Does recent reporting at Bloomberg and the Wall Street Journal, among other major media outlets, indicate that, after 2021’s huge rollout and focus on the “energy transition” narrative, and all the massive rises in energy costs of all kinds that materialized largely as a result, 2022 might become a year during which a new energy realism begins to take hold? We can only hope.
In a recent story titled “Europe Sleepwalked Into an Energy Crisis That Could Last Years,” Bloomberg, whose editorial slant puts it at the forefront of advocates for this energy transition to renewables, admits that Europe’s current crisis was “years in the making” because governments there engaged in massive virtue signaling initiatives that involved “shutting down coal-fired electricity plants and increasing its reliance on renewables.”
At the Wall Street Journal, where the news reporting advocacy often conflicts with positions staked out on the publication’s editorial page, it comes as no surprise that a new opinion piece this past week by Holman Jenkins is highly critical of Europe’s “crazy” climate politics. But the piece, titled “Europe’s Energy Crisis Goes Global,” also references a new study by commodities research firm CMT, very much an advocate of man-caused climate change theory. That study argues that 2022 will be a year in which real events on the ground, inevitable impacts from this rush to prematurely destroy energy sources we negatively call “fossil fuels” and nuclear, and to try to replace them with renewable sources that are not capable of filling the bill, will cause a new energy realism to take hold not just in the U.S. and Europe, but globally.
Again, we can only hope.
Jenkins quotes CMT as stating that electric vehicles that virtue-signaling politicians like Joe Biden are moving to subsidize with trillions of newly-printed dollars, Euros and other currencies around the world “will not significantly reduce carbon dioxide output, only shift its location…There are real constrains to moving toward clean energy industries.” Predictably, CMT cites the reluctance of voters and consumers to keep footing the massive bills for all it as perhaps the single major constraint.
But EVs face a far more immovable constraint to their ultimate ability to displace a significant portion of internal combustion engine (ICE) cars than mere voter and consumer attitudes. That constraint comes in the form of the eternal, immutable laws of supply and demand.
I spent a good deal of time during 2021 researching, interviewing key players and writing about the challenges the electric vehicles (EVs) industry is likely to face in the coming years related to supply of an array of critical minerals that are essential to their manufacture. With the international energy agency projecting demand for lithium, antimony, graphite and other key minerals to rise by as much as 900% by 2030 and 4,000% by 2040, and the supply chains for them all mostly in control of the Chinese government, questions about the future viability of EVs to meet aggressive targets being set by governments around the world were bound to arise.
While so many American consumers complained about a 50% or so increase in gasoline prices during 2021, they didn’t really much notice the fact that the price for lithium, without which no lithium-ion battery or EV can be manufactured, skyrocketed by a surreal 477% over that same period of time. The reason for this lack of consumer notice is simple: 98% of the cars on American roads today are ICEs; thus, any rise in the price for gasoline hits most consumers in their pocketbooks.
Despite all the recent hype in the media as part of the massive “energy transition” narrative push, EVs remain an expensive, highly-subsidized boutique product purchased mainly by the wealthier class. If the price of that F150 Lightning might have to go up by a few thousand dollars due to the rising price of lithium, no biggie: President Biden has plans to implement another new, $12,500 per unit subsidy in his “Build Back Better” green new deal funding bill.
But wait: That bill is again stalled in the Senate despite Majority Leader Chuck Schumer’s current plan to force it to a vote on Jan. 17. The latest news there is that powerful West Virginia Sen. Joe Manchin not only announced right before Christmas that he cannot vote for the BBB bill, but he also took the formal step of pulling the $1.8 trillion topline compromise he had offered in early December off the table entirely. Both Manchin and Arizona Sen. Kyrsten Sinema have recently reiterated their intent to vote against the bill in the 50/50 senate if it comes up for a vote.
So, prices for lithium and other critical mineral supplies going up, subsidies not going up, EVs become more costly in the actual marketplace and will lose the ability to be forced into that market unless some other aspect of the equation changes. You can be sure that the Biden administration is already working on non-legislative (and thus, constitutionally questionable) ways to try to force those changes.
The problem there, though, will be this: The reason why any commodity’s price rises at such an exponential pace as lithium’s did last year is that it is in short supply, and the market does not see a quick fix to that supply issue near on the horizon. This is an inevitable outcome that I warned about in these columns repeatedly during 2021, and the Biden administration has done little to really address major supply chain problems despite promises made for a “whole of government” approach to doing so announced last summer.
Tesla, led by the visionary leader Elon Musk, has avoided the worst of this current issue by having largely secured its supply chains for its minerals and battery needs years in advance. GM, Ford and other not-so-visionary companies have made themselves more hostage to the always-risky federal rent-seeking and crony-capitalism schemes enabled by friendly politicians, and thus will see their EV fortunes ebb and flow accordingly. They are certainly ebbing on Capitol Hill right now.
In the meantime, all of these market realities and many more stand in stark conflict to the stupidly-aggressive “targets” for transitioning to renewables and EVs set by political regimes in Europe and at all levels of government in the U.S. If governments insist upon holding firm to these unachievable targets, then the inevitable result will be the enforcement of massive hardships and deprivations on their constituents. Massive hardships and deprivations forced by governments invariably result in the kind of social unrest we are already seeing in various hotspots around Europe and in Kazakhstan today.
These are inevitable outcomes, not guesses. The energy media seems to be waking up to these realities now, and that’s a positive for everyone, far more productive than pushing out a narrative for a rapid “transition” that never had much basis in reality to begin with.
