Twilight of the good times...
Twilight of the good times... nielubieklonu/gettyimages.com

The trade war with China is deeply unpopular. Only 27 percent of Americans do not support free trade—or, put another way, free trade with China, the second-largest economy in the world. But President Donald Trump will not let go of the war. He claims that the United States will win in the end, but this seems highly unlikely and even politically catastrophic. You now have farmers on welfare in red states, a stock market that's tossed this way and that, and a rise in the price of basic goods. None of this makes any sense. It's baffling to Wall Street, conventional Republicans, and the neoliberal left. Who exactly wins in this trade war scenario? I want to suggest it's the fossil fuel industry.

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If any sense of Trump's trigger-happy tariffs is to be made, then one must see their true target, which is solar or other renewable modes of energy.

China is, true, a huge consumer of fossil fuels, but it has also played a major role in the rising affordability of solar cells and panels. If this trend in solar prices is coupled with the expanding electric vehicles market and its infrastructure, it's easy to see the makings of an economic and cultural revolution that, in the near future, will fundamentally transform our society's foundation which, for the past 100 years, has been the burning of fossil fuels.

This is not the wishful thinking of some pinko commie on the Left Coast. One of the largest banks in the world, BNP Paribas, also believes that "the economics of renewables are impossible for oil to compete with" and is recommending that investors take into account the real possibility of oil prices falling to "$11 to $12 per barrel" to remain competitive with the batteries of electric vehicles and the growing renewable energy market.

Joe Romm of ThinkProgress writes:

The bank’s analysis, “Wells, Wires and Wheels,” is devastating for Big Oil. It concludes that “the oil industry has never before in its history faced the kind of threat that renewable electricity in tandem with EVs poses to its business model.”

Within a few years, electric vehicles (EVs) will be superior to gasoline-powered cars in every respect. In part, that’s because electric motors are vastly more efficient than gasoline engines. And it’s also in part because solar and wind power and batteries have seen staggering price drops in the past decade — and are projected to see equally big drops in the coming years.

But one of the most startling findings is that because the cost of running EVs on solar or wind power is dropping so rapidly, the only way gasoline cars can compete with these renewable energy-powered EVs in the 2020s is if the price of oil were to drop to $11 to $12 per barrel. The current price of oil is over $50.

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The banks also report that Big Oil is using "its vast current income to buy political power so that it can slow down investment and government policies aimed at advancing electric cars." And so we have Trump planning to cut subsidies for electric cars and renewable energy, and imposing high tariffs on Chinese solar panels and cells. (It must be noted that George W. Bush's administration initiated tax credits for EVs, and this incentive was continued and expanded by Obama. Trump wants to kill it.)

Now, if we insert all of these bits and pieces into the confusion of the current trade war, a logic emerges. For its entire history, the fossil fuel industry has never faced competition from other energy sectors. It had all of the money, all of the power, and all of the future. This is no longer the case. The industry is really threatened by recent developments in solar technology and EVs. And as these technologies are becoming cheaper, oil's "opportunity cost" is rapidly increasing. The bank estimates that “the size of that opportunity cost [will be] $24 trillion over the next 25 years on gasoline alone” (this does not include the cost of oil security and the subsidies, which are $5.2 trillion a year).

What this means is that the fossil fuel industry, which has very deep pockets at the moment, must become more dependent on politics (socialism), rather than market forces (capitalism), for its survival. The trade war with China might look like it's spreading in every direction, but Big Oil is its prime mover.

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