Big Oil is joining forces with biofuel producers in a united front against electric vehicles. The message came from Bloomberg this week, suggesting EV sales were rising so rapidly that they were threatening two industries that have traditionally been at odds with each other.
In fact, what seems to be happening is Big Oil and Big Corn uniting against federal and state policies aimed at promoting electric vehicles as the only option for the future, whatever the cost. Because EVs are not going to make it on their own.
Per the Bloomberg report, the American Petroleum Institute joined forces with the National Corn Growers Association and other industry groups to support a bill authored by Nebraska Republican Senator Deb Fischer, which proposes to mandate the sale of gasoline blended with higher portions of ethanol throughout the year.
The so-called E15 blend is normally only sold during the colder months, while in summer, E10 is used. The number after the E stands for the percentage of ethanol blended into the gasoline. The reason E15 is not sold during the summer is that it increases vaporization and the risk of smog.
The oil industry has been against higher blending mandates because more ethanol in the gasoline means less gasoline in the tank, and this is not in their interest. Now, Big Oil has essentially made a U-turn, presumably in order to counter the rise of electric vehicles—when demand for electric vehicles is beginning to slow down. Related: Silicon Valley Startup Claims Massive Copper Discovery in Africa
By the way, the EV camp is on to them. It was on to them before the API, and the corn growers even made it official, it seems. In March last year, a pro-electrification organization dubbed Transport & Environment published a report titled “The big e-fuel lie” that told the story of how the oil industry is supporting biofuels in order to “derail mass electrification.”
From today’s perspective, it rather looks like mass electrification was doomed to derailment because of its inherent problems. After reaching a record-high portion of over 7% of all car sales last year, EV sales are set for a slowdown this year. Even their fans are admitting the slowdown, although they are doing their best to brush it off as insignificant.
But if it were, Ford would not be slashing its production targets.
The reason that the mass electrification vision is not going to materialize is that EVs have too many features that push potential buyers away. And they are unlikely to make any serious dents in oil demand any time soon—the main motive for Big Oil to get in bed with Big Corn.
In a recent analysis of the EV dream and why it will likely remain a dream, Mark P. Mills, senior fellow at the Texas Public Policy Foundation, wrote that even in Norway, oil demand has not declined after mass EV adoption. Norway is the country with the highest per-capita EV ownership in the world. Yet oil demand is stable even there—not growing, true, but stable. So why is Big Oil so worried?
The answer to that question comes from the political realm. Big Oil majors, by necessity, keep a finger on the pulse in Washington and now this pulse is telling them that the federal government and its transition allies at the state level are not giving up on their electric dreams so easily. They seem to be willing to spend whatever is asked of them to make that dream happen.
And this is the grave danger that Big Oil seems to be anticipating with its move to support Big Corn. Even though everyday reality shows that people are unlikely to start buying EVs on a mass scale anytime soon. Even though so far, EV sales have only displaced 1.5 million barrels of oil in daily global demand—a tiny portion. And even though with its move, Big Oil essentially goes against its own sector players—the refining non-majors for whom higher blending mandates cost actual loss of profits.
It also, in a way, goes against its own customers by potentially making their life even more expensive. Biofuel crops require large amounts of land to grow on. This land would otherwise be used for food crops. Thus, one of the main arguments against biofuels as an alternative to gasoline is that more biofuel production means higher food prices. And Big Corn wants more biofuel production.
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The two new allies argue that the bill they are supporting will bring long-term certainty to markets and help avoid supply disruptions. And they have a pretty good chance things will go their way because support for the Fischer bill is extensive—except from small refiners. All because they have believed that the Biden administration’s plan to have half of all new car sales be EVs by 2030 is going to happen. It won’t. Because it can’t happen unless people are being forced to buy EVs at gunpoint.
By Irina Slav for Oilprice.com
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