Only an Oil Glut Would Slow a Rapid Electrification of Trucks

Having the price of diesel above $3 per gallon guarantees a $30,000 per year incentive to switch from diesel to electric for heavily used Semi and large trucks. Currently, prices at the $4.5 to $5 per gallon level provide a $60,000 per year incentive to switch from diesel to electric.

There will be a shift for ten of thousands of the 270,000 Semi trucks sold each year in the United States because of massive subsidies and grants at the federal and state level. There are those who complain loudly that tens of billions or hundreds of billions of dollars per year grants and subsidies are government waste. The various bills have already passed. It is like this is some shocking new revelation that governments might spends billions or trillions on things that they do not agree with. California has passed a legal mandate that 30% of all trucks sold in California will have to be electric by 2030.

The 2008-2009 recession took prices down to $2 per gallon briefly.

The electric Semi won’t sell for less than a diesel model. So long as diesel goes not drop below $1.5 per gallon there will be a significant operating cost advantage for electric Semi. 100,00 miles/year $17k of electricity at 10 cents per kwh wholesale, 14300 gallons used for 7mpg to go 100,000 miles/year. $5/gallon $71.5k, $4/gallon $57.2k, $3/gallon $42.9k, $2/gallon $28.6k. Last 20 years briefly touched $2/gallon twice.

$7-8 per gallon in Europe vs 20 cents per kwh in europe. $100-110k/year vs $34k/year for electricity.

$4 per gallon in China vs 9 cents per kwh. $57k/year for diesel vs $16k/year for electricity.

Oil Advantage for Countries that Shift

If all trucks are made electric 40 million large trucks and 80 million smaller work trucks globally (not counting another 100 million casual trucks and large SUVs) then this removes demand for 17 million barrels of oil per day. This is 17% of global oil for just large trucks. Shifting that much transportation energy to solar, wind or natural gas and coal means adding 20-40% to fixed electrical generation. The USA is already adding 70 Terawatt-hour per year in solar and wind at current annual pace. World is about 4-5X more solar and wind. Yes, massively subsidized but all energy and transport is massively subsidized.

Pepsi will shift at least 30,000 of their 44,000 trucks because of massive subsidies and because they can cut their $2 billion per year fuel bill to $500 million per year in electricity. Capital costs over 3-5 years to payback. Packback cut by 2-3 years because of subsidies.

For China the truck electric shift means, cutting out 5 million barrels per day of 10 million barrel per day that are currently imported. It is like getting the oil of Iran and Iraq without any of the politics and war. Japan would cut out 1 million barrels per day of oil. India 1 million barrels per day. US 2 million barrels per day. Europe 2 million barrels per day. Europe was importing 2 million barrels of oil per day from Russia before the war.

How many tens of billions of subsidies would be justified to shift from imported oil dependence to domestic energy sourcing?

Every million barrels of oil per day is $28 billion per year to import. China would benefit by about $140 billion per year in lowered oil imports. However, the geopolitical and strategic advantage has even more value.

Megapacks Needed

I have written extensively that the grid has to be modified to handle the electric trucks. It is a feature for Tesla. The grid cannot handle it. You must have the 3.9 megawatt-hour megapacks to buffer the grid. About one megapack per 5-8 large trucks and for every 20 cybertrucks.

Pepsi had four megachargers (version 1 at 750 kw charging next ones will be 1-2 megawatt). Five to eight trucks per megacharger. Only 150-300 kilowatt draw max for prime factory utility customer. Must have big battery and solar (costco size for 4-6 megawatt hours per day in sunny areas) to flatten the draw for no very costly and impossible peak draws.

The billions and tens of billions for solar, grid and batteries is already happening.

21 thoughts on “Only an Oil Glut Would Slow a Rapid Electrification of Trucks”

  1. Even if there’s an immediate diesel glut, lack of diesel exhaust fluid from a urea shortage will effectively sideline diesel trucks unless you somehow get an EPA waiver.

  2. This is magical thinking. New York City has been experimenting with snow removal because they retrofit their garbage trucks with plows in the winter. Unlike many locales they do not have a massive fleet of dedicated snowplows. Latest real world data says the half dozen trucks they got at a mere $500,000 ea were able to plow for 4 hrs, but NYC needs 12. You can read about this over at zero hedge. Original article is in gothamist.

  3. Electric semis are definitely coming and the only thing that can slow them is cheaper diesel *or* reduction of insane EV semi credits.

    “Hey why is inflation so high? Maybe we need to print more money!”

    • Oil glut, drastic tax changes OR a collapse in the projected world lithium supply.

      Not that I’m predicting one, but that’s how I’d go if I was writing a script for a movie. I can’t even make up a semi-realistic crisis for Australia, but Chile is not completely without coups and similar within the past half century.

      Or maybe some other critical element? Cobalt?

      As for inflation, as our media experts tell us, that is always and 100% caused by greedy people being greedy. Greed was non-existent since the mid 1980s, but has been rediscovered in late 2021 by someone reading an ancient cursed book discovered in the burnt remnants of ancient crypts below Notre Dame. Since then, greed has spread widely, and can be identified easily: if someone is both rich AND has different politics from you, then they are greedy and the cause of inflation.

      I hope this clears things up.

  4. Here in Sweden, the electricity market is broken. I guess it’s the same in the rest of Europe because it’s the integration with the European grid and the pricing model that kills the market economy mechanisms that are supposed to “fix things” automagically.

    We now get to pay the highest price occurring on the global market for all kWh produced at any given time. Since most of the price is taxes and transfer fees, the grid owners (state) and power producers make more money the bigger the shortage of power. There is no incentive to build out the grid or produce more power. It’s the opposite… The worse everything works, the more money they confiscate from the citizens. Instead, they shut down nuclear, hydro plants, waste burning plants producing heat and power etc.

    They also make sure they shut down the nuclear plants for maintenance every winter when power is needed the most. And then they delay the restart, again and again and again. As a result we now have more than 10x the power price of previous years.

    With the exception of cars and trucks, Sweden was basically electrified and fossil free. We have a lot of electricity dependent industry like mining, steel, forest/paper etc.
    Now, it’s screwed up for foreseeable future and they can’t even deploy more trains or build more houses due to lack of power.

  5. Infrastructure investment? Ask the utilities. It’s their equipment, that they’ve completely refused to upgrade or maintain in lieu of shareholder and executive payouts. See PG&E fire that roasted 88 people alive.

    • You do know that most of these utilities are heavily regulated, and can’t just up and decide to spend money on something without government approval, right?

  6. Sure, the need for utility upgrades looks like an advantage if you’re in the business of selling utility upgrades.

    An epidemic of kids throwing stones through windows looks like a good thing if you sell windows. It’s a variant of the broken window fallacy.

  7. It seems counterintuitive that the solution to rising oil prices would be replacing the trucks with Teslas instead of shipping more by rail.

    • Rail is good for long distance, very bad at shipping quickly to the destination. Rail is pretty obviously “ship to other state, unload on to semi”. Rail’s nature means that there is significant delay in getting a delivery cross country.

      • The only trucker that I know well is an independent operator that tows his refrigerated trailer coast to coast and everywhere in between.

      • Freight rail in the US is greatly underutilized. Half of it is derelict. Rail is 6x more fuel efficient per ton-mile, and that is actually understated because rail was put in earlier and has more direct access to cities than the highways, so the distances are shorter. So why hasn’t the market moved to rail, and reaped the benefits of that higher efficiency? Three main reasons: 1. Rail workers unions, 2. The Railroad Retirement Board, 3. Railroads are effectively monopolies, there is little if any direct competition between railroad companies. As a result, prices are set to have parity with trucks, and the massive difference in true cost is divided amongst these parties. You can thank FDR for this disaster. His goal was to raise prices. He succeeded, and we have suffered in national and global competition thereafter. I am simplifying a bit. Rail has had to compete with barges in some areas. Partly this is due to the construction of the St. Lawrence Seaway in the 1950s, which allowed farmers in the Midwest with access to the great lakes to sidestep rail.

    • For good or ill, rail is a lot more oligopolistic than trucking. Trucks are relatively expensive compared to passenger cars, but it’s still at the level where a person can buy one and start working for themselves carrying freight. You can’t buy a locomotive to get into the rail freight business, though.

      • According to Peter Zeihan, the real question in the USA is why you can’t use ships any more, which make even trains look inefficient AND can be run by independent owner-operators.

        The answer seems to be a straight forward “they passed a law to make it too difficult to do”. AKA The Jones Act.

        But I certainly don’t know (or, to be fair, care) enough to say if this is an accurate summary of the situation.

  8. Let’s discuss the economic viability WITHOUT the governmental subsidies for the solar/wind installations AND the subsidies for buying the electric vehicles. The government double dips in pushing this technology and we are supposed to be amazed?

    Wouldn’t it be better if all technologies were allowed to stand on their own two feet?

    And Bryan, that 70 TWH number you quote for what is being added annually for electricity generation, is that nameplate or estimated from when the sun shines and the wind blows.

    • Why bother talking about a world without subsidies and government meddling? That is not the world we are living in. Wishful thinking is where there are competent and non-corrupt governments. 70TWH is what is being added annually for electricity generation in the US.

      You do not have to be amazed, it will just happen. The motivations are there economically, geopolitically and strategically.

    • Electricity was never cheap in Europe and it very expensive due to Russia-Ukraine war.

      In the US electricity is more expensive than usual due to Russia-Ukraine war.

      • Current Belgium price is 40 c per kw, not including transportation add 15 c per kw, as explained above the price is aligned on gas electricity

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