Oil & Gas elephant spooked by EV mouse — for good reason

Photo of EV charging station
Electric Vehicle charging station. Image: City of Hoboken NJ

The oil and gas industry is losing market share to clean energy technologies such as wind and solar. But it’s the electric vehicle (EV) that poses the most pressing threat to the industry. Here’s why:

The car-owning public reacts negatively to high gas prices. Politicians of all strips are sensitive to that fact. Even politicians who recognize the environmental need to reduce fossil fuel production are reluctant to take actions that could drive up prices at the pump. Taxing the carbon in fossil fuel emissions rather than taxing the carbon content of fossil fuels as they are produced is an example of this reluctance — it distances the politician from the effect. And even that feeble political action is further weakened by the failure to set the carbon price high enough to cause meaningful reduction in fossil fuel use. A switch from gasoline to electric powered cars will remove the political fear of pump prices and leave the oil and gas industry vulnerable to direct carbon pricing.

Many of the country’s newer natural gas powered electricity generating plants might last for another thirty years or more. This means that the complete replacement of fossil fuel power with cheaper renewables could take decades. The situation with electric vehicles is different. The average life expectancy of a car is 10 years or less. As EV prices drop and public acceptance increases, a shift to EVs could result in a complete replacement of the existing fleet of vehicles within a period of 10 to 15 years. Motor gasoline accounts for about 24% of total fossil fuel energy currently used in the U.S., a big chunk of the fossil fuel industry’s market. The shift would, at the same time, create new opportunities for wind and solar powered electricity generation.

Oil and gas industry executives are well aware of the threat posed by EVs. It explains the industry’s hatred of the EV incentive program. The program, introduced in 2015 under the Obama administration, offers a tax credit of $2,500 to $7,500 per new EV purchased for use in the U.S. Initial funding for the program was capped at about $2-billion. The oil and gas industry, concerned that Congress may decide to extend funding for the program, has ramped up its propaganda machine to try and prevent that from happening. As usual, when it comes to spreading disinformation about climate science and clean technologies, the industry calls on its mercenary propaganda troops to do the lying for them (see Apr.21 post — How the Oil and Gas Industry gets others to fight for its life). The propaganda effort described below shows the lengths the industry will go to fight what is a relatively small program.

A coalition of 34 fossil-fuel-funded, free market advocacy groups (see image below) delivered a letter May 9 to Congress (addressed to Senators Grassley and Wyden, and Representative Brady and Neal) urging members to protect “all American families by opposing an expansion of the electric vehicle tax credit.” The coalition is led by the American Energy Alliance (AEA), a not-for-profit organization that, according to its website, “engages in grassroots public policy advocacy and debate concerning energy and environmental policies.” The AEA, according to Desmogblog, is run by a former lobbyist for Koch Industries. The letter claims that the EV subsidy is unpopular, overwhelmingly benefits the rich, and amounts to a wealth transfer to California at the expense of all other states. It also claims that electric cars are not cleaner than cars powered by internal combustion engines.

Image of 34 fossil fuel funded, free market advocacy groups logos
Coalition of fossil fuel funded, free market advocacy groups organized to oppose expansion of the federal EV subsidy program. Image: eenews

As mentioned above, the U.S. EV subsidy is relatively small. Since its start in 2015, the program has handed out a total of about $20-billion in the form of income tax credits. By comparison, the U.S. fossil fuel industry receives about $27-billion annually in direct federal subsidies. The industry letter to Congress says nothing about that. The following bar chart shows the amount of annual subsidies each of the G7 nations currently hand out to support their fossil fuel addictions. It’s time they sought treatment.

Bar chart showing how G7 countries subsidize fossil fuel industry
Image: Natural Resources Defense Council (NRDC)

Note that the bar chart above shows only the direct subsidies to the fossil fuel industry. The industry also receives a massive indirect subsidy due to the fact that it does not pay the cost of damages — global warming, climate destabilization, etc. — caused by the burning of its products.

Big Oil rattled by Electric Vehicles; Senator Barrasso tries to help

Worldwide sales of electric vehicles (EVs) have been climbing steadily since 2010. While the proportion of EVs to new car sales is still less than 3% worldwide, the oil industry is disturbed by the trend in total numbers sold (see graph below).

Graph showing sales of EVs in leading markets 2011 to 2017
Sales of EVs in leading markets. Image from Wikipedia.org

Transportation is now the country’s largest source of global warming carbon dioxide. If CO2 emissions are to be reduced, EVs will have to play a major role. For oil refiners, that’s bad news. Electric Vehicles don’t run on gasoline, which means less profit at the pump.

What do giant corporations do when confronted by threats to their market dominance? The simple answer is, they buy political influence. But they also need to be helpful (in a practical way) to the politicians they aim to influence. That is, they need to show them exactly what legislation to adopt and pass into law. That’s where ALEC comes in.

ALEC, short for American Legistative Exchange Council, is a conservative, non-profit, bill-writing organization headquartered in Arlington VA. Its motto is, ‘“Limited Government, Free Markets, Federalism”. Membership includes state legislators and private sector representatives, people who get together to discuss and agree on their political objectives and then convert those objectives into the legislative language of government bills. These ‘model’ bills are then distributed to states that want to adopt them. The bills generated by ALEC reflect the politics of its right wing, conservative, Republican membership. Bills aimed at reducing corporate taxes, cutting environmental regulations, opposing gun control, introducing tough voter ID rules, and weakening labor unions, are typical of the organization’s output.

Several nations, including the U.S., have introduced incentives designed to encourage the purchase of electric vehicles. The U.S. offers a federal tax credit of up to $7,500 to people who buy new EVs., a measure that predates the Trump era. Last November, and again in December, oil industry representatives and state legislators held ALEC meetings to discuss (in private) how to kill the tax credit. According to The Guardian of 4th Dec., the participants secretly approved resolutions “supporting stripping tax benefits from electric vehicles and endorsing Donald Trump’s pro-fossil fuel energy agenda. And they voted down a proposal to limit monopoly control of the power industry, which backers said would give consumers more choice and help grow renewable electricity faster and more cheaply.”

Entities linked to the ALEC meetings included Marathon Petrolium, the nation’s largest refiner, and the American Fuel & Petrochemical Manufacturers Association (AFPM). Marathon alone has reported spending close to a million dollars lobbying Congress about the EV tax credit and other issues. The fossil fuel industry’s man in Congress is John Barrasso, Republican Senator from Wyoming.

Photo of U.S. Senator John Barrasso
U.S. Senator John Barrasso (R-WY). Image: Facebook

Barrasso heads the Senate Environment & Public Works Committe, and sits on the Energy & Natural Resources Committe. According to OpenSecrets.org Barrasso received $520,650 in campaign financing from the fossil fuel industry over the period 2013 to 2018. Last October, the Senator introduced a bill to Congress to revoke the EV tax credit and to impose a highway use fee on electric vehicles to make up for the fact that their owners  don’t pay a gasoline tax.

On March 6 of this year, Barrasso Spoke from the Senate Floor on the subject of the Democrats “Green New Deal”. He was responding to a challenge from Senate Minority leader Chuck Schumer (D-NY), to tell the Senate what the Republicans planned to do about climate change. Here’s part of what Barrasso said (Senate Committee Press release):

It’s a plan: cut carbon through innovation, not regulation. The question is: do we believe the climate is changing? Do humans have an impact? The answer is yes to both. . . . Second, the United States and the world will continue to rely on affordable and abundant fossil fuel, including coal, to power our economies for decades to come. And we need to also rely on innovation. Not new taxes, not punishing global agreements. That’s the ultimate solution.

Interesting plan — Stick to fossil fuels and innovate. Innovate how? I’m guessing ‘green plan’ type innovations such as wind generators, photovoltaics, battery storage systems, and electric vehicles, are not what the Senator has in mind.

Four-door electric sedans currently sell In the U.S. for $30,000 and up. How will the oil industry react when prices fall? The image below shows the EV currently being built in China  by Great Wall Motors. It’s listed at around $9,000, little more than the tax credit Senator Barrasso is so keen on killing. That’s the future the oil industry will have to contend with.