The Corn and Oil Lobbies Should Forget EVs, Focus on Airlines

Source: By David Fickling, Bloomberg • Posted: Monday, February 12, 2024

Fossil and biofuels have lost the battle for passenger cars. Carving out a place in aviation would be smart.

Looking to the skies.
Looking to the skies. Photographer: Chalabala/iStockphoto/Getty Images

Countries have no permanent friends or enemies, only interests. It’s not so different with lobby groups.

Farmers producing renewable fuel and oil companies digging up fossil petroleum might seem natural enemies, but both groups will suffer if electric vehicles keep edging out conventional cars that burn their main products. It’s no surprise, then, that they’re burying decades of enmity to take on EVs while the sector is looking weak.

The National Corn Growers Association and the American Petroleum Institute have been shoulder to shoulder in supporting legislation that would lift a seasonal curb on blending 15% renewable ethanol into gasoline, Bloomberg News reported last week. The corn growers’ group separately wrote to the White House, saying President Joe Biden’s support for EVs is “short-sighted” and would make it harder to reduce emissions.

The Oldest Fuel

The price of ethanol in the US closely tracks that of gasoline

Source: Bloomberg Note: Ethanol price has been multiplied by 1.5 to account for its lower energy content.

That tentative alliance is quite a turnaround. Every gallon of biofuel sold by corn growers, after all, is nearly a gallon of gasoline that oil companies can’t sell. The two industries have been at loggerheads since the 1930s, when Henry Ford predicted that ethanol would be the road fuel of the future due to declining US oil production and an agricultural surplus caused by motorization killing off fodder farms. Just a few years ago, the American Petroleum Institute was warning that the predominant E10 standard, which contains 10% ethanol, was damaging engines, voiding car warranties, and raising costs for consumers.

Like squabbling Game of Thrones families uniting against the greater threat of ice monsters from the north, the two lobbies recognize the current fight as more existential. Ethanol was never going to destroy more than a fraction of oil demand beyond the roughly 1.4 million barrels that gets blended into US pump fuel each year. Electric vehicles, however, are a threat to the entire market for road fuel, a 45 million barrel-a-day global business.

The moment is opportune for making a kill. Sales of EVs are still growing at 40% a year in the US, but demand appears to be hitting a soft patch, with growth rates slowing, cars taking longer to be sold, and automakers outside China reining in their transition plans. Even the impregnable Tesla Inc. is showing cracks; the stock has fallen 24% so far this year. Federal tax credits for EVs are already being scaled back, and those that remain are some of the most likely to go in the event of a Trump victory in November. The fast-falling cost of EVs means they’re less needed nowadays, in any case.

Planes, Trains and Automobiles

The US car fleet and the global aircraft fleet consume about the same amount of oil

Source: Energy Institute Statistical Review

An agro-petro alliance could be dangerously potent, politically. It would bring together rural voters and energy companies — and even the automotive sector itself, in the unlikely event that carmakers junk their transition plans altogether. The combined lobbying spending of those three sectors in Washington would exceed even that of the pharmaceuticals industry. China’s rapid electrification of its road fleet and the growing availability of good value, innovative Chinese EVs on the international market can even be presented as a plot by a geopolitical rival to undermine local industries — a line that appears to be playing well in Europe.

The compact could work in other important auto markets, too. In Brazil, decades of promoting vehicles powered by locally-grown sugarcane mean that EVs barely exist, with a sales share of just 0.4% in 2022. A similar pattern is playing out in India and Indonesia, fast-growing emerging markets where government backing for biofuels is lavish and rising, while support for electrification languishes.

There must be a way out of this if net zero plans are to be kept on track. And the best solution is to lean into the decarbonization of another transport mode. Biofuels have little value in the future of light vehicles now that EVs are taking off — but they can still play a role in the skies.

Flying Low

Most sustainable aviation fuels offer only minor emissions savings to kerosene

Source: International Civil Aviation Organization Note: Figures are in grams of CO2-equivalent per megajoule

The potential of sustainable aviation fuel to shift the industry toward zero emissions has been vastly overhyped. Most technologies involve so many crop inputs and processing steps that their climate advantages relative to conventional jet fuel are marginal. Still, such incremental changes will be one of the few ways to reduce emissions from intercontinental flights for decades to come.

One of the biggest problems with that shift is precisely that the world’s farms can’t produce enough biofuels to fill jet tanks — but the job would be a lot easier if they weren’t fulfilling pointless blending mandates for cars. The US car fleet and the global aircraft fleet consume about the same amount of petroleum, at about 8 million barrels a day in normal times.

That offers a way out of this lobbying dilemma. Just last month, the US opened its first plant for producing sustainable aviation fuel from ethanol. More and more will follow. The far more fruitful collaboration between the oil industry and agribusiness will come from accepting they’ve lost the battle for passenger cars, and trying to carve out a place together in the skies.

To contact the author of this story:
David Fickling at dfickling@bloomberg.net

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