By Gaurav Kulkarni
The ushering in of the Biden Administration has been a decisive and interesting turning point in American politics. Following a contentious election in November which included months of misinformation, partisan politics, and controversy, the United States is looking ahead to hopefully solve some of the more pressing issues that have been plaguing the country. While there are much more important matters at stake right now, a contentious conversation is starting to emerge over the future of energy production in the United States. A couple weeks after the Inauguration of President Biden, a bold promise was made by the new President that going forward, all Federal, State, Local, and Tribal fleets would transition to clean zero emission vehicles. This is part of a larger climate agenda that aims to have the US be a carbon free producer by 2035 and have net zero carbon emission by 2050 as well as taking a more involved role in the Paris Climate Accords and creating a National Climate Task Force among a plethora of other initiatives. This sort of symbolic message will hopefully persuade more manufacturers to go down the path of clean electric vehicle production. However, it’s hard to see what kind of effect this will truly have. There are currently over 300 million vehicles in the USA compared to the minuscule 600,000 vehicles that will actually be affected by this policy. Additionally a lot of the standards Biden has in place are stringent and are not yet been fulfilled by any of the current electric car manufacturers in the USA. These requirements include standards such as having 50% of the parts manufactured domestically; as well as requirements that the labor used is unionized. A lot of companies currently cannot comply with these standards and will most likely take a while. Electric cars are also more expensive than their oil counterparts and on average cost 19,000 dollars more.
Even so, some players in the US energy market are not very content with Biden’s proposals and what that may mean for their future. Oil companies have been quick to sound the alarms on these new proposals, citing their dislike for federal mandates and wanting to give choices to consumers. Oil producers also raise concern for smaller oil and gas refineries which won’t have the ability to adhere to Biden’s new standards
In response to these new proposals, representatives from the American Fuel and Petrochemical Manufacturers group began to reach out to farmers, specifically biofuel producers. These biofuel producers are affected by these proposed policies as well. Both of these industries produce fuel that are used in combustion engines: the engines used in motor vehicles. These are parts that could possibly be phased out and made primitive under Biden’s plan which would negatively harm these producers as their success is dependent on these non electric cars sticking around . These meetings have mostly been in order to find a united front to combat these policies and to find sustainable alternatives. There has been some controversy within this peculiar grouping of industries. Biofuel and Oil producers have historically been clear competitors in the energy market; so this sort of alliance could be a sign of desperation; and a sobering understanding of the dynamic that could unfold over the next decade in relation to renewable energy. Biofuel groups such as The National Corn Growers Association, however, have been rather lukewarm to these advances for a variety of reasons. These groups don’t want to oppose the president and have been understandably skeptical of a huge competitor suddenly becoming so friendly and question their underlying agenda in this matter. Biofuel Groups have stated that they don’t want to be played by the Oil Industry and are taking a more cooperative approach to these initiatives rather than a combative one. An approach perhaps Oil producers could learn from. However, one thing is certain, It’s clear to see that the future of oil, which had already been a dwindling industry, is beginning to become even more precarious as the US moves forward into the decade.
This brings up an interesting dynamic because the oil and gas industry is no stranger to adversity; in 2019 they spent over $125 million on lobbying. Additionally, More than 67% of those currently working at Oil & Gas lobbying firms were previously government workers themselves. President Biden is no stranger to lobbying either. Biden himself has still taken more than $1 million in money from Oil & Gas lobbyists. This election, however, has been different from most. With the innumerable controversies surrounding the past president in relation to election fraud, money laundering, and tax evasion his predecessor may be looking to make sure he can keep a clean image. Biden seems to be set on a path of trying his best to right the wrongs of the past president, or at least not come close to making mistakes of the same magnitude. It is too early to tell right now whether this sort of talk is just lip service from the president or an energy initiative that could change the course of the country. While the oil industry may be quick to sound the alarms on this, this is not a proposal that will happen overnight. Oil companies need not worry as it will be a while before electric cars even start to become the norm.
Looking forward, there may need to be some sort of market analysis done. Oil companies may need to diversify their sources of revenue, look to different industries, maybe getting into alternate sources of fuel or look into investing in different types of products all together, because one thing is clear competition is on the horizon. Companies focused on dying industries must understand that playing this game is not going to work out for them long term. No matter how much oil lobbyists and interest groups try to get in the way of progress; the US is moving forward with renewable energy initiatives. More and more legislation such as this executive action are bound to come and hit these companies even harder.. Rather than trying to fight change which has never and will never work, companies that rely on dying industries should start to accept these societal changes and work towards a plan to stay competitive in that space in an innovative way rather than trying to push back the clock. □
- Image source
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