Unless you’re Fred Flinstone, your vehicle is probably powered by electricity, gasoline, or some mix of both. Where that energy comes from matters, either because you care about the cost or because you care about the larger environmental impacts (or both). If you live in these here United States then congrats, we’re finally energy-independent again.
Last night was the State of the Union, and it was conspicuous both for who was there (UAW President Shawn Fain) and for what wasn’t mentioned much (electric cars). Weird! I was kind of hoping we’d get a Year of the Hybrid shoutout; oh well.
With America finding energy independence and electric vehicles coming, eventually, it’s no surprise that Saudi Aramco and Adnoc are looking into ways to extract lithium from the brine in their oilfields. And if that doesn’t work, I guess they can try to mine spice.
And, finally, there was a bunch of Rivian news yesterday, but the most interesting to me was that the company is going to pause the building of its Georgia plant.
America Continues To Be A Net Exporter, China And Europe Not So Much
The emergence of the United States economy in the 20th century is no great historical accident. Few places on earth still held the promise of fertile land, relative security via geographic features, and a lot of easily accessible petroleum.
Guess what? There’s still a bunch of oil and natural gas here, but it became popular in the second half of the 20th century to buy the energy we needed from other places. An entire economy sprung up not only to import, ship, and store that energy but also to make money betting on futures contracts and other derivatives.
And then a few important things happened. For one, in the early 2000s oil prices shot up, and it reinvigorated domestic production (and production in Canada). At the same time, automakers began looking for an edge in fuel economy for both regulatory and market reasons. At that point, there was no looking back, but the invasion of Ukraine by Russia, itself a net exporter of energy, seems to have accelerated the restoration of America’s energy crown (the invasion also had lots of people who were speculating on energy prices feeling a bit uncertain, which may have the interesting side effect of at least temporarily stabilizing energy prices as those traders play it a little safer).
I mention this because megabank J.P. Morgan has its 14th annual energy report out, and there are pages and pages of interesting facts, but here’s what’s got me going this morning:
The US has achieved US energy independence for the first time in 40 years while Europe and China compete for global energy resources.
Props to CNBC’s Carl Quintanilla, who pointed this out last night.
So what does this mean?
Energy economist and occasionally extra person Phillip K Verleger has said it’s possible oil could contract to as little as $40 a barrel by 2030 and makes the point that oil is the least interesting part of the energy market:
Most who follow oil remain stuck in the past when those not in the petroleum business considered oil to be important. Markets have moved beyond oil. While oil futures were once a key financial instrument for speculation, today they comprise an investment backwater. Cryptocurrencies and “Magnificent 7” shares have replaced them as the vehicle of choice for speculation.
This has serious implications for the speed of vehicle electrification and the goal of significantly reducing emissions, as J.P. Morgan’s Michael Cembalest points out in his report:
US EV sales are now ~10% when including BEVs and PHEVs8 , but they’re just 1.5% of the car fleet and even less as a share of the Class 8 truck fleet; it takes time to change the fleet when vehicles last for 12 years or more. More states are following California’s lead to phase out internal combustion engine cars; states comprising one third of the existing car fleet plan to do so. EV capital commitments by manufacturers also suggest that the future of road vehicle transport is electric, but I wonder how long it will take. BNEF estimates that the US fleet will be 50% EVs by 2037, but that requires accelerated adoption from current levels.
I wonder what BNEF would say about the following: US EV inventories on dealer lots reached an all-time high at 114 days in December 2023, double the figure from the prior year (these figures exclude Tesla and Rivian which sell direct to consumers). Ford and GM are cutting back on EV production, GM and Honda abandoned a plan to build lower-priced EVs, and a consortium of 4,000 auto dealers asked Biden to “tap the brakes” on EV mandates. In other words, Electravision EV forecasts are very optimistic and could take a LONG time.
Here’s the EV Forecast per BloombergNEF projections, btw:
Maybe. For all the chatter about slowing EV adoption, February’s limited sales numbers (Tesla, GM and some others only report quarterly) show that some automakers are still reporting strong EV sales.
President Biden Didn’t Talk About EVs
You can see the full transcript of President Biden’s State of the Union here, but if you didn’t watch it and don’t feel like reading it, there were about as many references to Hitler as there were to electric vehicles.
Here it is:
I’m taking the most significant action on climate ever in the history of the world.
I am cutting our carbon emissions in half by 2030.
Creating tens of thousands of clean-energy jobs, like the IBEW workers building and installing 500,000 electric vehicle charging stations.
And even that was in the context of union jobs. There was a lot of talking about union jobs:
Here tonight is UAW President, Shawn Fain, a great friend, and a great labor leader.
And Dawn Simms, a third generation UAW worker in Belvidere.
Shawn, I was proud to be the first President in American history to walk a picket line.
And today Dawn has a job in her hometown providing stability for her family and pride and dignity.
Showing once again, Wall Street didn’t build this country!
The middle class built this country! And unions built the middle class!
When Americans get knocked down, we get back up!
If you didn’t watch it, just assume he sang it to the tune of Tubthumping. It’s way better that way.
if you look at this as a campaign speech, and this was a campaign speech, then union labor + more jobs will get more airtime than EVs, which makes sense.
Brine, Baby, Brine
Will we end up using more batteries with LFP chemistry or NCM chemistry? I don’t know. What I do know is that whatever the specific anode chemistry, electric cars need a lot of lithium. And graphite. And other stuff. But there’s a lot of lithium required.
The good news, sort of, is that lithium isn’t hard to find. In fact, the national oil companies of both the UAE (ADNOC) and Saudi Arabia (Aramco) are working hard to try and utilize the brine from oilfields to extract lithium.
This exclusive report comes from Reuters, who reports that sources are saying the companies are working on direct lithium extraction utilizing oil fields:
An issue with extracting lithium from brine is that concentration levels can be very low, making already uncertain economics less favourable.
One of the people said Aramco was working on using new filtration technology that seeks to solve the issue of concentration, while another person said Adnoc was also addressing that.
Saudi Arabia’s oil wealth means it can afford to take a financial risk and its diversification plans include establishing itself as a hub for EVs to make use of whatever lithium it produces.
A company in the country is also working on extracting lithium from seawater, which is something Saudi Arabia has a decent amount of as well.
Why Rivian Is Slowing Down In Georgia
We spent a lot of time talking about the cool Rivian R2 electric vehicle and the future, even cooler Rivian R3 and Rivian R3X. The vehicles were interesting, but listening to the livestream I was struck by CEO RJ Scaringe saying that, in order to save money and speed up production, it would start building the vehicles in Rivian’s Normal, Illinois factory.
Huh.
Rivian has already started prepping a facility outside of Atlanta, Georgia but hasn’t officially broken ground. This makes a lot of sense in the short-term as we are no longer in the ZIRP (zero interest rate policy) era and cash is hard to come by, especially for electric automakers like Rivian.
For Rivian, which is burning through billions of dollars in cash, the pivot to its existing plant for the R2 makes sense, an industry analyst said. Rivian is also struggling with soft EV demand in the U.S. market.
“With the need to get another product onto the streets, it makes perfect sense to utilize some of that excess capacity to introduce the R2 earlier,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions.
Eventually, Fiorani said, Rivian will need the Georgia plant to reach the scale it needs for its more affordable models.
“If the R2 is to be a profitable high-volume model, it will take the dedicated plant in Georgia to get their costs down and production efficiency up to necessary levels,” Fiorani said.
The politics of this are interesting as the current Georgia Governor, Brian Kemp, has made the Rivian plant a big deal as it was likely to be the second biggest economic development project in the state’s history. It’ll maybe still happen, just not as soon as expected.
What I’m Listening To While Writing TMD
Most of the Super Bowl wasn’t that interesting this year and just made me more excited about baseball season returning. One of the highlights was, for some reason, Kacey Musgraves released a song where she talked about giving up weed and I guess people also figured out she was single again. As a middle-aged married dad who is not a weed dealer only the new song part of it was relevant to me, but good for her I suppose? I do love Kacey Musgraves.
The Big Question
Do you think about energy prices when buying a car? Are you worried about gas prices going up? What about electricity?
Top photo: ExxonMobil
As far as electric vs gas prices go in the long run, I think electric’s a much safer bet. Demand-shifting plus household solar+storage kind of put a cap on how high your electric prices will be, especially for charging. Long-term those should get cheaper, though places with more privatized electric utilities like CA and TX may see some shenanigans in the medium term. Solar, wind, and nuclear aren’t running out of fuel any time soon. Technology’s come a long ways for oil extraction, but over the long term the price will still inevitably rise. If nothing else, really low gas prices compared to electricity mean you can just burn gasoline to turn it into electricity. The other way around’s technically possible, but a lot more involved and less efficient.
I own a small pest control company that runs 3 company vehicles, so I think about fuel costs a lot. I used to drive a Chevy Colorado that got a whopping 19mpg average, even with the 4 cylinder. I replaced it with a Chevy Bolt and it was one of the best decisions I ever made. I save several thousand dollars a year on gas and oil changes
I got a 2nd Gen prius for the second car and I like that it gets 45mpg on average
I cheaped out for the third car and got a Chevy Sonic, assuming it would be very fuel efficient. After being spoiled by the Bolt and Prius, the 26mpg average in the Sonic seems downright wasteful. I’ll eventually replace it with a Prius
I drive a 2015 Honda Fit EX. I’m not worried about gas prices.
My main concern was (is) to have a car that’s responsible, but still practical and fun. At an average of 35 mpg I’m very happy with my choice.
I plan on keeping the car for many years to keep its environmental impact as low as possible…and because I love it.
I think about gas and electricity prices a lot. Being in PG&E territory we pay much more for electricity than most people. Being in California we pay much more for gas than most people. And Diesel. Diesel here is even pricier than gas.
I keep a logbook so I record each fillup. That helps me keep track of my car’s MPG. If I see a drop I check the tires. That’s usually it.
I combine trips as much as I can to save time and fuel. I drive the speed limit or a bit below and get better than my car’s EPA MPG ratings for it. I use my bicycle when possible for short, light errands. Also for pleasure rides. Its been quite a while since I drove strictly for fun. Traffic makes that hard anyway.
I use fueleconomy.gov a lot whenever I kick around the idea of a different car. Plugging in what I pay for gas and electricity on various PHEVs shows that around here electricity isn’t necessarily cheaper than gas. Even so if I were to get a newer car I’d definitely prioritize fuel economy but lowest overall cost of ownership and overall safety and utility are what get my dollar. When I buy tires I prioritize fuel-efficiency, longevity and noise over performance.
I’ve always preferred to own cars that were reasonably fuel efficient. My GTI and CC could get 30 if you were careful on the highway, and low 20s in town. So not bad. When I bought my Sportwagen TDI, we were only one month into the pandemic and I assumed, at some point, I’d be commuting again, so I was definitely interested in the fuel economy. That day never came, and I’ve worked from home since. That said, getting 40+ on the highway and 30s in town has been nice, even with diesel prices what they are I’m saving money over the aforementioned GTI and CC, as they both took premium. I make almost monthly trips to rural KY to visit grandparents and bring able to do it all on one tank is nice. On one particularly efficient road trip, I could have pushed it to almost 600 miles on a tank.
“The emergence of the United States economy in the 20th century is no great historical accident.”
Well, there’s the matter of the US not having its economy and industrial capacity bombed to near extinction in WWII.
I don’t know that I think about energy prices directly, but I do think in terms of waste, at least in terms of my DD. I daily drove a Mini Cooper for 12 years. After about 4 of those years, I ended up with a used pickup because while a great commuter car for someone living alone, I was still a homeowner with some need to move large objects occasionally in a place with notable snowfall. So between storms and projects, having the 2nd vehicle made sense, but then there’s insurance and upkeep on two vehicles vs. one.
Circumstances are different now, I have one highly irrational car, so I keep thinking in terms of what makes the most sense in terms of the DD. The Mini is long gone. The current DD is great on the highway, but most of my trips are fairly short and it can be thirsty. As such, I ponder replacing. There’s nothing wrong with the current two car lineup. I’m not needing to borrow or rent something. One car I can take out and get the joy of driving. The other is more fun that people think and does its job admirably, just gets less than 25 mpg in town.
Why not just get a cheap utility trailer for when you need an open bed?
Now? As I said, circumstances are different now, there’s no need.
Then? Did you miss the part about notable snowfall? Snow tires don’t change the ground clearance on a Mini. Also, while you technically could tow a small trailer with a Mini, I can’t say it’s necessarily a good idea. Plus there was also the issue with securely storing such a thing. I most certainly did not have that at the old place.
Do they not clear the snow off the roads? I’m in the snow belt in Ohio and, sure, you couldn’t trailer during an active snow storm, but give it a day for the salt to melt and it would be fine
Or are you *north* north?
I was in Colorado at that time. My county just decided they were no longer going to plow residential roads at all, unless it was like over 10″ or more. So basically, yes, they did not clear the snow off of the roads. So for the sake of continued employment, I definitely needed something that could handle more than a few inches.
I see
I think about fuel costs an unfortunate amount when buying a car, especially since I’ve been spoiled by my 2nd-gen Prius. It’s hard for me to buy anything that gets sub-30mpg highway, since most of my recreational driving is longer trips where fuel is the main cost.
Luckily my 23-25mpg Saabaru, and supercharged Miata (which still gets high 20s, but needs 91 octane) were bought (or modified to their current form) after I got so stingy about MPG, and my Alto Works is hovering right around that threshold, so I have no problem driving it wherever. My 335d does get 35+mph which is nice, but the high price of diesel makes driving it less appealing, plus it’s annoyingly broken thanks to an incompetent tow company, so if or when I drive it again is an unknown.
Man, that Prius does make you loathe spending more on gas doesn’t it?
I’m almost ready to accept that I don’t need to drive 22k miles a year anymore. I bought the Prius for commuting, and I don’t do it as much anymore. So I have considered getting a more fun vehicle to daily that doesn’t get 50 mpg. But then I see 28 mpg (never mind premium gas) and just see money being thrown away.
Plus in my state, I avoid an annual emissions inspection with the Prius. Kind of like that. One less hassle.
I don’t think about fuel costs that much because it’s mostly a symptom of getting a vehicle that does the job I need it to do. I drive about 13,000 miles a year and my wife drives less than 5,000 a year. Now, if I were to switch to a Hummer H2 as a commuter, I might change my tune, but we tend to stick to the most efficient vehicles that do what is needed.