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1.1 The Dangers of Oil Dependence
Oil has been the lifeblood of the American economy for more than a century. Despite decades of concerted efforts to reduce our dependence on it, each day in 2024, more than 20 million barrels of petroleum were consumed in the United States to power industry and propel cars (11). Just as the body depends on a healthy circulation of blood to function properly, an American economy powered by the combustion engine depends on a consistent flow of oil (12). When that flow is interrupted, the consequences are immediate and severe—as evidenced by the fact that notoriously unpredictable economic recessions remain almost perfectly synchronized with one indicator: proximity to an oil price shock (13). Of America’s 12 recessions since World War II, ten have been preceded or accompanied by a sharp spike in oil prices.
SECTION 1
Setting the Scene
Since 2009, the U.S. ground transportation sector—the country’s largest single consumer of oil and source of greenhouse gas (GHG) emissions—has seen steady and significant improvements in fuel economy across all vehicle classes (6). Despite real progress in reducing transportation’s oil intensity, the sector remains almost entirely dependent on this volatile energy source.
Petroleum products dropped from 97 percent of total U.S. transportation sector energy usage in 2015 to approximately 90 percent in 2022, but economic growth has completely offset the reduction in oil use earned by these modest gains; across the entire economy, Americans have consumed more oil in each of the past three years than in 2009, the year Electrification Coalition published the first Electrification Roadmap (7). To date, all of the current administration’s rhetoric and policy decisions—both deregulatory and involving active uses of federal resources—aim to entrench and expand oil’s position in the economy. In other words, the U.S. economy remains nearly as dependent on oil today as it was more than a decade ago, and if the current administration’s policy agenda is implemented, will become even more so in the coming years. Incremental fuel economy improvements to internal combustion engine vehicles (ICEVs) have dampened the explosion of oil use that would otherwise have occurred alongside the growth of the transportation sector, but gradual improvements to a technology predicated on the consumption of oil will never solve the economic, national security, environmental, and public health vulnerabilities that stem from our dependence on it. Transportation electrification offers the first truly scalable solution to oil’s century-long monopoly on transportation.
Petroleum products dropped from 97 percent of total U.S. transportation sector energy usage in 2015 to approximately 90 percent in 2022, but economic growth has completely offset the reduction in oil use earned by these modest gains; across the entire economy, Americans have consumed more oil in each of the past three years than in 2009, the year Electrification Coalition published the first Electrification Roadmap (7).
Gradual improvements to a technology predicated on the consumption of oil will never solve the economic, national security, environmental, and public health vulnerabilities that stem from our dependence on it.
To date, all of the current administration’s rhetoric and policy decisions—both deregulatory and involving active uses of federal resources—aim to entrench and expand oil’s position in the economy. In other words, the U.S. economy remains nearly as dependent on oil today as it was more than a decade ago, and if the current administration’s policy agenda is implemented, will become even more so in the coming years. Incremental fuel economy improvements to internal combustion engine vehicles (ICEVs) have dampened the explosion of oil use that would otherwise have occurred alongside the growth of the transportation sector, but <Quote dark blue w/line> gradual improvements to a technology predicated on the consumption of oil will never solve the economic, national security, environmental, and public health vulnerabilities that stem from our dependence on it. <Quote dark blue w/line> Transportation electrification offers the first truly scalable solution to oil’s century-long monopoly on transportation.
Image 3; U.S. military defending oil assets
Most discourse surrounding transportation electrification is focused on its importance in the effort to reduce GHG emissions, mitigate climate change, and eliminatereducing GHG emissions, mitigating climate change, and eliminating local air pollution. The significance of these advantages alone cannot be understated and are worth embracing on their own merit; however, environmentalists are not the only ones now embracing electrification. National and economic security experts have correctly identified that committing to electrification would finally end America’s reliance on chronically vulnerable international oil supply lines—a national security vulnerability that costs $81 billion taxpayer dollars (approximately 16 percent of the national defense budget) annually to mitigate.8
While the economic and national security benefits of electrificationelectrification's economic and national security benefits have been evident for decades, technological limitations have restricted profitable EV production to niche applications, creating a seemingly insurmountable obstacle on the road to complete electrification. Although the road ahead has its challenges, market trends, geopolitical competition, the impressive rate of EV technology’s advancement, and the global need for rapid decarbonization all signal clearly that the future of transportation is electric. The question is no longer whether electricity will replace oil as the dominant fuel for transportation, but when.
Globally, EV sales increased by approximately 59 percent annually from 2012 to 2023.9 The majority of the world’s advanced economies have heeded the message, committing bothMost of the world’s advanced economies have heeded the message, committing politically and economically to electrification. The IIJA and IRA have served as the United States’ “down payment” on electrification, but these hard-fought gains are now threatened, and the future of electrification policy in the United States is unclear.
Figure 1: Electric Car Sales Globally, 2012-2024
1.1 The Dangers of Oil Dependence
Oil has been the lifeblood of the American economy for more than a century. Despite decades of concerted efforts to reduce our dependence on it, each day in 2024, more than 20 million barrels of petroleum were consumed in the United States to power industry and propel cars (11). Just as the body depends on a healthy circulation of blood to function properly, an American economy powered by the combustion engine depends on a consistent flow of oil (12). When that flow is interrupted, the consequences are immediate and severe—as evidenced by the fact that notoriously unpredictable economic recessions remain almost perfectly synchronized with one indicator: proximity to an oil price shock (13). Of America’s 12 recessions since World War II, ten have been preceded or accompanied by a sharp spike in oil prices.
SUBHEADING
Many of the most extreme oil price spikes in the past 50 years were direct results of market manipulation by the Organization of Petroleum Exporting Countries (OPEC) and OPEC+ (the name given to the group of ten oil-producing countries that aren’t official OPEC members but signed an agreement with OPEC in 2016). Current OPEC member countries include Algeria, Equatorial Guinea, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, the Republic of the Congo, Saudi Arabia, the United Arab Emirates, (UAE), and Venezuela, the Republic of the Congo, and the United Arab Emirates. OPEC+ is comprised of Azerbaijan, Bahrain, Brazil, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan. OPEC and OPEC+ (hereafter referred to as OPEC) control approximately 80 percent of the world’s proven oil reserves but produce just 40 percent of the world’s oil, acting as a global cartel by manipulating supply to inflate or deflate prices as fits their economic and geopolitical interests.14
OPEC’s near monopoly on global oil reserves gives the organization immense influence, which it has consistently used to undercut American economic progress. As identified in the Oak Ridge National Laboratory’s Transportation Energy Data Book, the direct transfer of wealth out of the American economy due to market manipulation by OPEC from 1974 to 2018 totals approximately
$5 trillion.15 The indirect effects of oil dependence are equally devastating; over the same timeline, the loss of potential GDP—the lost economic production that results from the elevated cost of an essential factor of production—added more than $2.2 trillion in costs to the nation between 1974 and 2018,” and dislocation losses—the costs associated with responses to unforeseen price shocks—number $2.67 trillion.”16
First and most obviously, both the existential threat of climate change and decades of intense depletion of the most accessible oil reserves have increased the direct and indirect costs of both extracting and consuming oil, placing limits on its use. As the most easily accessible, highest energy return on investment, and least expensive to extract sources of oil are consumed over time, extraction moves to less profitable and, more energy intensiveenergy-intensive, and often more environmentally impactful sources and processes. Renewable energy has already begun to replace oil as the world’s primary energy source for purely economic reasons, becoming the logical choice even among those who give no weight to carbon neutrality.
In aggregate, OPEC’s market manipulation from throughout this time period cost the U.S. economy approximately $30,000 per capita between 1974 and 2018 (17).
While the United States has reduced its dependence on foreign oil by increasing domestic production, has been a net exporter of oil since 2020, and is currently the world’s largest producer of oil, simply drilling for more and more oil is not a viable approach to eliminate the dangers posed byof oil dependence for two main reasons.
Oil’s price volatility is Tthe second reason why simply increasing domestic oil production cannot resolve America’s energy vulnerabilitiesis not a viable approachviable to eliminating the dangers of oil dependence is oil’s price volatility. that aAs a globally priced commodity, it is impossible to insulate U.S. oil prices entirely from the volatile global marketnsulating U.S. oil prices entirely from the volatile global market is impossible. The 2022 spike in U.S. oil prices during the Russian invasion of Ukraine proves that even as a net exporter and the world’s largest producer of oil, geopolitical tension, natural disasters, and supply chain disruptions can send domestic oil prices skyward, causing massive economic hardship for hard-working Americans.
It does not take an economist to understand the dangermicroeconomic economic dangers of oil dependence. Drivers who faced a national average gas price above of more than $5 per gallon for the first time ever during the Russian invasion of Ukraine already know what it’s like to be reliant on such a price-volatile good to get by; from Q2 2021 to Q2 2022, gasoline and other energy goods’ share of total consumer expenditures doubled from less than 1.5 percent to more than 3.2 percent, eating into household budgets for food, childcare, medical expenses, and more.18 Unlike other goods, most consumers can not simply find an alternative or go without oil when prices spike, —kids still need rides to school, groceries must be picked up, and the drive to the office does not get any shorter—so budgets must bend or break until prices abate.
Examples of such oil price shocks are commonplace throughout U.S. history. During arguably the most famous of these events, the 1973 Ooil cCrisis, arriving at the gas station on the wrong day would result in being turned away with an empty tank.19 The economic, political, and cultural impacts of this moment cannot be understated. As Professor Geoffrey Kirk argued that the fourfold increase in oil prices impacted economic growth a decade laterput it a decade later, “It continues to affect the standard of living of the populations of oil-importing countries, where economic growth is still hampered by the fourfold increase in oil prices.”20 Kirk continuedsaid, “Foreign policy, especially of the United States, is heavily influenced by the fear that supplies will be withheld.”21
At the peak of the crisis, when all Americans experienced understood andAmericans first experienced the true dangers of oil dependence,and government stepped in to mitigate themacted to reduce the dangers posed by oil dependence;. oOn November 7, 1973, the Nixon administration announced “Project Independence” to promote domestic energy independence.22 Over the next few years, the United States implemented a broad consensus of Americans overwhelmingly supported a wide range ofmany measures to tackle America’s immediate and long-term energy threats—to reduce oil use and develop alternative domestically-produced energy sources. To reduce the demand for oil, the nation adopted wide-ranging domestically produced energy sources. These policies such asincluded a nationwide 55 mph speed limit, fuel economy standards, and daylight saving time.23 To secure domestic energy sources, the government created the Strategic Petroleum Reserve and funded research that led to today’s $269 billion dollar U.S. renewable energy industry.
Oil prices rose sharply in 1979 during the Iranian Revolution, in 1990 during the First Gulf War, and again during the Great Recession of 2008, when prices rose so high that paying for gas alone consumed more than four percent of the average household’s annual income.24
High gas prices affect everybody, but they hit the poorest among us the hardest, representing a greater portion of the household budgets of lower-income Americans. According to a 2024 study on oil price fluctuation and inequality, “temporary positive oil price shocks yield substantial and enduring increases in consumption, income, and wealth inequality.”25 Again, it does not take an economist to figure this out. Those who make $30,000 per year still need to purchase gas to commute to work, pick their kids up from school, and get groceries, just like those making six or seven figures. In fact, working-class Americans are often among those most reliant on gas for their daily lives. An analysis of “gasoline superusers” identified that “many of America’s biggest drivers are tradespeople… others are low- or middle-income Americans who have been pushed out of cities by rising housing prices and face long commutes.”26 The analysis found that these “superusers” drive an average of 116 miles per weekday, own vehicles that are larger and less fuel-efficient, and spend an average of about ten percent of their household income ($530 per month) on gasoline.27 Oil’s price volatility and the monopoly it holds over transportation perpetually threaten the livelihoods of these rural and small-town residents and prevent upward mobility by consuming such a large percentage of their income.
Oil dependence’s costs extend far beyond the economic realm. OPEC member countries like Saudi Arabia, Russia, Iraq, and the United Arab Emirates AE have consistently leveraged their near monopolistic market share as a geopolitical cudgel in pursuit of an undemocratic agenda. For decades, these oil-rich countries have relied on their oil supplies as leverage to maintain a profitable relationship with the United States despite egregious human rights violations, blatant market manipulation, and warmongering. As cited in Professor Jim Krane’s 2021 book, “Energy Kingdoms: Oil and Political Survival in the Persian Gulf,” by the end of the 1970s, Middle Eastern monarchies had become “the strategic heartland of America’s energy security,” leading to President Jimmy Carter declaring that “America would go to war, if necessary, to defend the monarchies.”28
For decades, American foreign policy has been hamstrung by the necessity to maintain relations with oil-producing nations, weakening its negotiating position and forcing American leaders to overlook indefensible human rights violations occurring within oil-producing nations.
OPEC’s near monopoly on global oil reserves gives the organization immense influence, which it has consistently used to undercut American economic progress. As identified in the Oak Ridge National Laboratory’s Transportation Energy Data Book, the direct transfer of wealth out of the American economy due to market manipulation by OPEC from 1974 to 2018 totals approximately
Oil dependence has not only caused the United States to overlook the undemocratic behavior of other countries; it has also been a primary factor triggereding many of the nationcountry’s most deadly, and costly, and morally dubious wars. The United States’ involvement in both the First Gulf War and the Iraq War was primarily due to the preservation of oil supplies in the area. Oil interests remain a factor in America’s continued military involvement in the Middle East. In response to Iraq’s August 2, 1990, invasion of Kuwait, President George H.W. Bush announced the deployment of U.S. troops to the region, citing the economic threat that Iraq’s aggression posed to the United States, which, at the time, imported a large share of its oil from the Middle East.29 The University of Virginia’s Miller Center on Presidential Scholarship, Public Policy, and Political History’s overview of the First Gulf War states that “Oil was driving force behind the invasion and would lead to U.S. military involvement,” quoting Paul Wolfowitz, undersecretary of defense for policy in the George H.W. Bush administration who said, “the fundamental U.S. interest in the security of the Persian Gulf is oil.”30
For decades, American foreign policy has been hamstrung by the necessity to maintain relations with oil-producing nations, weakening its negotiating position and forcing American leaders to overlook indefensible human rights violations occurring within oil-producing nations.
A year later, Alan Greenspan, chair of the Federal Reserve from 1987 to 2006, wrote in his memoir, “I'm saddened that it is politically inconvenient to acknowledge what everyone knows: The Iraq war is largely about oil.”32 These wars—fought largely to secure oil supply lines—have cost trillions of dollars, led to the loss of hundreds of thousands of lives, and have severely damaged the United States’ global image.
The costs of the transportation sector’s oil dependence extend beyond the economic and national security realms. As the single largest source of carbon emissions, the sector’s oil use has played a massive role in accelerating climate change and worsening its public health impacts. By now, few people in the United States know nobody who has been hurt, had their home destroyed, or their livelihoods threatened by wildfires, drought, hurricanes, or extreme heat—all made more extreme and more common by the transportation sector’s oil consumption. While any individual source of emissions’ effect on climate change is nebulous, the transportation sector’s oil use has other more quantifiable public health impacts as wellalso has other more quantifiable public health impacts. A 2023 report by the American Lung Association found that a transition to EVs would save more than ten times the number of American lives lost in the wars in Iraq and Afghanistan combined—preventing over 89,000 premature deaths, 2.2 million asthma attacks, and providing nearly a trillion dollars in health benefits by 2050.33
Oil is a double-edged sword—an effective yet dangerous tool that unlocked a century of rapid growth at an incredibly high cost. By the time its dangers were fully understood, it had become so enmeshed in the workings of the economy that there seemed to be no choice but to continue burning it. For generations, both Democratic and Republican administrations had no option but to prioritize the relentless pursuit and maintenance of oil supply lines TFor decades, tabove all other concernshe relentless pursuit and maintenance of oil supply lines has have superseded all other moral, environmental, and diplomatic concerns across Democratic and Republican administrations for generations because there was simply no other option. Electrification provides another optionNow there is.
Although oil was not cited as a motivating factor for the American invasion of Iraq in 2003, political scholarship has come to a consensus that it was, in fact, one of the main factors. Administration officials have also retroactively acknowledged the role played by oil, such as Commander General John Abizaid, whose 2007 comments on the Iraq War concluded with, “Of course it’s about oil. We can’t really deny that.”31
1.2: The Electrification Solution
Electrification couldwill finally put an end toend America’s dependence on oil for transportation; it allows the United States to meet the transportation sector’s ever-growing energy demands through plentiful, sustainable, and price-stable domestic sources, eliminating the innumerable dangers posed by the sector’s dependence on oil. Combined with the rapid deployment of renewable energy generation, electrification creates the potentialallows for to the rapid decarbonizeation of transportation, while increaseing the global competitiveness of the U.S. auto industry, reduceing fuel and maintenance costs for consumers, improveing air quality, and insulateing the American economy from the volatile global oil market.
SUBHEADING
These benefits are achievable, but not guaranteed; the necessary technology exists or is rapidly approaching, but the current administration’s moves to challenge the 2009 GHG endangerment finding, eliminate California’s waiver under the Clean Air Act, revoke electrification incentives, and revert to antiquated standards for vehicle efficiency and tailpipe emissions are eroding the regulatory environment needed to facilitate the transition.
Non-fossil energy technologies like hydrogen, biofuels, and electricity have shown promise for decades, but until recently, none of these technologies could produce vehicles capable of meeting people’s daily needs without breaking the bank. While hydrogen and biofuels remain applicable mostly in niche scenarios (primarily as a transition technology for long-haul freight applications until battery technology improves), battery electric vehicle technology has been proven to work and even save users money across a wide variety of use cases—from light-duty passenger vehicles to heavy-duty freight transport.
TWhile transportation electrification will require an expansion of grid and charging infrastructure, but unlike hydrogen and biofuels, electricity is already ubiquitous and well-regulated, i. Its infrastructure supports multiple technologies, and it and and will only get cleaner over time as the grid transitions to renewables.
Cost, weight, and range concerns do remain among some heavy-duty vehicle (HDV) use cases, with today’s long-haul electric semi-trucks costing almost three times as much as their diesel counterparts.34 However, recent projections indicate that most HDVs are expectedwill to reach cost parity with ICEVs within a decade. According to Bloomberg New Energy Finance’s EV Outlook 2024, electric HDVs will be less expensive than their diesel counterparts in four out of five categories by 2030, and in and all five five categories by 2040.35
Electrification’s Economic Impacts
On a macroeconomic level, displacing oil demand with demand for electricityelectricity demand produces widespread economic protections because spikes in oil prices dramatically impact other sectors, the price of oil “can move by 50% within months… It is hard to reduce consumption quickly when prices rise, and this has widespread knock-on effects across other sectors,” which can “delay business investment, require costly reallocation of resources, reduce consumer spending, and slow job growth.”36 Electrification greatly reduces this volatility because “historically, electricity prices have had a lower average annual inflation rate and a smaller range of price changes than gasoline and piped utility gas service, used for heating and fueled by natural gas.”37
In addition to the protective effect of the switch from the volatile global energy market to a more stable domestic one, eElectrification also keeps the economic activity associated with energy production withinbenefits the domestic economy. In 2023, despite being a net exporter and the world’s largest producer of oiloil producer, America the United States imported 8.51 million barrels of petroleum products per dadaily, 76 percent of which was crude oil.38 With an average price of $101 per barrel, that’s $630 million per day leaving the American U.S. economy for crude oil.39 Replacing the energy sourced by foreign oil with energy produced by domestic renewable sources would recapture that lost revenue and, improve our trade balance, and contribute to the growth of the American economy.
Electrification also produces incredible microeconomic benefits. EVs are expected to last an average of 300,000 miles, approximately 50 percent (100,000 miles) longer than ICEVs.40 And dData from the National Automobile Dealership Association shows that while on the road, EVs continually accrue savings.;
Fuel prices are among those most immediately and meaningfully felt by consumers. Analysis shows that there is a tight relationship between gas prices and consumer sentiment about the economy—that when gas prices rise, Americans’ confidence in the economy drops correspondingly.42
This trend makes intuitive sense because oil’s monopoly on transportation makes it an input into nearly every good produced or sold in the country. When oil prices spike, inflation follows, forcing families to choose between filling their gas tank or their pantry.43
Developing a robust primary EV market in the United States is essential because doing so will allow the American automotive industry to retain its role asmain a catalyst for innovation and a key driver of the American manufacturing economy. As stated by the Alliance for Automotive Innovation in its letter congratulating President Trump on his second election victory, “automaking is America’s largest manufacturing sector and underpins our industrial base. The sector employs 10 million Americans in all 50 states” and, annually builds 10.3 million vehicles, exports 1.5 million vehicles, and drives $1 trillion into the economy, generating five percent of U.S. GDP.48
According to the 2020 edition of the State of the U.S. Automotive Industry publication, in the previous decade, U.S. automakers had “exported more than $1.1 trillion in vehicles and parts—nearly $36 billion more than the next largest exporter (aerospace).” The report also mentions that the American automotive industry buys “hundreds of billions of dollars worth of American steel, glass, rubber, iron, and semiconductors each year” and “ranks third out of the 40 largest industries, on a global basis, in R&D spending.”49 As a key purchaser of raw manufacturing products and an economy-leading exporter, the industry's continued success is vital to the strength of the American manufacturing economy.
Driving 15,000 miles per year in an EV costs half as much as it does in an ICEV, with the average driver spending $9,490 on gas compared to $4,295 in average electricity costs.41