The U.S. Oil Industry’s Dirty Little Secret

Because greater fuel economy for cars is toxic for the oil industry.

By Nick Cunningham, Oilprice.com

The oil industry engaged in a secret public relations campaign to undermine U.S. fuel economy standards, according to a new investigation from the New York Times.

One of the main actors was the largest oil refiner in the country, Marathon Petroleum. Marathon, along with others, ran a “stealth campaign to roll back car emissions standards,” the NYT reported. The campaign argued that the U.S. no longer needs fuel economy standards because it is now such a massive producer of oil.

“With oil scarcity no longer a concern,” Americans should be given a “choice in vehicles that best fit their needs,” a draft letter that was sent to members of Congress said. The Trump administration took up the talking points in its official justification for the proposed watering down of fuel economy standards.

Much of the debate about the corporate average fuel economy standards (CAFE), which were set to rise to over 50 miles per gallon by 2025, focused on the position of the auto industry. But California still has the authority to set its own fuel economy standards, something that the Trump administration is now contesting as it seeks to freeze federal standards at 37 mpg beginning in 2020.

The auto industry has been the dog that caught the car – it initially pressed the Trump administration to weaken the fuel economy standards, but realized that the aggressive rollback would leave the industry with a patchwork of state levels regulations, led by stricter standards in California. Different standards for different states would require automakers to produce different cars for different markets, a reality that would be more problematic than the more stringent nationwide standards.

However, while media coverage focused on this back-and-forth between major automakers, environmentalists and the Trump administration, it appears that oil refiners were waging a stealth PR campaign to convince the public that the standards are no longer needed. Marathon teamed up with the American Legislative Exchange Council (ALEC), according to the NYT investigation, where they pushed Facebook ads, and lobbying at the state and federal level. They trumpeted a resolution calling the fuel efficiency standards “a relic of a disproven narrative of resource scarcity.”

The motivation is obvious: more efficient vehicles, including hybrids and increasingly electric vehicles, will cut into gasoline sales from refiners. While automakers have to worry about complying with state level fuel standards, refiners simply want to sell more fuel. Marathon’s CEO Gary Heminger told investors in early December on a conference call that the rollback in fuel economy standards would mean the refining industry would sell an additional 350,000 to 400,000 bpd of gasoline.

By 2030, freezing the auto standards, as proposed, would lead to increased U.S. oil demand by between 221,000 and 644,000 bpd, according to the Rhodium Group.

Some experts argue that the gutting of auto emissions standards would likely result in the largest impact on U.S. greenhouse gas emissions out of any other initiative pursued by the Trump administration, including the rolling back of methane limits, gutting the Clean Power Plan, or opening up vast new acreage for more oil and gas drilling.

The cleaning up of the electricity sector – more renewable energy, and a coal-to-gas switch – is happening on its own, due to pricing pressure from cheaper and cleaner sources of energy. Transportation is a tougher nut to crack and stricter federal standards have been critical to improving fuel economy.

But oil refiners were never going to sit on the sidelines and let federal regulations cut into their sales.

Amy Myers Jaffe, a Senior Fellow on Energy and the Environment at the Council on Foreign Relations, summed up the New York Times investigation on Twitter:

Marathon Petroleum, biggest US refiner, wants you to use more of its product, pay more for gasoline, drive car w inferior tech, lose future jobs to China, enhance Saudi/OPEC power, harm US national security

The oil industry argues that regulations are not needed because the U.S. is such a large producer of oil. This sentiment has permeated much of the political establishment as well, and helps explain the sudden indifference to the selling off of the strategic petroleum reserve (SPR) after decades of rigorous safeguarding of the stockpile. Washington seems to think that producing more oil insulates the country from supply risks.

But it doesn’t matter how much oil the U.S. produces, motorists are always going to be vulnerable to price swings so long as they burn a lot of fuel. Even recent data demonstrates this to be true. U.S. gasoline demand actually declined in the third quarter compared to a year earlier, a sharp drop off due to the run up in global crude oil prices. The fact that the U.S. was breaking oil production records did very little to insulate drivers from the price spike. It’s true that U.S. shale has contributed to lower global prices, but removing the most effective demand-side policy from the toolbox is really self-destructive. By Nick Cunningham, Oilprice.com

But look how Parker Drilling’s bonds, after the bankruptcy announcement, got manipulated up 24% in one minute at the close. Read…  Parker Drilling Bankruptcy Kicks off “Oil Bust 2”  
 

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  65 comments for “The U.S. Oil Industry’s Dirty Little Secret

  1. r2d2
    Dec 13, 2018 at 10:00 pm

    In this modern day and age, I’d be very surprised if the onboard computers that every car has couldn’t be adjusted with different settings in different states. Could probably tie it into a car’s GPS system an make it real time as you cross a state line.

    Thus, you could hear a couple in a car say simultaneously…
    “Hey, the engine power just dropped”
    and
    “Wow, I’ve never seen a sky that blue”

    • Dec 14, 2018 at 1:26 am

      These big differences in fuel economy are not just a matter of software.

      • ArcticChickens
        Dec 14, 2018 at 2:22 am

        Indeed. One example is cylinders – tolerances in the 10um range iirc are necessary for extreme efficiency – but expensive to fabricate! Contrast that with soviet engines that ran 100weight oil and had ridiculously large tolerances: cheap to build, but sucks down fluids (and sprays them out the exhaust!)

      • MCH
        Dec 14, 2018 at 11:25 pm

        as a matter of fact, I always wondered which consumer would not want better fuel economy. I understand that there are huge differences in capabilities. And while an efficient pickup still uses more gas than an efficient sedan, I would think it’s a no brainer that the consumer would want efficient period. Given this, you would think the competitive pressure would be sufficient for everyone to keep to relatively the same level of efficiency.

        I for one hope that someone eventually forces the rest of the country to adapt CA efficiency standards. It can do nothing but good. (yeah, in case you’re wondering, I’m shorting oil)

    • Prairies
      Dec 14, 2018 at 10:40 am

      Hard to swap physical exhaust or engine parts as you drive the car. Very hard, not as easy as Mad Max would make you believe.

      • Jessy S
        Dec 14, 2018 at 4:05 pm

        Not as easy to cut time into a small montage in real life. You could manage to watch Titanic twice followed by half of another showing in the amount of time it takes to switch engines (about 7-8 hours).

        • Prairies
          Dec 15, 2018 at 12:06 am

          still, 8 hrs for a swap in a scenerio where ” make it real time as you cross a state line”, isn’t very efficient.

  2. Former
    Dec 13, 2018 at 10:32 pm

    Marathon wants to sell more of it’s product, a shocker ;-)

    As someone looking at USA from the outsider eyes, lobbing (legalized bribery) is something that is in my opinion detrimental for the country.

    I think someone posted link here at wolfstreet few weeks ago about modified hybrid car, one tank is good for over 900 miles, fuel is used only for recharging the battery, each wheel has it’s own small electric engine… I love the idea and specs. If/when available I’m getting me one no mater what Marathon has to say ;-)

    • Jon Laughing
      Dec 13, 2018 at 11:36 pm

      I challenge you to a simple physics calculation. 1. Calculate the energy in one tank of gasoline. 2. Calculate the energy required to move the mass of one car over 900 miles, assuming a reasonable coefficient of friction and an engine that is say 90% efficient. 3. Inform us of the results. 4. If the value of 1. is greater than the value of 2. then I pledge $100,000 to your favorite charity.

      • Cam
        Dec 13, 2018 at 11:46 pm

        Come on, it’s not far fetched at all…

        At economy of 50 mpg you need 18 gallons of fuel to travel 900 miles. My current gas driven car gets this economy now, the fact its fuel tank is only 9 gallons just means a stop to fuel up due to the small tank. My older gas guzzler has an 18 gallon tank so it’s by no means impossible physically, you don’t even need electric.

      • Dec 14, 2018 at 1:31 am

        Jon Laughing,

        The math is pretty easy, really: A car that gets 50 mpg and has a 20 gallon tank can go 1,000 miles on one tank.

      • Dec 14, 2018 at 9:31 am

        The car in question was a 2006 Mini Cooper rebuilt as an electric/hybrid and was driven only by electric motors for wheels. The gas tank was tiny and only supplied fuel to a generator. The car could do 230 miles on a charge (lot depends on conditions) and then the generator kicked in. https://www.autoblog.com/2006/07/21/pml-s-mini-qed-boasts-640-in-wheel-electric-horsepower/

      • Philb
        Dec 18, 2018 at 2:52 am

        Peugeot 308 Estate Wagon equipped with a 1.5L BlueHDi diesel and a six-speed manual has a highway range of approximately 1100 miles. That is a 14 gallon tank getting 80 mph. That is from the Puegeot website, I also know first hand because I drove one around Italy for three weeks this summer.

        I’d love to get my hands on a real car. Not only does the US auto/petroleum industrial complex leave us with the lowest grade automobiles, we also have little choice but to purchase gasoline guzzlers and have little access to the high tech and super efficient diesels the rest of the world seems to be able to have. I guess you have to have a market for the gas somewhere. Also, in Europe, they are phasing out petrol cars for electric very quickly. I understand that within the next 10 years it will be difficult to buy a diesel. Maybe just much more expensive, But at any rate, the EU is serious about reducing carbon. One thing I don’t really understand the is oil industries need to pump it and burn it as fast as possible. It is supposed to be a finite resource after all. Not to mention that in addition to the CO2, oil terrible environmental pollutant that no doubt is responsible for at least some portion of the cancers you are likely to get. I also for the lives of the poor soul whose job it is to pump gas. In any form except when blended as gasoline, the chemical constituents in gas are highly regulated requiring special handling and personal protective equipment including a VOC capturing respirator. I’m not even sure that people who work at gas stations have to be OSHA hazwopper trained to work there. Insane.

    • Hmm-San
      Dec 14, 2018 at 12:30 am

      As someone from the USA, living outside of it for almost half a decade, regular (illegal) bribery isn’t better than “legalized bribery”: its just more opaque and harder to trace outside of hearsay and more susceptible to the political winds regarding enforcement. Something being illegal (or not) isn’t going to change whether it happens (or not), just will shift the incentives around for the actors involved.

      Anyways, 100 years from now, oil will be mostly used for plastics if we’re not already using hemp packaging for everything :P

    • IronForge
      Dec 14, 2018 at 12:48 am

      Try a Chevy Volt PHEV or Toyota Prius PHEV.

      The Volt operates like the way you described in your earliest post. If your daily commute is (mostly) within the Battery Range and you can charge overnight and/or at Work (when at a Mall, EV Parking are usually for those Charging, so make sure you charge when parking there – some give Tickets), your Gasoline Usage should be Minimized.

      The Prius’ Battery-Only Range didn’t go as far as the Volts; but I think You might get Lucky enough to stretch out the Mileage btwn Tank Fillings.

      One of the better deals in California are the Toyota Mirai and Honda Clarity Hydrogen Fuel Cell Vehicles. TM and HMC will foot the Fuel Bill for 3 Years, so if you have a 3-Year Lease, your Fuel Costs are Covered. ^_^

      • Paid Minion
        Dec 16, 2018 at 2:22 pm

        Guy I know bought a Volt. Was able to charge it at both ends of his 20+ mile commute.

        He burned four gallons of gas in the first 2000 miles.

        The Prius is an interim solution. IMO, all cars and trucks are going to look like the Volt (electrically and mechanically) 20 years from now.

        Chevy Volt = Future classic/collectible?

    • Kraig
      Dec 14, 2018 at 2:26 am

      “If/when available I’m getting me one no mater what Marathon has to say ”

      The basic thing has been available since 1979, since everyone is waiting rather than just building them, few have been built.

      https://keelynet.wordpress.com/2008/05/11/75mpg-hybrid-electric-car-powered-by-5hp-lawnmower-engine/amp/

    • Dec 14, 2018 at 9:24 am

      Hi Former: I posted that story a couple of weeks back. I’m surprised anyone noticed. Treehugger.com published an article back in 2006 about an engineering firm in England that rebuilt a Mini Cooper as an electric/hybrid with motors for wheels with a small generator once the battery needed juice. No brakes needed either because the electric wheels acted as their own brakes. A couple of years ago Porsche built a prototype with exactly the same idea. https://www.autoblog.com/2006/07/21/pml-s-mini-qed-boasts-640-in-wheel-electric-horsepower/

      • Former
        Dec 14, 2018 at 9:55 am

        Yes, thanks for sharing. I didn’t realize, project was from 2006.

    • JohnM
      Dec 16, 2018 at 4:45 am

      https://www.autocar.co.uk/car-review/toyota/prius/mpg

      62.5 MPG
      47 litre fuel tank
      Do the math….

  3. zoom ev
    Dec 13, 2018 at 11:50 pm

    Follow the money. Who in the Trump administration or someone with close ties profited from this.

    How about pruitt?

  4. David Horowitz
    Dec 14, 2018 at 12:18 am

    That the oil industry would lobby on behalf of reduced fuel economy standards isn’t a big surprise. But who has lobbied for a 50 mpg standard? We need that information to get a fair picture of the situation and to put the Trump Administration’s position in perspective. A major increase in complexity and cost is involved in getting modern-type vehicles up to a 50 mpg average with modern safety standards. You could get close to 50 mpg in the early 1980s with small, slow diesel cars, but such vehicles wouldn’t meet all the other federal standards today. And will all of the 10 speed transmissions and turbocharged 4 cylinder engines (for fuel efficiency) in modern vehicles have a long service life with little maintenance? Jury is still out on that question.

  5. R cohn
    Dec 14, 2018 at 12:27 am

    Gasoline approximates %50 of the volume of refined products from a barrel of crude. What nobody discusses is how production of these other products will be affected by less production of gasoline.
    Does that mean that the prices of these other refined products will have to rise , given a price of a barrel of crude oil?
    And while the amount of production of gasoline from a barrel of crude oil can be adjusted downwards to a small extent, what will physically happen to this excess gasoline that can not be sold .

    • Sarcastic Fringehead
      Dec 14, 2018 at 6:17 pm

      Depends on the crude. Heavy Venezuelan or Canadian oil yields more long-chain fuels like diesel & kerosene(jet fuel/heating oil). This can also result in big piles of petro coke, as on the Detroit waterfront (Koch bros.). Lighter grades from Saudi or Permian give more octane.

  6. lastdance
    Dec 14, 2018 at 1:17 am

    This is also the true reason behind VWs dieselgate. Somehow a Jetta with diesel engine that needs 4.5L/100km is less enviroment friendly than a Ram 1500 with a 5.7 Hemi engine that needs at least 13L/100km. Here in North America the car, petroleum and air traffic lobbies reign supreme.

    • fajensen
      Dec 14, 2018 at 2:02 am

      If you want to increase efficiency of a car engine, thermodynamics (Carnot) says that you must increase the temperature range of the combustion cycle. You do this with a turbo, intercooler, lean mixture. Easy.

      The problem is that the high temperature will make the particles from regular diesel combustion very small, which mean they are more reactive and get into the lungs better. Also nitrous oxides are produced which are a catalyst for smog and also toxic for the heart.

      Now you will need systems to control emission of these toxins.

      Instead of diesel, one can run on fuels like heptane, alkane, which contain oxygen so that the carbon is fully burned. One still need to deal with the NOx’s.

      Anyway, the less efficient “suction engine” with fuel injection in the carburettor does not run so hot so even though it use more fuel, the amount of toxins produced is less. Although it does emit more CO2 and a lot more unburned hydrocarbons, the latter making those glorious L.A. smogs of the 1980’s.

      It is a shame that conservatives these days are mostly about conservation of misery.

      • Prairies
        Dec 14, 2018 at 10:52 am

        The reason conservatives would rather a car making 5lt/100km over a truck with 13lt/100km isn’t because pardon my francais “Fuck the air” but because less consumption would lower the amount of demand for the product coming out of the ground. Use less product and you will require fewer pipelines, fewer wells, etc. The main goal is to use less. The liberal argument is to pollute less at the tail pipe, conservatives want to pollute less at the source of the product. The same outcome can be achieved in both cases, but one costs the consumer directly through expensive cars and taxation on fuel. The other costs the corporations with lower sales volume and lower demand – likely causing fuel prices to go up to cover losses.

      • California Bob
        Dec 14, 2018 at 1:02 pm

        “suction engine???”

        Do you mean ‘normally aspirated?’

        “fuel injection in the carburettor”

        Huh (demonstrating insufficient knowledge of internal combustion engine technology)??? Fuel injection and carburetion are mutually exclusive these days. Early fuel injection systems did inject fuel under pressure into the throttle body–not a carburetor–but almost all new cars are ‘port’ fuel injection–where fuel is injected behind the intake valve–or ‘direct’ injection–where fuel is injected directly into the cylinder (all diesel engines use port injection; and some newer gasoline engines use both, to overcome issues with DI alone).

        “one can run on fuels like heptane, alkane, which contain oxygen”

        No, they don’t (ethanol does).

        Anyway, what happened to the article; copyright issues (it’s still up on oilprice.com)?

        • California Bob
          Dec 14, 2018 at 1:03 pm

          Correction: Should be “all diesel engines use DIRECT injection”

        • Dec 14, 2018 at 1:10 pm

          California Bob and everyone,

          Please be easy on the commenters’ diction and grammar; many live in other countries and speak a native language other than English. If I recall correctly, fajensen said he is Scandinavian and lives in Scandinavia. So some of the terms are translated by him into English.

          “Suction” makes sense as a translated term because that’s what a “naturally aspirated” engine does, as opposed to an engine with a blower. Even an engine with a blower (turbo or supercharger) generates a vacuum and sucks in air most of the time when it runs under lower loads.

        • Dec 14, 2018 at 1:24 pm

          What do you mean: “Anyway, what happened to the article; copyright issues (it’s still up on oilprice.com)?”

        • California Bob
          Dec 14, 2018 at 4:54 pm

          The article didn’t show up for me earlier–but the comments did–even after a refresh. An ISP or browser issue, perhaps. I’m getting it now.

          My apologies to ‘fajensen’ for being, perhaps too harsh; I did look to see if s/he had a foreign-sounding moniker–I know lots of ‘Jensens’ here in the ‘States–and the bulk of the comment did not show any of the artifacts you get from computer translators, so I assumed a native English-speaker with limited knowledge of both ICE engines and chemistry but with an apparent knowledge of thermodynamics (beyond mine).

          A quick web search clearly shows heptane–an aliphatic hydrocarban–and alkanes–a class of aliphatic hydrocarbons–do not contain oxygen, either here or in Scandinavia (I DO know chemistry). This issue is personal to me, as the half-baked attempt to introduce oxygen into fuels, initially in the form of MTBE, has had significant detrimental effects (cancer) in California.

      • Lion
        Dec 14, 2018 at 7:50 pm

        The 1980’s were relatively clean air days to me when comparing to the Los Angeles air quality of the 1950’s and 1960’s, when visibility on a bad day would be less than one block.

        My concern is that if you back off on the Auto clean emission standards, then research and development will likely get backed off too. Though other nations will continue to advance.

        Of course, if corporations back off on research this should free up more funds for stock buybacks ?

  7. gRant
    Dec 14, 2018 at 5:40 am

    John D. Rockefeller did more to save the whales than Green Peace ever did and he wasn’t even trying (with a notable mention to Thomas Edison and Karl Benz/Bertha Ringer). This is market manipulation to undo manipulation, the cost of efficient is still passed onto the consumer either way through price, either through the cost of the vehicle or the pump. If Ford is allowed to build the car the consumer truly wants (not the one the government mandates) equilibrium can be found.

  8. Bobby Dale
    Dec 14, 2018 at 6:39 am

    California setting its own CAFE standards could only apply to vehicles sold in California, not the other states and D.C.
    Thus manufacturers would have no need to modify their models, simply keep track of vehicles sold within California and stop selling those which exceed the standards until enough of those meeting standards are sold.
    The state would then need to prevent residents from purchasing cars outside and registering them in California.

    • Dec 14, 2018 at 11:28 am

      Bobby Dale,

      Until 2014, there had been a separate “California emissions” standard. Over a dozen other states adopted these California emissions standards. But automakers hated having to build two versions of everything. So in 2014, the EPA adopted the California emissions standards as a national standard for the 2016 model year. This has simplified things for automakers.

      But here we’re talking about fuel efficiency standards, which is a much more difficult thing to achieve because fuel efficiency is impacted by the entire vehicle, from the engine to vehicle weight and even tires. It’s not just a few sensors, ancillary components, and software, but the entire vehicle. So, building two or more versions of everything to meet various fuel efficiency standards is practically impossible.

      • Bobby Dale
        Dec 14, 2018 at 12:44 pm

        Wolf,
        Your point is correct.
        Correct me if I am wrong, but are not CAFE standards an average of the fleet sold? Or are they a per vehicle standard?
        It follows that California only CAFE standards could only apply to vehicles sold within California, they can not dictate what is sold in other states, hence a manufacturer could easily limit the number of higher consumption vehicles sold within California while continuing to sell them in Arizona, Nevada and Oregon. I see this as a boon for car dealers in Nevada especially.
        If California really wants to limit gasoline consumption the most effective route is to raise fuel taxes, but the lessons of Emmanuel Macron in France will probably prevent direct taxation of this sort from passing.

        • Dec 14, 2018 at 1:21 pm

          An automaker doesn’t get to a high CAFE unless almost all vehicles it sells have a high fuel economy — since CAFE a high average for the fleet. For example, if the CAFE standard is 50 mpg, a manufacturer’s most popular vehicles would have to have a fuel economy that ranges from something line 40 mpg for pickups to 60 mpg for the smallest vehicles.

          Ford’s number one seller is the F-series. For Ford to get to a high CAFE, it needs to increase the fuel economy on its F-series, which it has been doing, btw. The F-series doesn’t have to get the CAFE standard, but it has to be fairly high so that less popular smaller vehicles can push the fleet average to the CAFE standard.

    • Dave Chapman
      Dec 17, 2018 at 4:18 pm

      Many moons ago, California set up its own (First in the Nation) emission laws. Porsche took one look at them and decided that building two versions of the 911 was totally not worth it. Result: Every Porsche sold in the US meets the air pollution standards of wherever is most strict (California).

      Using similar logic, a bunch of states made their local air quality regulations “Whatever California Says They Are”, which certainly eliminates the 50 Shades of Smog problem.

      It turns out that this is not really a problem.

  9. Dec 14, 2018 at 9:45 am

    It’s possible one of the biggest challenges to oil’s dominance was a back page article this week on the legalization of hemp farming. Hemp can easily replace plastics and will safely break down in environment. Packaging, synthetics, paper, livestock fodder, etc. etc. will be done by hemp and much cheaper than what it will replace. States with an oil industry will feel the pinch, same with a wood pulp industry, but farmers everywhere now have a new crop and the US is about to get new industries.

  10. Augusto
    Dec 14, 2018 at 10:29 am

    The oil and gas is one of America’s last true industries. It employs large numbers of Americans in real jobs and pays an enormous amount of taxes funding much good. It is also a bright light that attracts bugs. Every parasitic regulator is looking at how to take a chunk out of it. Every moralizing “environmentalist” wants its “dirty” money for the next crusading boondoggle. Then there are the politicians always nicking a little bit off here and a little more off there. Of course, the media likes nothing better than demonizing anything associated with oil and gas (including the industry pushing back now and then) their secular holiness assured (given the “media” is an dead husk of an industry held up by government and billionaires loose change) In some ways, it is amazing American oil and hasn’t been destroyed yet, as America’s elite loves nothing better to eat its own (coal, steel and oil come to mind). It is a truly a Golden Goose, and one of America’s last. How long before it becomes the next Dodo bird.

  11. KGC
    Dec 14, 2018 at 11:17 am

    There is no valid argument other than profit regarding why mileage on vehicles has not increased to a minimum 50 mpg for gasoline by now. Mileage increases were fairly common, and expected by consumers, through the 60’s and 70’s. After that they slowed considerably, if they increased at all. The 4 cylinder vehicle I purchased in 1987 actually had better mileage than the one that I replaced it with (same manufacturer and model). And the one I’m driving today (again same mfr & mdl) has less than a 2% increase over that. I cannot accept that, with all the other changes in technology, that we cannot increase MPG.

    Fuel prices hold consumers hostage, and they definitely have a greater impact on those on the lower end of the economic scale. Not just in the USA, but worldwide, which is why you see major social unrest when fuel prices change drastically.

  12. raxadian
    Dec 14, 2018 at 11:26 am

    Let’s remember this the next time they feel insulted by being called Robber Barons, shall we?

  13. Kasadour
    Dec 14, 2018 at 12:36 pm

    Short sighted policy ideas based on this:

    But oil refiners were never going to sit on the sidelines and let federal regulations cut into their sales.

    And there you have it.

    I don’t care so much about green policies as long as they work. Who are we kidding here? Oil is everything. Oil drives the economy. It’s a mistake to assume we don’t need restrictions on oil consumption and renewable alternatives because it’s documented that these wells deplete quickly and the ROI improvements on existing wells are mediocre at best. Do we really want to fall off that cliff?

  14. Ed Kennedy
    Dec 14, 2018 at 1:31 pm

    Question: Are light trucks, SUVs, and Crossovers (Small SUVs) included in the fuel economy mandate, or do they have a separate fuel economy requirement?
    I am starting to think that one of the reasons the US car companies are stopping making cars in the future is because of these fuel economy regulations.
    On the other hand, I believe some regulation is needed to keep Detroit from going back to making highly polluting, low economy junk.
    The hard part is getting the correct level of regulation.

  15. Yellowcake
    Dec 14, 2018 at 1:38 pm

    Imagine that – the NY Times writes a negative article about the oil industry. Moreover, it cites some faux “academic” to vilify a company because it wants you to “use more of its products” as if all companies don’t want people to use more of its products.

    If Elon Musk and his capital burning enterprises wanted customers to “use more of its products” would that be objectionable? And by using the coercive power of the state to enact laws that penalize the competition, would it then be acceptable?

    What shoddy journalism, shoddy validation, shoddy everything.

    And lastly, I am not defending the oil industry or attacking Musk, but this whole blog post along with the articles that it cites are garbage.

    Used to seeing more thought-provoking stuff Wolf!

    • Dec 14, 2018 at 2:44 pm

      You’re sitting on one side of the debate, and everything that is not on your side is “garbage.” Good thinking!

      • Hans
        Dec 14, 2018 at 8:47 pm

        Did you or the “author” of this fine piece
        of work ever think about the cost to consumers
        or the difficultly of achieving those new standards,
        Mr Richter?

        • Dec 15, 2018 at 1:29 am

          Hans,

          Wasting finite resources such as petroleum is not only irresponsible toward future generations, it’s also very expensive for current drivers. It’s a waste of money when your vehicle gets 18 mpg instead of 40 mpg.

          Just do the math. It’s not rocket science:

          — If you drive 30,000 miles a year, at 18 mpg, at $3.50 a gallon, you pay $5,833 a year for gasoline.
          — If you drive the same distance but get 40 mpg, at $3.50 a gallon, you pay $2,625 a year for gas.

          At 40 mpg, you save $3,208 a year. This is like tax-free income of $3,208 a year you can spend on other things or save and invest. If you do this for 20 years, it amounts to $64,000 that you saved, as a form of tax-free income. Think of what this would amount to today if you had invested it in an S&P 500 index fund!!

          Refiners are livid, because you just cut the revenues that they extract from you by 55%, or by $3,208 a year. That’s what efficiency does.

          So how much are you willing to pay in order to save $3,208 a year? This is a basic question of “return on investment.”

          If you expect to earn 7% tax free on your investment, you’d be willing to invest about $30,000 to obtain a tax-free cash flow of $3,208 a year for 15 years (life of vehicle). When you make business decisions, you do this type of calculation all the time, even if it is in the back of your mind, subconsciously.

          But the additional cost of a vehicle that gets 40 mpg is NOT $30,000. It’s really pretty minimal. That vehicle might actually cost less because it might be a car instead of an SUV. Ha, double-savings!

          Inefficiency is very expensive – and it’s useless. It’s a waste. Pushing old technologies, such as the ICE-powered vehicles, to higher efficiencies is a very productive activity.

          There are losers too, such as refiners and oil companies. But they’re adults. They can deal with declining demand. Their investors might think it sucks, but hey, sell the crap and buy something else.

          And since when do we as humans abandon an effort just because it is “difficult.” This is one of the nuttiest arguments I’ve heard from the petroleum lobby in a long time. We THRIVE on overcoming difficulties. Ask any oilman in Texas!

      • Joe Banks
        Dec 15, 2018 at 2:24 am

        Finally Wolf after all these months you come out with your true opinion: you do not like ICE vehicles. What took you so long? I’ve said it before, most of your writing/articles lack a thesis. “Pushing old technology, ICE powered vehicles.” I knew it. I’ve been honest here, you haven’t until now. You talk down to Yellowcake but your mind is made up. Yellowcake made some valid points. And who gives a damn if someone wants to, as you put it, “waste their money on old technologies.” Isn’t that what freedom is all about? What business is it of yours? I’m glad after all these months of reading your articles (which I do enjoy by the way) that you have made a stand. You know I’m all about freedom, I could care less whether it’s EV or ICE. I have a lot more to say.

        • OGshortFTW
          Dec 15, 2018 at 7:26 am

          Problem is that markets are bad at addressing tradgedy of the commons type issues , and gov intervention is not necessarily most efficient for mitigating agaisnt such. Either way, im happy to keep shorting o & g producers and their “assets” in this enviroment if they manage to catch a bid lol

        • Dec 15, 2018 at 11:27 am

          Your logic defies logic, and you quoted me out of context to distort what I said to fit your narrative, and so your conclusion is total BS. Let’s review:

          Your “quote” of what I said: “Pushing old technology, ICE powered vehicles.” Yes, ICE were invented in the 1800s. Hence “old technology.”

          But electric motors were invented before ICE, hence even older technology.

          What I actually said — if you’re even capable of reading a whole sentence — is this: “Pushing old technologies, such as the ICE-powered vehicles, to higher efficiencies is a very productive activity.”

          Note the last 8 words — “to higher efficiencies is a very productive activity.” That was the key, but you never got there.

    • Mike G
      Dec 14, 2018 at 6:05 pm

      Wanting consumers to use more of your product – fine.
      Pressuring the government to change legislation to make it happen – sleazy.
      Do you really not understand?

      • Atu
        Dec 15, 2018 at 3:39 pm

        This reply is to all of the above but Mike G’s comment makes a good starting point.

        Wolf is right on efficiency – it makes sense. Calculating the production cost of more efficient products and subtracting them from the increased efficiency is also working out efficiency.

        The problem is the following. We mostly all here agree on free market principles right? So in theory if deregulated, consumers would go for efficiency. That is to say you would not have to mandate efficiency standards, and you would not have to counter that regulation (and that is what oil producers are saying Mike G – deregulate).

        Unfortunately it is not that simple. If a consumer is offered a cheaper less efficient vehicle at purchase, possibly subsidised by industry and even via state, even though consumer might know eventually it will cost more, he or she will still buy it. Why? Because he ( or she ;-) ) makes an visible immediate saving and the future costs of fuel are spread over many years. We seem to live in a debt friendly society, and hence it makes sense to consumer to pay off in future, as he ( yes, or she) already calculates the efficiency in terms of immediate reward of doing that.

        Add to this that if all the autos on sale neglect efficiency, and there are not that many to choose from in reality within wanted category, within reach of test drive etc. etc., then consumer just has no choice but to run with the crowd, that is to say, what is offered that will be most efficient for the auto and oil industry as a whole, and not the consumer.

        That is the crux of the argument, and it has no obvious resolution for sensible but liberty minded people. Educate people and set trends is about the best I am able to think of, but you can be sure the average consumer will take advantage of every small edge that gratifies his ( yes yes and her) present circumstance, even if it costs everyone later, as they hope to be just that edge ahead of the rest when it comes to payment time.

        So what do ya do ???

  16. Dec 14, 2018 at 2:09 pm

    time to convert that 500HP muscle to CNG

  17. R Davis
    Dec 14, 2018 at 4:37 pm

    “a relic of a disproven narrative of resource scarcity”
    Oh, how sophisticated a way to say …
    It sounds great doesn’t it.
    We could be speaking Latin it sounds so profound.
    When Texas ran out of oil everyone one was in a state of shock.
    Never did they believe that the well would run dry.
    Nothing lasts forever, denial is futile in the face of inevitability.

  18. In the sticks
    Dec 14, 2018 at 6:05 pm

    As per the author’s quote. “The cleaning up of the electricity sector – more renewable energy, and a coal-to-gas switch – is happening on its own, due to pricing pressure from cheaper and cleaner sources of energy.”

    I live in the middle of these boondoggle solar and wind “clean sources of energy.” Literally triple the price of natural gas per kw produced. The dollars pumped into this sector would make Elon Musk blush. The are subsidized front to back. The day this country has no choice but to reckon with its frivolous and corrupted spending habits, those solar and wind farms will be gone as fast as det cord can drop them to be scrapped for the metal. An amazing and visual testament to the hypocrisy and moral despair of what used to be an alleged free market economy with a Congress that no longer serves the people whatsoever. (Sigh)
    Merry Christmas everyone.

  19. Joe Banks
    Dec 15, 2018 at 12:08 pm

    Wolf it’s too bad you took offense at my comments. The threads here on Wolf Street are generally thought provoking and i try to stay within the bounds of your guidelines. Sometimes we’ll all have to be ok to “agree to disagree.” I’m a fan, read every article by every author (for at least a year); aren’t I a part of your effort to build Wolf Street too? Keep up the good work, you won’t offend me, I see where your heart is.

  20. Dec 15, 2018 at 7:02 pm

    Joe Banks, read this carefully, don’t skim it, because you’re not getting the message:

    This was NOT about a disagreement, or whether or not to “agree to disagree.” This was about your twisting around what I’d said by misquoting a few words out of context to come to the wrongest possible conclusion that “you don’t like ICE vehicles,” and you used this BS conclusion to criticize my articles in a generic way: “most of your writing/articles lack a thesis.”

    So step by step:

    1. This is what you wrote in your comment (above):

    “Finally Wolf after all these months you come out with your true opinion: you do not like ICE vehicles. What took you so long? I’ve said it before, most of your writing/articles lack a thesis. “Pushing old technology, ICE powered vehicles.” I knew it. I’ve been honest here, you haven’t until now. You talk down to Yellowcake but your mind is made up. Yellowcake made some valid points. And who gives a damn if someone wants to, as you put it, “waste their money on old technologies.” Isn’t that what freedom is all about? What business is it of yours? I’m glad after all these months of reading your articles (which I do enjoy by the way) that you have made a stand. You know I’m all about freedom, I could care less whether it’s EV or ICE. I have a lot more to say.”

    2. You misquoted me as having said, “Pushing old technology, ICE powered vehicles.” This was your entire quote of what I’d said. It’s missing the most important parts that you conveniently left off.

    3. This misquote proved to you that:

    “Finally Wolf after all these months you come out with your true opinion: you do not like ICE vehicles. What took you so long?”

    4. But I actually said: “Pushing old technologies, such as the ICE-powered vehicles, to higher efficiencies is a very productive activity.” SEE THE DIFFERENCE???

    5. Then you used your misquote and your BS conclusion to criticize my articles, when you said:

    “I’ve said it before, most of your writing/articles lack a thesis.”

    Lesson: when you criticize me, don’t use a few words that you maliciously misquoted out of context to make your fake point. When you criticize me, make sure you got it straight.

    BTW, for your own edification, I’ve always been a gearhead. I turbocharged engines myself back in the day (including the one of my 280Z which I owned for something like 21 years). I’m amazed by how far ICE technology has already been pushed (compared to the 70s). I’m amazed at how clean and efficient and powerful these engines have become. And I ran a large Ford dealership for decade, selling thousands of new and used ICE vehicles every year.

  21. Top-GUN
    Dec 15, 2018 at 8:07 pm

    There are several or more items technical and otherwise left out of this discusdion.
    Vehicle weight,,, which has been driven up by federal dictates, such as crash survivability. Weight affects mileage.
    Consumers like big vehicles, which are going to be heavier even without federal fatwas..
    Electric vehicle performance and distance traveled per charge go down fast when you turn on, AC, wipers, headlights.. somehow that never gets mentioned..
    And on the green side not much talk about where all those nasty chemicals in batteries come from or where it goes…
    The libertarian in me says uncle has no business dictating mileage, crash worthiness or about a million other things…
    PS,,, loved my 1969 VW Karmen Ghia… somewhat maintenance heavy, but fun to drive,, not to mention the control one had with 60+ % of weight on rear wheels and manual trans…
    Still love my 1984 VW rabbit diesel 5spd,, a great design, maintenance is a breeze,,

  22. Cashboy
    Dec 16, 2018 at 10:17 pm

    Surely you have to look at the total cost of owning the vehicle, not just the cost of the fuel per mile.
    Cars are getting technically very complicated (some due to the emission regulations) and repairing them after the warranty is expensive. You see that catalyst converters (expensive) have to be replaced, there are issues with DPF (Diesel Particle Filters).
    You will be reluctant to buy a used BMW with 100,000 miles on it knowing that the catalyic converter will need to be changed that will cost you $2,000. This means that the second hand value of current new vehicles in the future are going to crash. This is going to effect the solvency of leasing companies as the monthly charge was based on the cost less realisable value of the vehicle.
    It will be the same with EVs because batteries disintegrate over a period of time ( look at batteries in mobile phones now) and of course there will be a disposal cost as well (if we are “protecting the environment”).
    Do the calculation of the cost of the vehicle per mile and often this is more than the cost per mile of the fuel. Ok; you are getting free electric from some of the electric car manufacturers at the moment but how long will that last, or that will have to be added to the cost of purchase of the vehicle.
    I am in the UK at the moment and it is working out much cheaper to buy a 14 year old BMW for £1,000 (US$1250) that will not have catalyst to replace, no ECU and software problems (simpler) and for me to drive it for 2 years and sell it for spares for £100 (US$125) than to lease or buy new on finance.
    The UK government are now trying to stop people from doing this by charging higher annual road tax on these cars and an emissions charge of US$13 per day for entering the London zone.
    In my opinion this has more to do with tax for the government directly from the car drivers, corporations able to keep manufacturing and selling cars than anything else.

  23. Aussie
    Dec 17, 2018 at 1:05 am

    They can shove their petrol, their diesel, and their electric vehicles with a battery replacement cost of $5-10 thousand dollars, and that’s if they don’t burst into flames, let alone waiting for a recharge, I will keep my push bike and keep using the public transport. Yawn!

    • Cashboy
      Dec 17, 2018 at 11:21 am

      I live 50:50 in UK and Thailand. I just bought a new Toyota Hilux Pickup 2.4 Diesel Turbo (US$25,000) on the basis that it should be reliable and you can still open the bonnet (hood for you Americans) and see where everything is and everything is accessable for normal tools. It should last 20 years if maintained so last until the end of my driving days.

  24. R Davis
    Dec 18, 2018 at 1:12 am

    “With oil scarcity no longer a concern.”

    For Whom ??
    Is the question to ask – isn’t it.
    Globally – oil reserves are drying up – period.
    So – is this denial a resistance or a blatant refusal to accept reality ??
    Or is it EVASION of some sort …
    A deviant ploy to avoid costs incurred with emissions reduction ??
    The mindset being “for as long as the oil lasts, what’s left of it, we need to be squeezing the maximum profits possible from the enterprise” !!

    This waste & waste again mentality is the filth habit that has taken planet earth to the doorsteps of END TIME.

    Happy Holidays People !!

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