Biden's EV push could upend Texas oil industry

Automotive analysts had been projecting major growth in the electric vehicle market in the decade ahead, with sales increasing to between 40 percent and 50 percent of the market by 2030 from less than 6 percent currently . But it’s unclear whether automakers will have the electric vehicle manufacturing capacity to reach the proposed emissions standards by 2032, said Stephanie Brinley, an analyst with research firm S&P Global Mobility.

“It’s a more aggressive target than we expected, and I wish there was an easy answer to whether they can meet it,” she said. “It’s a little bit wait-and-see.”

Automakers like GM and Ford have already announced plans to to phase out vehicles that run on gasoline and diesel by 2035. But those targets are considered largely aspirational by analysts, and automakers are now questioning the practicality of the new rule, which ramps up emissions standards beginning in 2027 with steady increases over the following five years.

Not only do automakers have to secure the critical minerals and technology they need at a time Europe and China are rushing to do the same to meet their climate targets, but charging networks need to be built and the power grid expanded to meet the flood of new electric vehicles.

“EPA’s proposed emissions plan is aggressive by any measure,” John Bozzella, president of the trade group Alliance for Automotive Innovation, wrote in a blog post Wednesday. “A lot has to go right for this massive — and unprecedented — change in our automotive market and industrial base to succeed.”

Much is at stake for the nation’s oil and gas industry, largely centered in Houston. The new rules are likely to upend the market for petroleum-based fuels, an industry worth hundreds of billions of dollars a year and a mainstay of Gulf Coast economies where refineries produce almost half the nation’s fuel supply.

If the Environmental Projections Agency’s proposed rules are finalized as written, U.S. gasoline and diesel sales could start declining within the next few years, forcing the closure of refineries along the Gulf Coast and around the country, said Alan Gelder, vice president of refining, chemicals and oil markets at the energy research firm Wood Mackenzie.

“We’ve been saying refining (along the Atlantic and Gulf Coasts) is healthy for the next decade, and this threatens that,” he said. “The peak (for gasoline demand) could come this year or next.”

As a result, the EPA is likely to face a long regulatory and legal fight from the oil refining sector.

Chet Thompson, president of the American Fuel and Petrochemical Manufacturers trade group, said Wednesday the new rules would “effectively ban gasoline and diesel vehicles.”

“We should all be aiming for individuals and families to have more fuel and vehicle choices, not less, that can fit within their budgets and meet their work and household needs,” he said. “The (EPA) should withdraw this rule and work collaboratively with the fuel, petrochemical and vehicle industries to find cost-effective ways to reduce emissions.”

The question now is whether the EPA will go ahead with the rule as written.

If automakers are unable to produce the amount of electric vehicles prescribed by EPA, they could be left in the position of having to temporarily reduce overall vehicle sales to meet the emissions rule, analysts said.

Such a hit to a major American industry could be difficult to justify politically, and EPA Administrator Michael Regan said Wednesday he intended to give the car industry “as much flexibility as possible.”

“This is a very ambitious proposal, but it’s also a proposal, and it’s designed to solicit questions,” he said.