Will gas cars go obsolete?

The EPA’s Ban of Gasoline-Powered Cars Will Actually Slow Development of Electric Cars

The Biden administration wants as many as two-thirds of all new vehicles sold in the U.S. by 2032 to be electric. But the market should decide how to make that switch.

(Dominick Sokotoff/Sipa USA/Newscom)

This week, the Environmental Protection Agency (EPA) announced new vehicle standards with updated limits on car and truck emissions. If adopted, the rules would include prioritizing electric vehicles (E.V.s) and mitigating climate change. While those are good goals, it’s not clear if the auto industry will be able to pull them off on the government’s timeline.

More to the point, while it’s entirely inappropriate for the government to make such mandates, it also may hinder future progress on E.V. technology.

President Joe Biden has been pushing for an E.V. future. In August 2021, he signed an executive order advocating that by 2030, half of all new vehicles sold in the U.S. should be electric. At the time, the nation’s «Big Three» automakers—General Motors, Ford, and Stellantis—agreed, jointly announcing a «shared aspiration» that by 2030, «40-50%» of their U.S. vehicles would be hybrid or all-electric «in order to move the nation closer to a zero-emissions future.» To that end, the global automotive industry expects to spend $1.2 trillion by the end of the decade.

The EPA’s new rules go even further. Some pertaining to light-duty vehicles (cars and trucks weighing under 10,000 pounds) would require as many as 60 percent of new cars and trucks to be E.V.s by 2030, jumping to 67 percent by 2032. If adopted, they would make mandatory what Biden’s 2021 executive order had merely recommended.

The EPA estimates that adopting all of its rules «would avoid nearly 10 billion tons» of carbon emissions and «reduce oil imports by approximately 20 billion barrels» through 2055. But the auto industry may not be able to meet these accelerated deadlines, and it could even disincentivize innovation in the field.

In 2022, E.V.s made up 5.6 percent of U.S. auto sales, more than tripling their market share in three years. The sector is certainly booming—new E.V. registrations rose 60 percent in early 2022 even as overall new car registrations fell by 18 percent—but going from less than 6 percent of the market to fully two-thirds in less than a decade is quite ambitious.

Not to mention, despite falling prices in recent months, E.V.s remain considerably more expensive than their internal-combustion counterparts. In September 2022, the average E.V. cost $17,000 more than the average gas burner, according to Kelley Blue Book. Rep. Debbie Dingell (D–Mich.), whose district sits near the U.S. auto capital of Detroit, told Politico, «I’m hearing from too many people in this country—I mean, strong Democrats—that they can’t afford an electric vehicle.»

The Biden administration tried to put its thumb on the scale by including tax credits of up to $7,500 for E.V. purchases in last year’s Inflation Reduction Act (IRA), but those credits are directly dependent on whether the battery’s materials were sourced from a U.S. trade ally or a «foreign entity of concern.» The latter clause was clearly directed at China—which is unfortunate, since that country owns or controls the vast majority of minerals used in E.V. batteries.

Overall, the E.V. industry is struggling to reach scale. Ford, which sells more E.V.s than any company except Tesla, lost $2.1 billion on its electric division last year and expects to lose another $3 billion this year. Rivian, an electric truck and SUV manufacturer with one of the most successful IPOs in recent history, is struggling to meet its own production targets as it burns through cash. At this rate, there’s no guarantee that the automotive industry will be able to reach the government’s target of 67 percent E.V.s by 2032.

The Biden administration should let the market decide. Clearly, there is a demand for electric vehicles. But by insisting on the rate at which the industry needs to make the transition, the administration’s incentives could be undermining progress. Axios noted this week that «battery technology is still evolving…meaning the U.S. may be at risk of building mines and factories to produce batteries that wind up being obsolete in a decade.»

As Reason‘s Ronald Bailey wrote in the March 2023 issue, electrochemists are already devising new methods of powering electric cars that don’t use scarce materials. By imposing such a breakneck timeline, the EPA is forcing automakers to choose production over innovation.

Exxon CEO says no new gas cars globally by 2040, goes wolf in sheep’s clothing about CO2

Every new passenger car sold in the world will be electric by 2040, according to Exxon Mobil CEO Darren Woods in an interview aired this weekend by CNBC.

The interview also covered the company’s climate ambitions, putting a flashy coat of paint on an organization that is the world’s fifth-largest historical polluter and has pushed climate denial at a high level for half a century.

Exxon Mobil CEO Darren Woods sat down with CNBC’s David Faber for a long interview about climate change. The full interview is 35 minutes long (on top of a previous hour-long interview) and mostly discusses climate change and Exxon’s carbon capture and storage desires.

The interview sounds, at first glance, surprisingly reasonable and candid. Woods does not deny the scientific reality of climate change, calls for carbon reductions and a higher global carbon price, and recognizes that electric cars are coming.

But in view of Exxon’s history, Woods looks more like a wolf in sheep’s clothing.

No new gas cars by 2040

Of particular note is that he seems to think that sales of new gas-powered passenger vehicles will end in 2040 globally – before even many governments do. Some governments have set a target earlier than that – for example, 2035 in California and Europe (some European countries will go even earlier); 2030(-ish) in Washington; and the gold standard, 2025 in Norway. But there are others that have either set no target or that have set later targets, like China’s and Japan’s 2035 targets that still allow gas cars, and the US, which currently has no target but the earliest nationwide proposal is for 2045.

We’ve written before about how many of these targets will likely be exceeded (and also why post-2035 ambitions are pathetic), but the notion that Exxon also sees these targets being exceeded is quite interesting. Particularly given that not long ago Saudi Aramco, the world’s largest oil company, said that it expects 90% of vehicles to still be driven by internal combustion engines in “mid-century,” and industry analyst IHS Markit thinks only 30% of new cars in “key automotive markets” (i.e., not globally) will be electric in 2040.

So Exxon is a big outlier here and is predicting a much earlier end to gas vehicles than most other groups.

However, Woods still claimed this isn’t a threat to Exxon’s business. He said that even if all new cars were electric by 2040, that would only drop oil demand back down to 2013-2014 levels by Exxon’s calculations. Since the company was profitable then, he sees a future where it can remain profitable, even with that level of demand.

A much larger part of the interview is devoted to Exxon’s plans for carbon capture, which it is clear that Woods sees as a potential future revenue stream that Exxon can leverage.

Carbon Capture as another revenue stream

Woods paints a rosy picture of Exxon’s potential for contribution, but it’s easy to see the dollar signs in his eyes while he does so.

He claimed that Exxon is responsible for more carbon capture than any other company in the world (by capturing CO2 from its facilities, “some” of which it stores and the rest which it uses in operations…to help drill for more oil), and he thinks that Exxon can be a leader in “direct air capture” in the future.

Direct air capture is the idea that carbon can be taken directly out of the air and then sequestered in some way to make sure it stays out of the atmosphere. Environmentalists have questioned whether it is a valuable goal, or if it risks delaying climate action or simply works to serve oil industry profits.

Currently, it is very costly, as Woods pointed out in the interview, stating that it is “too expensive” to consider right now. (Would this excuse work if you threw your trash in the street and told your neighbors/city it’s “too expensive” to pay taxes for trash pickup? try it out and report back in the comments.) And the least expensive carbon storage would be to leave that carbon in the ground, where it currently is, in the first place.

On this tack, Exxon has recently asked for a higher carbon price because this would help incentivize companies to develop carbon capture technology, which is true – if Exxon, or some other company, could eventually capture carbon at a cost of $80 a ton and the carbon price is $100 a ton. Then it could profit by removing carbon from the air, and this will incentivize cleanup while disincentivizing pollution.

But we’ve heard this carbon pricing story before from Exxon. Last year, Exxon lobbyist Keith McCoy was caught on tape by Greenpeace, revealing the company’s reason for publicly supporting carbon pricing. The lobbyist said that Exxon felt it was politically safe to advocate for carbon pricing because it makes the company look good (known as “greenwashing“) but that “a carbon tax is not going to happen,” so Exxon benefits from goodwill but gets to continue benefiting from massive subsidies.

It is possible that Exxon has now earnestly changed its position only one year later, but even if it has, it certainly feels like Exxon may have only changed that position because it sees potential for profit. And given Exxon’s history on climate, the wolf-in-sheep’s-clothing theory is quite persuasive.

The mess is Exxon’s – why should it profit from cleanup?

In the interview, Woods completely failed to take responsibility for Exxon’s tremendous contributions to climate change. When Faber asked whether there is any question that climate change is human-made, Woods stated that there’s no question it is and that “it was always understood that CO2 in the atmosphere had potential for warming.”

This statement is true; scientists have known for a long time that CO2 increases warming and that humans are causing this. But Woods blatantly ignored a half-century of Exxon’s efforts to cast doubt on climate science, which it is currently being tried in court over and which McCoy admitted to in Greenpeace’s investigation. Exxon knew climate change was happening and lied about it, and Woods not only doesn’t acknowledge those lies but claims Exxon never told those lies – which is, itself, another lie.

And while Exxon plans to lower its carbon emissions and become carbon neutral by 2050, that only accounts for its “scope 1 and 2” carbon emissions. This only counts company-owned facilities and vehicles and the energy they use, but it does not account for the impact of various impacts like distribution, leased assets, employee travel, and most importantly, Exxon’s products, which account for the vast majority of any fossil fuel company’s “scope 3” emissions (for Exxon, about 85% of its emissions are scope 3).

Exxon has not committed to carbon neutrality for scope 3 emissions, so its “carbon neutral” commitment means it will offset 100%… of 15% of its emissions.

Part of Woods’ plan includes other ways to leverage Exxon’s vast store of hydrocarbons and its existing infrastructure into cleaner-burning fuels. Rather than eliminating petrochemicals from our energy supply, which is necessary for the climate, Woods wants blue hydrogen (cracked from methane, rather than green hydrogen, which is generated through electrolysis of water), biofuels, and ammonia to play a part in the conversation. He is sure to point out the “challenges” of solar, wind, and battery storage – three products his company isn’t involved in. And he explained how LNG could fix Europe’s heating issues, rather than geothermal, heat pumps, electric heating, or other less-polluting or more efficient solutions. Weird – almost like he’s selling us something.

Despite that, Exxon, a single company, has sold products responsible for almost 3% of all of humanity’s historical carbon emissions, Woods claims that Exxon can be a large part of the cleanup, which seems appropriate since Exxon made the mess in the first place.

And at the $100/ton price that Exxon seems to favor, it would cost several trillion dollars to make up for its historical contribution to carbon emissions and at least $65 billion for its scope 3 emissions for the year 2020. Exxon made $181 billion in revenue and $30 billion in profit in 2020.

But rather than spending the $65 billion a year it needs to clean up its scope 3 CO2 at the price it favors, Exxon has announced a plan to spend just $15 billion over 6 years ($2.5 billion per year) on its scope 1 and 2 emissions reduction plan.

The emissions blame game

Woods plays the blame game, which is so common, with every entity these days with respect to climate change. In this game, everyone stands around pointing fingers, blaming some other entity for climate change, absolving themselves as only responding to market forces, and claiming that action can only happen once some other entity takes action first.

Exxon, in this case, was only responding to “consumer demand” and still responds to consumer demand, selling oil because there are buyers for it. Woods foresees continuing to meet that demand and considers Exxon the savior for people around the world who are “living in energy poverty.” But a large majority of currently proven oil reserves must stay in the ground if we want to avoid catastrophe, and that catastrophe will disproportionately affect those people living in poverty. He also blames government for not crafting consistent and efficient regulation, after Exxon has lobbied against action for decades.

Meanwhile, consumers point out Exxon’s contribution to climate change – the 2.6% of scope 3 carbon emissions the company’s products are responsible for – and claim there is a lack of nonpolluting options. Then blame government for not acting to pass climate legislation while also complaining about high prices for a fuel that needs to stay in the ground anyway and basing their votes on whichever candidate “seems more fun to have a beer with” rather than which one will keep our only home from burning.

And governments stand by in a cowardly manner because of fear that voters will blame them for any disruption of the energy industry and that companies will leverage their power toward unseating any representative who affects the profits of established, polluting firms (rather than funding them, as those firms currently do).

This behavior is echoed on a worldwide level as governments and citizens wonder why they should act when that other country over there “isn’t doing enough” – a common excuse used by the world’s climate criminals.

So everybody points the finger at everybody else and uses this to absolve themselves of blame and to justify inaction.

And the worst part is that everyone is partially right. Nobody is doing enough. Everyone can do more.

But the “wait and see” approach (or worse, Exxon’s “propose solutions you know are unpopular or not technologically or politically viable” approach) doesn’t solve any problems. We can’t all stand around, pointing fingers and loudly proclaiming our innocence, while the boat sinks. We have to grab a pail and start bailing, and the more powerful entities, like perhaps the 16th largest company by market cap in the world, have to leverage that power to bail harder.

Exxon mustn’t wait for the carbon prices to incentivize cleanup – it needs to clean up its mess now and make up for the century of messes it has caused and the lies it continues to tell. Consumers have to stop making excuses for sticking to the status quo and need to demand more action from governments and from themselves because everyone’s life is going to have to change somehow or another to fix the biggest problem humanity has ever faced (and caused). And governments need to take courageous and bold action and call Exxon’s bluff on carbon pricing – which a majority of Americans in every congressional district support.

And if we do all that, maybe we’ll even beat Exxon Mobil’s 2040 all-EV target.

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All fossil-fuel vehicles will vanish in 8 years in twin ‘death spiral’ for big oil and autos

No more petrol or diesel cars, buses, or trucks will be sold anywhere in the world within eight years. The entire market for land transport will switch to electrification, leading to a collapse of oil prices and the demise of the petroleum industry as we have known it for a century.

This is the futuristic forecast by Stanford University economist Tony Seba. His report, with the deceptively bland title Rethinking Transportation 2020-2030, has gone viral in green circles and is causing spasms of anxiety in the established industries.

Seba’s premise is that people will stop driving altogether. They will switch en masse to self-drive electric vehicles (EVs) that are ten times cheaper to run than fossil-based cars, with a near-zero marginal cost of fuel and an expected lifespan of 1 million miles.

Only nostalgics will cling to the old habit of car ownership. The rest will adapt to vehicles on demand. It will become harder to find a petrol station, spares, or anybody to fix the 2,000 moving parts that bedevil the internal combustion engine. Dealers will disappear by 2024.

Cities will ban human drivers once the data confirms how dangerous they can be behind a wheel. This will spread to suburbs, and then beyond. There will be a “mass stranding of existing vehicles”. The value of second-hard cars will plunge. You will have to pay to dispose of your old vehicle.

It is a twin “death spiral” for big oil and big autos, with ugly implications for some big companies on the London Stock Exchange unless they adapt in time.

The long-term price of crude will fall to US$25 a barrel. Most forms of shale and deep-water drilling will no longer be viable. Assets will be stranded. Scotland will forfeit any North Sea bonanza. Russia, Saudi Arabia, Nigeria, and Venezuela will be in trouble.

It is an existential threat to Ford, General Motors, and the German car industry. They will face a choice between manufacturing EVs in a brutal low-profit market, or reinventing themselves a self-drive service companies, variants of Uber and Lyft.

They are in the wrong business. The next generation of cars will be “computers on wheels”. Google, Apple, and Foxconn have the disruptive edge, and are going in for the kill. Silicon Valley is where the auto action is, not Detroit, Wolfsburg, or Toyota City.

The shift, according to Seba, is driven by technology, not climate policies. Market forces are bringing it about with a speed and ferocity that governments could never hope to achieve.

“We are on the cusp of one of the fastest, deepest, most consequential disruptions of transportation in history,” Prof Seba said. “Internal combustion engine vehicles will enter a vicious cycle of increasing costs.”

The “tipping point” will arrive over the next two to three years as EV battery ranges surpass 200 miles and electric car prices in the US drop to $30,000. By 2022 the low-end models will be down to $20,000. After that, the avalanche will sweep all before it.

“What the cost curve says is that by 2025 all new vehicles will be electric, all new buses, all new cars, all new tractors, all new vans, anything that moves on wheels will be electric, globally,” Prof Seba said.

“Global oil demand will peak at 100 million barrels per day by 2020, dropping to 70 million by 2030.” There will be oil demand for use in the chemical industries, and for aviation, though Nasa and Boeing are working on hybrid-electric aircraft for short-haul passenger flights.

Seba said the residual stock of fossil-based vehicles will take time to clear but 95 per cent of the miles driven by 2030 in the US will be in autonomous EVs for reasons of costs, convenience, and efficiency. Oil use for road transport will crash from 8 million barrels a day to 1 million.

The cost per mile for EVs will be 6.8 cents, rendering petrol cars obsolete. Insurance costs will fall by 90 per cent. The average American household will save $5,600 per year by making the switch. The US government will lose $50 billion a year in fuel taxes. Britain’s exchequer will be hit pari passu.

“Our research and modelling indicate that the $10 trillion annual revenues in the existing vehicle and oil supply chains will shrink dramatically,” Prof Seba said.

“Certain high-cost countries, companies, and fields will see their oil production entirely wiped out. Exxon-Mobil, Shell and BP could see 40 per cent to 50 per cent of their assets become stranded,” the report said.

These are all large claims, though familiar to those on the cutting edge of energy technology. While the professor’s timing may be off by a few years, there is little doubt about the general direction.

India is drawing up plans to phase out all petrol and diesel cars by 2032, leap-frogging China in an electrification race across Asia. The brains trust of Prime Minister Narendra Modi has called for a mix of subsidies, car-pooling, and caps on fossil-based cars. The goal is to cut pollution and break reliance on imported oil, but markets will pick up the baton quickly once the process starts.

China is moving in parallel, pushing for 7 million electric vehicles by 2025, enforced by a minimum quota for “new energy” vehicles that shifts the burden for the switch onto manufacturers. “The trend is irreversible,” said Wang Chuanfu, head of the Chinese electric car producer BYD, backed by Warren Buffett’s Berkshire Hathaway.

At the same time, global shipping rules are clamping down on dirty high-sulphur oil used in the cargo trade, a move that may lead to widespread use of liquefied natural gas for ship fuel.

This is all happening much faster than Saudi Arabia and OPEC had assumed. The cartel’s World Oil Outlook last year dismissed electric vehicles as a fringe curiosity that would make little difference to ever-rising global demand for oil.

It predicted a jump in crude consumption by a further 16.4 million barrels a day to 109 million by 2040, with India increasingly taking over from China as growing market. The cartel said fossils will still make up 77 per cent of global energy use, much like today. It implicitly treated the Paris agreement on climate targets as empty rhetoric.

Whether OPEC believes its own claims is doubtful. Saudi Arabia’s actions suggest otherwise. The kingdom is hedging its bets by selling off chunks of the state oil giant Saudi Aramco to fund diversification away from oil.

OPEC, Russia, and the oil-exporting states are now caught in a squeeze and will probably be forced to extend output caps into 2018 to stop prices falling. Shale fracking in the US is now so efficient, and rebounding so fast, that it may cap oil prices in a range of US$45 to $55 until the end of the decade. By then the historic window will be closing.

Experts will argue over Seba’s claims. His broad point is that multiple technological trends are combining in a perfect storm. The simplicity of the EV model is breath-taking. The Tesla S has 18 moving parts, one hundred times fewer than a combustion engine car. “Maintenance is essentially zero. That is why Tesla is offering infinite-mile warranties. You can drive it to the moon and back and they will still warranty it,” Prof Seba said.

Self-drive “vehicles on demand” will be running at much higher levels of daily use than today’s cars and will last for 500,000 to 1 million miles each.

It has long been known that EVs are four times more efficient than petrol or diesel cars, which lose 80 per cent of their power in heat. What changes the equation is the advent of EV models with the acceleration and performance of a Lamborghini costing five or 10 times less to buy, and at least 10 times less to run.

“The electric drive-train is so much more powerful. The gasoline and diesel cars cannot possibly compete,” Seba said. The parallel is what happened to film cameras – and to Kodak – once digital rivals hit the market. It was swift and brutal. “You can’t compete with zero marginal costs,” he said.

The effect is not confined to cars. Trucks will switch in tandem. Over 70 per cent of US haulage routes are already within battery range, and batteries are getting better each year.

EVs will increase U.S. electricity demand by 18 per cent but that does not imply the need for more capacity. They will draw power at times of peak supply and release it during peak demand. They are themselves a storage reservoir, helping to smooth the effects of intermittent solar and wind, and to absorb excess base-load from power plants.

Mark Carney, the Governor of the Bank England and chairman of Basel’s Financial Stability Board, has repeatedly warned that fossil energy companies are booking assets that can never be burned under the Paris agreement.

He pointed out last year that it took only a small shift in global demand for coal to bankrupt three of the four largest coal-mining companies in short order. Other seemingly entrenched sectors could be just as vulnerable. He warned of a “Minsky moment”, if we do not prepare in time, where the energy revolution moves so fast that it precipitates a global financial crisis.

The crunch may be coming even sooner than he thought. The Basel Board may have to add the car industry to the mix. There will be losers. Whole countries will spin into crisis. The world’s geopolitical order will be reshaped almost overnight. But humanity as a whole should enjoy an enormous welfare gain.

This article originally appeared in The Telegraph.

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