeli drivers, according to a senior executive at one of Israel's importers of hybrid cars.

"The volatility in gasoline prices doesn't boost demand for these cars," he says. "Hybrids have a growing following that understands their technological advantage and is primarily concerned with fuel savings - which, according to manufacturers' figures, reach 50% compared with gasoline-driven models."

The fuel efficiency of the Toyota Prius, at 20 kilometers per liter, reduces travel costs to just 39 agorot per kilometer - providing savings of up to NIS 3,950 a year for an average family-sized vehicle.

But hybrids still cost much more to buy, despite the heavily reduced tax - 30%, as opposed to Israel's 83% tax on gasoline-powered cars. The cheapest hybrid model, the Honda Jazz, costs NIS 117,000, while the equivalently sized Toyota Yaris sells for NIS 100,000. The Prius costs NIS 154,000, about NIS 35,000 more than similar gasoline-driven cars.

Manufacturers have already begun launching the next generation: plug-in hybrids like the Chevrolet Volt and the Prius Plug-In. Car prices will be relatively high in this category too, exceeding NIS 170,000. These, however, are capable of driving dozens of kilometers at minimal cost after their batteries are recharged, and have a larger range in the electrical mode.

Electric cars: Cheap for short distances

The newest alternative in the market is the electric vehicle, which is currently sold solely by Better Place. The company launched its new marketing campaign just two weeks ago, offering a locked-in price of just 55 agorot per kilometer for 40,000 kilometers, or 65 agorot per kilometer under its pay-as-you-go plan. This compares with 64 agorot per kilometer for a normal gasoline-powered family car, but that doesn't take into account the additional service package provided by Better Place or lower insurance rates on electric vehicles.

"The jump in the price of gasoline coincided precisely with our advertising campaign and helped us by boosting interest," said Better Place's Israel sales director, Zohar Bali. "We clearly aren't playing up the expense, but rather the instability of gasoline prices. The uncertainty is what drives customers mad... Until now customers were drawn by the innovation and environmental concerns, but today they're coming for the savings."

Diesel scores big in Europe

In Israel, diesel engines remain the domain of commercial vehicles and large SUVs, but in Europe they are grabbing market share from gasoline engines. In some countries, such as France, most cars sold today come equipped with diesel engines. Nowadays, these vehicles feature turbochargers and direct fuel injection, which offer smoother performance than ever before, as well as a savings of about 20% in fuel consumption. Diesel engines also tend to last many years longer than gasoline engines, but maintenance is more expensive.

"Each time gasoline prices rise, interest surrounding diesel grows," said a sales manager for diesel vehicles. "But the public is put off by the higher car prices and because the price of diesel fuel is inconsistent and unregulated."

The sales manager blames the higher prices of diesel engines on the higher taxes imposed because of the pollution caused by diesel exhaust. "The Europeans also have strict air pollution standards, but Israel invented a new formula making diesel engines the most expensive in the world," he said.

A senior executive in the leasing business said owners of taxis and fleets of cars are the dominant diesel buyers.

"The state killed off Israel's diesel market," he said. "And I don't see any change on the way."

Pump shock: There are alteratives.Credit: Bloomberg
Toyota's plug-in hybrid car.Credit: Daniel Bar On
Better Place's electric car during a test drive.Credit: Emil Salman



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