Global warming, climate change, all these things are just a dream come true for politicians. I deal with evidence and not with frightening computer models because the seeker after truth does not put his faith in any consensus. The road to the truth is long and hard, but this is the road we must follow. People who describe the unprecedented comfort and ease of modern life as a climate disaster, in my opinion have no idea what a real problem is.
Widespread blackouts, humanitarian challenges, and reliance on emergency measures like increased solar panel installations (with Chinese assistance adding ~1,000 MW of solar recently).
Intensified US sanctions and executive actions (under the Trump administration) blocking oil shipments from countries like Venezuela and Mexico.
Resulting near-collapse of oil imports (e.g., reports of zero oil imports in January 2026 for the first time in a decade).
Cuba is facing an acute fuel and electricity shortage, exacerbated by:
Widespread blackouts, humanitarian challenges, and reliance on emergency measures like increased solar panel installations (with Chinese assistance adding ~1,000 MW of solar recently).
Intensified US sanctions and executive actions (under the Trump administration) blocking oil shipments from countries like Venezuela and Mexico.
Resulting near-collapse of oil imports (e.g., reports of zero oil imports in January 2026 for the first time in a decade).
This has drastically reduced fossil fuel use (especially imported oil for power generation and transport), pushing the country’s energy consumption and emissions toward very low levels—essentially “net zero” by forced deprivation rather than deliberate, prosperous transition.
There it was on the front page of Saturday’s New York Times: with a small assist from the United States, the island nation of Cuba has almost entirely ended the use of fossil fuels. Finally, we have the first country in the world to achieve the climate movement’s Holy Grail and nirvana — Net Zero! Or at least a very close approximation. This should be cause for a huge celebration.
You would think that the Times, which has been demanding the elimination of fossil fuels for at least a couple of decades, would be leading the celebrations. But weirdly, now that Cuba has finally shown the way, the Times chooses to put a completely different spin on the achievement. The headline and subheadline are (print edition): “U.S. Choking Oil Deliveries To Cuba Ports; Military Action Brings a Nation to Its Knees.”
The piece reports that the Trump administration is helping Cuba to achieve Net Zero by preventing oil tankers from landing there. Somehow in this piece, that is spun as a bad thing. It has brought Cuba “to its knees.”
The funny thing is that here in the U.S., it was just over a year ago that we had President Biden and an administration full of zealous environmentalists who were using every governmental power at their disposal to force Americans to stop using fossil fuels. By Executive Order 14057 of December 8, 2021, Biden had directed all federal agencies to pursue an aggressive “all of government” operation to achieve “net zero” on an accelerated schedule. Goals number 1 and 2 from that EO are “100 percent carbon pollution-free electricity on a net annual basis by 2030,” and “100 percent zero-emission vehicle acquisitions by 2035.” In 2023, the Department of Transportation released a “Blueprint” for eliminating all carbon emissions from the transportation sector. In 2024 EPA released a plan to eliminate fossil fuels from electricity generation. Similar initiatives were everywhere in the government.
Did the Times ever suggest that government forcing an end to the use of fossil fuels was “bringing America to its knees”? Or even that forcing the end of fossil fuels was any sort of a problem? If they ever suggested anything like that, I never saw it. What I saw instead was that the Times was the biggest cheerleader for the use of government coercion to suppress the use of fossil fuels, at least if the use was by Americans.
And yet, if you believe yesterday’s article, the banishment of fossil fuels, which was to be such a boon to the United States, is somehow a problem in Cuba. From the Times article:
In Cuba, people are struggling with frequent blackouts, shortages of gasoline and cooking gas and dwindling supplies of diesel that power the nation’s water pumps. Trash is piling up, food prices are soaring, schools are canceling classes and hospitals are suspending surgeries.
Here is a picture from the Times of the “garbage piling up”:
What am I missing? Since when are fuels like oil, gasoline, natural gas, and diesel any longer necessary, or even useful or economic, for providing energy to the people? The Times for years has been pounding a relentless drumbeat emphasizing that wind and solar are now the cheapest ways to produce energy, and all sane people are flocking to them as the best sources. For example, from August 17, 2023:
As the planet registers the highest temperatures on record, rising in some places to levels incompatible with human life, governments around the world are pouring trillions of dollars into clean energy to cut the carbon pollution that is broiling the planet. The cost of generating electricity from the sun and wind is falling fast and in many areas is now cheaper than gas, oil or coal. Private investment is flooding into companies that are jockeying for advantage in emerging green industries.
In other words, to eliminate use of fossil fuels all Cuba would have to do would be to slap up a few wind turbines and solar panels, and then it could run its economy on the abundant renewable electricity without need for any of those icky fossil fuels. And saving money too! Cuba actually has a bunch of wind farms. Why doesn’t it just crank them up to provide the power formerly supplied by the fossil fuels?
It seems like the people who are writing these pieces for the Times don’t read their own newspaper.
Meanwhile, let me be the first to congratulate the people of Cuba on being the first to achieve Net Zero.
Cuba’s renewable energy efforts have accelerated significantly in recent years, driven by a long-standing goal to reduce dependence on imported fossil fuels, improve energy efficiency, and build resilience amid chronic shortages and external pressures like U.S. sanctions. These efforts are part of the country’s National Energy Transition Strategy (published in September 2024) and its updated Nationally Determined Contributions (NDCs) under the Paris Agreement, submitted in early 2025.Key Targets and Commitments
Cuba aims to increase renewables to 24% of electricity generation by 2030 (original goal from earlier plans).
More recent commitments target 26% of total energy supply from renewables by 2035.
Long-term vision: Achieve full electricity generation from national resources (renewables + domestic oil) by mid-century, with ambitions for near-total renewable electricity eventually.
Installed renewable capacity has grown rapidly, especially in solar, with a focus on photovoltaic (PV) parks.
Venezuela’s oil industry has long exemplified statism: full state control via Petróleos de Venezuela S.A. (PDVSA) after nationalization in the 1970s, intensified under Hugo Chávez’s 2007 expropriations of private assets. This model, combined with mismanagement, corruption, and U.S. sanctions since 2019, collapsed production from over 3 million barrels per day (bpd) in the early 2000s to around 1 million bpd by late 2025.
Venezuela’s oil industry has long exemplified statism: full state control via Petróleos de Venezuela S.A. (PDVSA) after nationalization in the 1970s, intensified under Hugo Chávez’s 2007 expropriations of private assets. This model, combined with mismanagement, corruption, and U.S. sanctions since 2019, collapsed production from over 3 million barrels per day (bpd) in the early 2000s to around 1 million bpd by late 2025.
“Venezuelan oil has been powering Cuba’s electricity grid, and the Trump administration may use the fuel issue to effect changes in the island-nation’s leadership.”
“More heavy oil from Venezuela will put pressure on Canada’s role as a supplier of heavy crude to the U.S. It may also pressure Saudi Arabia, which ships heavy oil to feed its refineries in the U.S.”
“Access to Venezuela’s substantial oil reserves is likely to put a cap on how high global oil prices might rise in the future….”
Little did we realize how interesting 2026’s energy market would become when we finished writing our January 3 Energy Musings, “Energy Finishes 2025 In 8th Place Out Of 11 Sectors.” Just a few hours after finishing and scheduling its publication, United States Special Forces and Federal Bureau of Investigation agents, supported by military forces, mounted a military-style campaign to capture Venezuelan President Nicolás Maduro and his wife, Cilia Flores.
Their arrest was to comply with a federal indictment in New York for narco-terrorism conspiracy and other charges. Those charges included cocaine importation conspiracy, possession of machine guns and destructive devices, and conspiracy to possess machine guns and destructive devices.
Multi-Country Ramifications
This dramatic change will have implications for global oil markets. And it might be asked if the political change underway in Venezuela marks the first domino of totalitarian regimes to fall, especially given the growing anti-government protests in Iran.
There will be many geopolitical ramifications from the Venezuelan leadership change, including the termination of sanctions on Venezuela and its oil. President Trump indicated a willingness to sell oil to China, helping Venezuela to pay down its $60 billion debt to that country.
Regionally, removing Maduro ensures that the border dispute with Guyana, which could impact its oil development, will be a non-issue. The news for Cuba, however, is not as favorable. Venezuelan oil has been powering Cuba’s electricity grid, and the Trump administration may use the fuel issue to effect changes in the island-nation’s leadership. That would be consistent with the administration’s desire to enforce the Monroe Doctrine’s policy of preventing foreign intervention in the governments of the Americas. Russia and Iran have long been supporters of the Cuban regime, as well as the Venezuelan regime. Putting these U.S. adversaries on notice to stop meddling in South American politics is an essential message from the Trump administration’s police action dealing with Maduro and his wife.
The decision to allow Venezuela to sell oil to China ensures that the nation will retain its commercial relationships, which are essential for ongoing international business activity. At the same time, it is a signal to China that the U.S. will enforce the Monroe Doctrine policies, removing the Americas as a focal point for increased Chinese involvement, which has involved significant investment in mines, ports, and other South American industries. The move also puts China on notice that its Venezuelan oil flows could be shut off instantly over unfriendly actions towards the U.S., changing the energy landscape for China. This risk may explain why China has been building its oil inventories despite flagging oil demand.
Oil Reserve Markup
Venezuela is estimated to have 303 billion barrels of crude oil reserves as of 2023, 17% of proven world reserves. Significantly, the reserve estimate was increased during the Chávez regime from 80 billion barrels to 303 billion barrels. While the reserve write-up was audited by the petroleum engineering company, Ryder Scott, it was prepared for the Venezuelan dictatorship.
The primary challenge for Venezuelan crude oil is its heavy, sour nature. That makes the oil a lower-quality supply, selling at a discount from world prices. Much of the oil comes from the Orinoco belt, which requires it to be mixed with diluent to enable transportation and refining. That also lowers the oil’s value and creates logistical issues, because without the diluent, the oil cannot be converted into a commercial product. Securing diluent supplies has been a recurring logistical and financial challenge, and is unlikely to change materially in the near term.
Four Oil Charts
Based on data from the Energy Institute and from BP, we have created several charts that show the role of Venezuelan oil in the global oil mix and the nation’s significance within OPEC since 1965. Venezuela was a founding member of OPEC in 1960 because it feared becoming a victim of international oil companies, which were unwilling to pay a fair price for oil extracted from OPEC member countries. [Ed note: The U.S. Mandatory Oil Import Program in 1959 created an oil surplus that sent prices down.]
It took more than a decade for the oil supply pendulum to swing in favor of OPEC members. When it did in the early 1970s, the international oil industry changed dramatically, with pricing power shifting into the hands of the host producing countries. In contrast, countries with mature production risked supply shortages and costly alternatives.
The first two charts show that Venezuela was a more important source of global and OPEC oil supplies in the 1960s and 1970s than it is today. They also show how Venezuela’s market share has declined sharply in recent years. What the charts show is how Venezuela’s output and market share fell sharply during those early years as other OPEC members rapidly expanded their outputs. Moreover, with lower-quality oil, Venezuelan supplies were less desirable to refiners seeking more low-sulfur, light crude oil to convert into gasoline and diesel fuels for the transportation market.
During that period of declining market share, the industrialized world was shifting its electricity generation away from oil to coal and natural gas, reducing the market potential for Venezuelan crude. Remember that this market shift was driven by a change in global oil pricing, from international oil companies to the Middle East OPEC host countries.
Chart 1: Venezuela’s global market share fell by nearly two-thirds between 1965 and 1977.
Chart 2: Venezuela has struggled to sustain relevance within OPEC in recent years.
For readers who prefer more granular oil production data, the following two charts show Venezuela’s output relative to the world oil supply and OPEC’s output. The challenges of sustaining and growing its oil production reflected the dynamics of Venezuela’s political situation and the tactics of its national oil company, Petróleos de Venezuela (PDVSA).
Hugo Chávez assumed the Presidency of Venezuela on February 2, 1999. At that time, world oil markets were in turmoil, partly due to PDVSA policies to maximize output, disregarding OPEC quotas and price objectives. This was a major contributor to the 1998 oil price collapse. The prior Venezuelan government had nearly abandoned OPEC as it struggled to avoid a financial collapse.
Chávez and his new oil minister, Ali Rodriquez Araque, completely reversed the situation. Along with the governments of Mexico and Saudi Arabia, a new understanding on quotas and higher prices was negotiated between OPEC and other oil-exporting countries.
A bit of personal history. In late February of 1999, as President of the National Association of Petroleum Investment Analysts (NAPIA), we were part of a group invited by PDVSA to spend a week touring Venezuela’s oil industry. PDVSA officials were hoping to curry favor from the investment community, as it would need to tap financial markets to sustain and grow its operations.
To appreciate the charade the Venezuelan government was attempting to conduct, on our first day’s lunch, Oil Minister Ali Rodriquez spoke. A condition was that he would talk in Spanish. Fortunately, we had a member fluent in Spanish who volunteered to conduct a contemporaneous translation. Sitting at the head table with other leaders of NAPIA and me was the U.S. Ambassador. When Rodriquez finished his talk and the Q&A, he sat down and conversed in perfect English with the Ambassador.
The new agreement between OPEC and other oil exporters led to a dramatically different oil market starting in 2000. That year’s Venezuelan oil export revenues were a record of $27.3 billion, a significant increase above the previous peak of $19.1 billion in 1981. However, there was a substantial difference in the impact on the Venezuelan government’s take. In 1981, PDVSA’s $19.1 billion in revenues generated $13.9 billion in royalties and income taxes. In 2000, the $27.3 billion in oil export proceeds generated only $11.3 billion in government income. Royalties and income taxes amounted to 73% of export revenues in 1981, but only 41% in 2000. This shift was mainly due to changes in how PDVSA structured its agreements after 1989, when it opened up its marginal oil fields to international oil companies. Those contracts were structured as service contracts rather than production agreements.
Furthermore, in 1989, when Venezuela came close to insolvency and was forced to subscribe to International Monetary Fund and World Bank adjustment programs and reforms, PDVSA adopted the worldwide accounting rules for reporting profits and losses. This brought down the ring fence around PDVSA’s Venezuelan operations. It was forced to transfer to Venezuela the costs it incurred in its foreign ventures, thus increasing the profits deemed to have accrued outside the country. The difference in tax rates between Venezuela and the United States was 67.7% versus 34%. Moreover, PDVSA also charged its Venezuelan accounts with the financial costs of its nine billion dollars in foreign debt, further reducing domestic profits and the taxes it owed to the Venezuelan government.
Chart 3: Despite its best efforts to increase production, oil output has been in a free-fall.
Chart 4: Venezuela (in gold) remains a minor player in OPEC.
Given the unsettled leadership situation in the government, we should not expect any near-term change in the oil market from Maduro’s removal. At the moment, his vice president, Delcy Rodriguez, has assumed leadership of the country. Unless the military leaders shift their allegiance away from her to the popularly elected politicians in 2024, the current turmoil is likely to continue. Will this lead to a further exodus of Venezuelans, or will people be willing to become active in demanding the leadership they desire?
An Oil Revival?
In the longer term, if the leadership changes to that of popularly elected officials, we can expect Western oil companies to re-enter Venezuela. There is also the possibility that PDVSA will be able to rehire prior professional employees who emigrated rather than live under the Chávez and Maduro regimes. A return of Western oil companies, with their technical talent and financial resources, plus long working histories and knowledge of the country’s oil resources for some companies, will put Venezuela on a path to increased oil output. Estimates are that the sector needs investments of $10 billion a year for many years to restore the industry’s productive capacity.
Few people know the condition of the country’s oil fields, its transportation network, and refining capacity. There may need to be a significant investment before production growth can be achieved. How long will this take, and what price will the international oil companies demand to return to Venezuela? Those are impossible questions to answer now.
While we may be surprised by how quickly the domestic oil industry changes and improves, without a significant number of former PDVSA workers returning, it is safer to expect a long, slow improvement in Venezuela’s production growth. There may be a jump of 250,000 barrels a day in output, assuming PDVSA can acquire sufficient diluent. However, sellers may be reluctant to commit to PDVSA until political stabilization is achieved.
More heavy oil from Venezuela will put pressure on Canada’s role as a supplier of heavy crude to the U.S. It may also pressure Saudi Arabia, which ships heavy oil to feed its refineries in the U.S. China might become a buyer of Canadian and Saudi heavy oil output in the future, as a supply diversification move, further altering global supply chains.
Access to Venezuela’s substantial oil reserves is likely to put a cap on how high global oil prices might rise in the future, given the lack of industry reinvestment in recent years. That could be a good thing for the industry in the long term, as demand might grow more than the International Energy Agency predicts by 2050, with lower near-term oil prices.
The issue of energy dominance is a key outcome of the weekend’s events in Venezuela. Europe struggles to understand it, while China and the U.S. fully comprehend its significance. Russia and Iran are in the process of learning the new energy landscape. Everyone will need to rethink their views of the geopolitical and energy landscapes after last Saturday night’s events.
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G. Allen Brooks has been actively engaged in the oil patch in various roles for the last half-century. He has been an energy securities analyst, an oilfield service company manager, a consultant to energy company managements and a director of various oilfield service companies.
Since early 2005, Mr. Brooks has been engaged in consulting as an advisor to PPHB LP, a boutique oilfield service investment banking firm, where he provides proprietary research for the firm’s partners and analysts. PPHB also distributes Musings From the Oil Patch, the highly regarded energy newsletter authored by Mr. Brooks since 1999.
An Economics graduate of the University of Connecticut, Brooks also has an M.S. degree in Economics from Cornell University. He started his investment career in 1969. Mr. Brooks lives in Houston, Texas.
Energy Musings contains articles and analyses dealing with important issues and developments within the energy industry, including historical perspective, with potentially significant implications for executives planning their companies’ future.
Spare a thought for the people of Cuba. In October, Cuba suffered through a week of extended blackouts when 7 out of 8 power plants were out of action. After power was restored, it meant people in Havana, the capital city, got 4 or 5 hours of electricity a day.
Things were dire in October, and they aren’t getting better:
Spare a thought for the people of Cuba. In October, Cuba suffered through a week of extended blackouts when 7 out of 8 power plants were out of action. After power was restored, it meant people in Havana, the capital city, got 4 or 5 hours of electricity a day. (So, they only had 20-hour blackouts each day, instead of 24-hour ones.) According to The National, people often travel by horse-drawn carts rather than motor cars, and in the countryside, it’s a common sight to see ploughs being pulled by oxen. “Motorways connecting major cities are eerily quiet.”
Not surprisingly, in the last few years, ten percent of the entire population has left (mostly for Florida). Unfortunately for Cuba, these were the working age adults. Predictably, the loss of productive workers and productive electricity means the loss of product, and so it has come to pass:
The Cuban government acknowledged that it is “shameful” for the island, traditionally one of the leading sugar producers in Latin America, to be forced to import this product.
Cuba was once known as the Sugar Bowl of the world.
John Hindraker calculates that the current cost of a pound of sugar in Cuba is about $25 US.
Blackouts on top of Blackouts
Apparently, the Cuban grid managers were expecting to be 1,311MW short today on a grid that was theoretically 3,150 MW. The reasons being just about everything:
The power outages are primarily due to a deficit in power generation, compounded by issues such as equipment failures and maintenance at key thermal power plants, as well as fuel shortages affecting distributed generation stations.
Not surprisingly, the buzz of diesel generators, and $25-per-pound sugar means the islands other big industry — tourism — is dying aswell:
One hostel owner in Old Havana, the capital’s partly restored tourist hotspot, said that there used to be “a lot of tourists” but the situation now was “very, very difficult”.
Ten years ago, President Barack Obama stunned the world by restoring diplomatic relations with Cuba, ending more than 50 years of Cold War estrangement between the United States and a country with which it had once been on the brink of nuclear war.
For two and a half years, Cuba brimmed with enthusiasm amid a remarkable wave of investment and tourism, …
But a financial implosion caused by a cascade of factors — the tightening of U.S. policy by the Trump administration, Cuba’s mismanagement of its economy, the crushing effect of the Covid-19 pandemic — has kept visitors away and launched an immigration exodus of epic proportions.
Teach the children. Big Governments can wreck anything.
They ran out of working electrical plants ten days ago, and endured blackouts lasting for four straight days, including one hurricane. Reports coming out suggest that though electricity is partly restored, it’s often only for four hours a day. Not surprisingly, the country is semi-paralyzed — schools are still closed and “labor services” are largely non-existent, apart from hospitals, funerals and efforts to repair the damage caused by Hurricane Oscar.
Soon they may run out of people. People were fleeing Cuba before things got this bad.
The big blackout began on Friday October 18th. In the next four days they restarted the grid three or four times only to have it crash again, and while power is sort of mostly restored the structural problems appear to be dire. Nothing really sums the state of the communist economy better than one line on Vox news which described the moment the big blackout began:
“Seven of the country’s eight thermoelectric plants, which generate power for the island, were not working or under maintenance prior to the Guiteras plant’s failure. So when the Guiteras plant shut down, there were no more energy sources.”
As if “seven out of eight” is not bad enough, there’s more. Cuba can’t get subsidized fuel anymore from Russia, Mexico or Venezuela, and they can’t afford to buy fuel at market prices. The economy is kaput. They don’t make many things that the world wants to buy, and tourism dried up with the pandemic.
It appears that either the only surviving plant suffered a malfunction, or the nation actually ran out of fuel, or both. Reuters is somewhat vague:
Long-time ally Venezuela slashed fuel shipments to Cuba by half this year as it struggles to assure supply at home. Allies Russia and Mexico have also cut exports to Cuba, forcing the cash-strapped government to seek far pricer fuel on the spot market.
The situation came to a head on Friday, when Cuba’s largest power plant malfunctioned, joining several smaller plants already offline. Foul weather had also stalled the arrival of fuel from tanker ships offshore, starving the island’s power plants. The combination prompted the entire grid to collapse.
Life is tough. Generators were only able to power hospitals for emergency situations.
People are collecting wood in the streets so they can cook anything for dinner. Even before the blackout some 600,000 had no running water, and now that is worse. The BBC reports that some are now going hungry.
Predictably there are fears the exodus will grow
The word is that the government won’t let people protest the dire living conditions, but it will let them leave, so one million people have left in the last three years. (There go the dissidents, the ambitious, the motivated, and often the brightest). Since Cuba had a population of around ten million, effectively ten percent of the country left since 2021.
This crisis could fuel a further exodus; an estimated 1 million Cubans have left the country in the past three years, the largest such migration in the country’s history. One Havana-based economist, Omar Everleny, told the New York Times he’s already starting to see a new wave of emigration: “Anyone who was thinking of leaving is now accelerating those plans. Now you’re hearing ‘I am going to sell my house and go.’”
This is not an exaggeration or a metaphor. The entire island went dark—even Havana, which has been protected from the worst of the recent blackouts. It was a civilizational breakdown. The economy quite literally ground to a halt, as factories and stores were ordered closed by the government. From elementary schools to universities, the educational system was put on pause. Hospitals turned people away. For three days, Cuba, already tattered and abused, entered a special circle of hell reserved for the most mismanaged nations on earth.
The material catastrophe is self-evident and can be measured empirically. The depth of human suffering is impossible to gauge from a distance. Without refrigeration, food—always hard to obtain—was spoiled. Mothers lacked milk for their children. Without fans or air conditioners, everyone, including the very young and the very old, was exposed to Cuba’s blistering temperatures. Without elevators, the old and the sick who lived in apartments were forced to sleep outdoors, in the heat and among the mosquitoes. Without traffic signals, venturing to the streets became a death-defying nightmare. Without light, the human mind itself begins to shut down—the Cuban public, frozen in place by an incompetent and antiquated regime, sank to almost metaphysical levels of hopelessness.
Despite the crisis and the hurricane, Cuba’s President Miguel Díaz-Canel somehow found the time to advise the citizens that “if they protest on the street they will be prosecuted”. He put on military garb and said the protestors were just drunks, as if sober people would not mind having no functional economy.
It’s hard to get stories out of Cuba but ex-pats or friends outside Cuba post opinions on Reddit and they are gloomy.
The problems in the Cuban grid have been decades in the making.
The eight power plants are largely crude fuel oil plants of about 400MW. In total, theoretically, they could generate 2,500MW. In actuality, they are badly built, badly maintained, and 30 to 40 years old. Power generation has declined by 25% in the last five years.
“It’s very hard to restart a power station,” said a retired engineer from Antonio Guiteras, who asked to remain anonymous. “You need to produce a lot of electricity just to get it going.”
Antonio Guiteras was built in 1989, and is now battered and obsolete. “The truth is that it was built rotten,” said the engineer. He told harrowing stories of working with faulty safety equipment, political management who would disappear when problems arose and a system long pushed to its limit.
“There was a scheduled maintenance programme, but it was never followed,” he said. “The requirements were too tight. We were told: ‘The factory has to produce, so patch it up.’”
Somehow, despite Cuba being almost a failed state, there are glorious plans to build 26 solar farms with a capacity of one gigawatt. As the Guardian tells it, China has offered the parts to make them, in return for access to Cuba’s nickel deposit. Though there are fears that the people who might have been able to build the solar plants have already left Cuba. What then?
The gigawatt of solar (if it even happens) will only provide about one third of existing demand at most, and will obviously only work in the middle of the day, and possibly not at all after the first hurricane. As Broken Hill, and Alice Springs know, when things are desperate, solar panels are not the answer. Baseload comes first.
If Cuba can’t get fuel oil, and get the grid functioning, surely food and water will run out, and people will be forced to make some very tough decisions.
If the grid can’t supply enough energy for the people, in the capitalist world the answer is “more grid” but in the communist world, it apparently means “less people”. In this case Cubans are “lucky” enough to be allowed (at the moment) to walk or swim away, but for how long?
Growing up on a farm, an initial mechanical obsession of mine was tractors (don’t laugh until you’ve tried one – think you feel unassailable in a 4×4 F-150? You have no idea), quickly followed by cars. They are so central to everything, and represent freedom, in a sense. The auto industry has been a passion ever since, my head hopelessly stuffed with useless trivia that only gearheads appreciate.
There have been painful episodes along the way, including watching beloved automakers at times make unfathomably stupid decisions. The entire US auto industry ran itself onto the rocks of bankruptcy a decade and a half ago, their smug executives shouting about their respective superiority right up until the infamous day that the three bonehead leaders of the big US auto manufacturers all flew from Detroit to Washington on the same day in separate private jets to beg Washington for bailouts.
Times change, and these days it’s hard not to feel a bit sorry for that bungling brigade. Consider the tight wire act they’re being forced to walk on, with the only safety net being the precarious support of governments barrelling full speed ahead towards an energy transition strategy that first and foremost burns all the bridges behind. Governmental transition plans with respect to autos will work against some very big odds, or will be a spectacular failure.
While the Biden administration recently spoke of increasing corporate average fuel economy standards significantly in coming years – a great development, more on that in a minute – the greater winds of change are clearly towards outlawing internal combustion engines (ICE) both in North America and in Europe. Canada and many western European countries have firm deadlines, as does California, and what California does, the rest of the US often follows emissions wise.
Imagine then what it’s like for North American/European auto manufacturers to see news headlines like this: EVs Are Piling Up on Dealer Lots as Supply Outpaces Demand. No more piffle about supply chain woes hindering EV sales, something else is going on.
On top of that are grim results for those vehicles actually sold. In the second quarter of 2023, Ford lost $72,000 on every EV sold. While the latter is ‘sort of’ normal for new car platforms – and EVs are nothing if not new platforms – what isn’t normal is for highly-touted/media-frenzy revolutionary new autos like the Ford Mustang Mach E EV to be selling under 3,000 units per month in the US as it is in 2023, two years after introduction (US sales peaked over 5,000 units per month shortly after introduction). In the second quarter of 2023, Ford sold 14,843 EVs (out of 513,662 vehicles sold by the company overall), a fairly meagre total considering the capital invested and the marketing campaigns. In the minds of most consumers, it seems an EV means a Tesla, and there is scant interest in anything else no matter the marketing hyperbole.
Problems compound further. Western countries and auto manufacturers are piling into new battery plant investments, trying to emulate Tesla. Well, guess what… many of the materials going into those batteries will have to come from China, who controls most of the world’s critical mineral processing facilities. China is itself, of course, setting out to build as many batteries as possible. Given their home field advantage with raw materials and the cost advantages noted by western automakers, what chance will western automakers have to compete?
And then it gets even worse from there. Think Cuba.
Cuba and the US have had their differences, as would any neighbourhood where adjoining neighbours are fierce capitalists and fierce communists. While the ideological fervour may be fading – Cuba is no longer as commie as it was, and the US is, well, like an ideological but malfunctioning fireworks show. Regardless, Cuba has not had access to modern automotive technology since the 1960s. As a result, streets still are full of ancient American cars, held together forever.
There is no reason to think that won’t happen in the US, Canada and western Europe when the new-ICE ban comes into effect. Some segments of the population will go with the regulatory-mandated flow, while a great many will hold onto what they know, trust, and love. Short of a miracle battery breakthrough, many will simply not trust EVs in cold weather and/or instances where battery power doesn’t cut it.
Should that happen, it will place a damper on new EV sales, or at minimum remove a potentially significant slice of the new car market. But the luddite old coots (as they will be known) hanging onto their ICE pickup trucks will be but a tiny worry in American automakers’ viewpoint; the central dominating terror in their eyes will be Chinese competition.
Chinese EV auto companies currently enjoy a 25 percent cost advantage in the manufacture of EVs, according to US automakers. Add that fact to the current stranglehold China has on critical minerals processing, and domestic auto manufacturers would be out of their minds not to be at least somewhat frightened.
But it gets even worse from there. North American and European automakers are being forced to abandon further development of ICE vehicles, because they have been assured by western leaders that those are doomed, and to suggest otherwise is to engage in modern blasphemy punishable by the worst of all possible punishments – public shaming and accusations that they don’t care about the planet.
Chinese automakers have no such compunction. They operate in a different universe. They will build what they have to and want to, including EVs and ICE and hamster-drive if they so choose.
Consider the meaning of Chinese vehicular manufacturing independence. The world currently purchases something like 100 million vehicles per year. The US, formerly the predominant market, is seeing its share slide to something like 15 percent. Europe likewise is shrinking.
But developing country demand is skyrocketing, and most developing countries have not declared China to be an industrial enemy. China will build what those markets want, and will not give even a fraction of a single hoot about western demands to eliminate gasoline and diesel. There are too many mouths to feed.
Western auto manufacturers that go all-in on EVs, as demanded by their governments, will find that they no longer can even dream of global domination; their home markets will be a money pit of massive proportions.
In case anyone cares, and it doesn’t seem that they do when energy transitions are discussed, this will all work out the absolute worst for lower income people. Ordinarily, the auto market provides options for lower economic classes with vehicles that are no longer in favour. For example, in periods of high gasoline prices, consumers that can afford to switch up will tend to go for more fuel efficient vehicles, and the market can get flooded with inefficient ones – which has the effect of pushing down prices of these out of favour beasts, putting them within reach of poorer people. The fuel costs may be higher, but at least they can buy wheels.
That likely won’t happen this time around, if we see people buy ICE vehicles and then hoard them for as long as they can. In fact, things are terrible already for lower income people looking to buy older used cars – prices have skyrocketed for those as well.
Used cars are expensive, new cars are hideously more so, and EVs are, thus far, mostly toys of the wealthy with multi-car garages, or well paid urbanites that can afford to use them where they really shine. Again, we can see where China is twelve steps ahead; many popular EVs in China are tiny, cheap EV runabouts that don’t have massive range, but get the job done. No such option is available here in North America, few in Europe, and if they do show up on these shores, it is a safe bet they will be of Chinese origin, because they’re the only ones that can make money at it.29dk2902lhttps://boereport.com/29dk2902l.html
One last bit of drizzle for the day. Recently, Toyota announced that they had made breakthroughs in solid state batteries; by 2026-27 they expect to have EVs on the road that can charge far faster, with batteries that don’t overheat and catch fire, and with more range. It truly is an exciting development (companies have teased us with solid state batteries for years, including one Lamborghini model that incorporated a tiny supplemental one more as a fashion statement than anything). I would be happy to buy a solid state Toyota EV if it lives up to its promise and is cost effective.
The problem is, if the new Toyota tech is as good as hoped (and Toyota brings much needed credibility to the idea), then what happens to all the existing EVs, to all the existing battery plants now being funded at a cost of hundreds of billions, to all the money being spent on lithium ion battery development/processing/etc.? It is normal for new technology to overtake old and outdated items, but these massive current investments will not have had any chance to recoup the investment. Ford may have lost $72,000 on each EV sold in Q2 2023, but that could be acceptable if they went from selling 14,000 EVs per quarter to a million.
But what if that is as good as it gets? What if they never see sales of these lithium-ion EVs rise to the levels needed to recoup even a fraction of that investment? What if they build them and no one comes?
In that scenario, there is at least one silver lining – poor people might have an amazing choice of today’s EV crop, at very modest prices indeed.
In a sane world, automakers would morph first into hybrid vehicle manufacturers, which can make pretty much everyone happy. That’s why Biden’s proposed new fuel efficiency standards would be important; we should be striving for higher mileage, low hanging fruit instead of utterly demolishing the old ICE world. Besides that logical point, hybrids are far, far better for the environment from a materials availability perspective. Toyota calculated that they could make 90 hybrids for the same battery material that goes into a single EV, and that those 90 hybrids over their life could offer electrical motivation of a magnitude no single EV could even hope to. Plus, the energy transition is being hobbled by lack of critical metals/minerals; why not pursue the biggest bang for the buck while the world sorts through exactly what additional resources are available, and where, and when?
But sanity is forbidden in the west. It is EV or nothing. Infrastructure be damned. Investment be damned. Popular demand be damned.
The only western auto company I’ve seen that is keeping their feet on the ground and their wits about them is Toyota, who is openly stating that there is a future for ICE, a future for hybrids, and that maybe hydrogen fuel cells will be the power of choice. Hats off to them for, if nothing else, courage.
The scenarios above are, of course, possibilities, and maybe probabilities, but not certainties. But the odds of big trouble for western automakers are significant and ignored at our peril. No one wants to see forlorn Big Three auto execs having to climb into those private jets for that humbling ride again.
Energy conversations should be positive and, most of all, grounded in reality. Life depends on it. Find out more in “The End of Fossil Fuel Insanity” at Amazon.ca, Indigo.ca, or Amazon.com. Thanks!
Read more insightful analysis from Terry Etam here, or email Terry here.
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