U.S. refiners warn “de-facto ban” on diesel, gasoline engines may soon make such vehicles unaffordable

The American Fuel and Petrochemical Manufacturers (AFPM) association warned that planned regulatory changes in the U.S. aimed at improving cars and trucks fuel efficiency would result in that just within a few years Americans may find new diesel and gasoline-powered vehicles much harder to afford, while demand for EVs would be created that would otherwise be inexistent.

“These standards create a distorted vehicle market with expensive, limited choices for American drivers and disproportionately burden those who can least afford it,” said Patrick Kelly, senior director of fuels and vehicle policy at the association that groups the biggest hydrocarbon-processing operations in North America.

Kelly made the comment on Sep. 28, 2023, the same day he testified before the National Highway Traffic Safety Administration, “against its proposal on two vehicle groups that serves as a de-facto ban on internal combustion engine vehicles,” the AFPM said.

AFPM sees coming mass adoption of EVs

The regulations are the Corporate Average Fuel Economy (CAFE) Standards for passenger cars and light trucks for model years 2027– 2032.

In addition, there were also standards set for heavy-duty pick-up trucks and vans for model years 2030–2035, the AFPM added.

“These proposals don’t assess the full life-cycle of emissions from all vehicle types and can only be satisfied with the mass adoption of electric vehicles (EVs),” the association said.

By doing this, U.S. authorities are “violating the statutory bounds set by Congress,” the association added.

According to the NHTSA-proposed rule, car manufacturers would be required to achieve a 2% annual fuel efficiency increase for the 2027-2032 new vehicle models, according to automotivefleet.com, which published a report on Aug 3, 2023.

Light trucks would need a 4% per year improvement during the same period, it added.

Big fines if new standards not met

General Motors Co. and Stellantis (maker of brands including Alfa Romeo, Citroen, Dodge, Fiat, Jeep, Opel, and Peugeot) paid in 2022 and 2023 together some $363 million in fines for failing to meet fuel standards in previous years, the biggest ever paid under the Corporate Average Fuel Economy (CAFE) program that goes back to 1985, The Detroit News published on June 2023.

The newspaper in Detroit, the U.S. city most associated with vehicle manufacturing, said auto companies are working to try to meet new standards.

"Stellantis is investing $35 billion to develop electrified vehicles and related software to accommodate a global product offensive that includes the launch of 25 U.S.-market BEVs by 2030," said Eric Mayne, a Stellantis spokesperson, according to the Detroit News report at the time. BEV stands for battery electric vehicle.

A GM spokeswoman separately said GM was committed to an “all electric” future and planned to have all zero emissions vehicles by 2035.

A different viewpoint on future vehicle costs

EV prices seen as very expensive in 2022 may trend lower in coming years along with greater economies of scale, and as materials become cheaper.

U.S. newspaper The Hill, based in Washington D.C., published in Aug. 2022  a report citing Sam Abuelsamid, e-mobility research analyst at Guidehouse Insights, who said that batteries, that typically account for a third of the cost of an electric vehicle, were in that year becoming more expensive due to a temporary shortage of materials, in 2022.

But EVs have seen significant price reductions already in 2023 and the trend could be extended, according to a report by The New York Times on Feb. 14, 2023.

“Prices are likely to continue trending lower as Tesla, General Motors, Ford Motor and their battery suppliers ramp up new factories, reaping the cost savings that come from mass production,” it said.

“New electric vehicles from companies like Volkswagen, Nissan and Hyundai will add to competitive pressure,” according to The New York Times.

“The first major crack in the trend of rising prices came in January when Tesla cut prices for the Model 3 and Model Y, the two best-selling electric cars, by thousands of dollars,” according to the NYT.

Number of EVs in the U.S. has tripled since 2021

Since (U.S.) President (Joe) Biden took office (in January 2021), “the number of EV sales has tripled while the number of available models has doubled,” according to a press release by the Environmental Protection Agency in April 2023 to mark the announcement of new proposed emission standards earlier this year.

“There are over 130,000 public chargers across the country, a 40% increase over 2020. The private sector has also committed more than $120 billion in domestic EV and battery investments since President Biden signed the Inflation Reduction Act into law,” it said.  

According to the U.S.  Energy Information Administration (EIA), in 2022 Americans consumed then nearly 136 billion gallons of gasoline, including 135 billion gallons of finished motor gasoline, equivalent to about 369 million gallons per day,

Motor gasoline is one of the most consumed fuels in the United States and the main product that U.S. oil refineries produce. Most U.S. finished motor gasoline has about 10% ethanol content.

In 2022, total gasoline consumption, based on energy content, accounted for about 57% of total energy consumption in the transportation sector and 16% of U.S. total energy consumption, and, based on volume, 45% of total petroleum consumption, the EPA said.

The by-bar-biggest gasoline market in the U.S. is Texas, with 11% of the U.S. total, followed by California, with 9%, and Florida, with 6%.

As of Jan. 2023, there were 129 operating refineries in the United States.

For the past 45 years, the U.S. has not seen any construction of an all new refinery with significant downstream unit capacity. The last time an entirely new refinery with significant downstream unit capacity was built was Marathon's facility in Garyville, Louisiana that came online in 1977. There have been, however, capacity additions in several refineries since that time.

U.S. refiners also expressed concern earlier this year over regulatory changes in California possibly spreading to other states.

By Renzo Pipoli