1. Historically and reliably, when fuel prices drop, car sales rise.
2. If we had vigorous fuel competition in America, fuel prices would drop.
3. Any car that runs on gasoline can be turned into a GEM car (which can burn any combination of gasoline, ethanol, or methanol) for 41 cents, creating robust fuel competition in America.
4. Automakers deliberately disable the flex fuel capability of their cars.
Why? Why would the manufacturer of anything deliberately disable a capability that their customer might find useful? Even more curious, why would a manufacturer disable a feature that would greatly improve their bottom line? Dr. Robert Zubrin, the renowned engineer, in a recent article in The New Atlantis, writes:
One answer, and perhaps the most salient one, is that the automobile companies are not capable of pursuing their own independent interests. Rather, significant parts of these car companies are owned by entities that are much more heavily invested in oil. In some cases, it is safe to surmise that these investors are one of the obstacles preventing automakers from encouraging free energy competition.
For example, the automobile company with the highest revenues in the world is Volkswagen. Today, 17 percent of Volkswagen is owned by the Qatar Investment Authority, the sovereign wealth fund of OPEC member Qatar, which gets its money from Qatar’s state-owned oil industry. It is the third-largest shareholder in VW (after having sold 10 percent to Porsche in 2013). The vice chairman of the Qatar Investment Authority even has a seat on Volkswagen’s supervisory board.
We see similar situations with other European automakers. For example, the Kuwait sovereign wealth fund owns 6.9 percent of Daimler (which produces Mercedes-Benz cars). Aston Martin — famous for its James Bond cars — was purchased in 2007 by a group with majority funding from two Kuwaiti investment firms (although much of their share of the carmaker has since been sold off). In recent years, the government of Abu Dhabi (part of the United Arab Emirates, an OPEC member) has owned stakes in Daimler and Ferrari.
What about the two biggest American auto manufacturers, General Motors and Ford? The dominant shareholders in these companies — not counting the U.S. and Canadian governments, whose bailout of GM temporarily made the U.S. Treasury the company’s largest stockholder — are major Wall Street funds whose holdings in the energy sector, including major oil companies, typically far exceed their shares in the auto industry. Again, one suspects that their interest in protecting these oil investments might conflict with flex-fuel capabilities.
For instance, the largest institutional stockholder in GM, Capital Research Global Investors, owns $2.9 billion of GM stock, but has $19.1 billion invested in energy, including $3.0 billion in Schlumberger, the world’s largest provider of oilfields services. (All these figures are current as of September 2013.) GM’s second-largest stockholder is Harris Associates, which has $2.3 billion invested in GM and $3.7 billion invested in energy, including $1.6 billion in National Oilwell Varco, an equipment maker for oil and gas drilling, and $0.8 billion in Devon Energy, one of the biggest U.S. oil and natural gas producers. Third is JP Morgan Chase, with $1.7 billion in GM and $29.2 billion in energy, $4.9 billion of which is in Exxon Mobil, $3.0 billion in Chevron, $2.0 billion in Schlumberger, and $1.7 billion in ConocoPhillips. The fourth-largest GM stockholder, the Vanguard Group, owns only $1.6 billion in GM, but $93.5 billion in energy, including $22.2 billion in Exxon Mobil and $12.1 billion in Chevron. And the fifth largest, Berkshire Hathaway, owns $1.6 billion of GM stock, and $7.5 billion in energy, of which $4 billion is in Exxon Mobil. Another major investor in GM is Saudi Prince Al-Waleed bin Talal, who snapped up $500 million in shares when the revived company returned to the stock market in 2010.
Ford does have one major investor — its largest shareholder, Evercore Trust — whose Ford holdings ($3.7 billion) exceed its energy investments, which are minimal and not at all in oil. But otherwise Ford’s situation is similar to that of GM. After Evercore, the next four top owners of Ford include again the Vanguard Group ($3.0 billion in Ford, $93 billion in energy), State Street Corporation ($2.5 billion in Ford, $77.9 billion in energy, of which $18.2 billion is in Exxon Mobil and $12.5 billion in Chevron); Wellington Management ($1.7 billion in Ford, $36.2 billion in energy, of which $5.4 billion is in Exxon Mobil, $4.7 billion in Chevron, and $2.3 billion in BP); and Barclays Global Investors ($1.6 billion in Ford, $47.5 billion in energy, of which $6.1 billion is in Chevron, $3.1 billion in Schlumberger, and $2.3 billion in ConocoPhillips).
Now, it is true that some of these investors also have shares in alternative energy companies, and even in methanol companies. But these tiny holdings are dwarfed by their oil holdings. For example, Wellington Management invests in Methanex, the world’s leading methanol supplier. But Wellington’s $0.4 billion investment in Methanex is just one-fortieth the size of its investment in oil companies. JP Morgan Chase has $0.1 billion invested in Methanex, less than one-hundredth the size of investment in oil. Naturally, for these investors, protecting their financial interests means prioritizing oil over methanol.
In short, the owners of the biggest U.S. car companies have interests overwhelmingly aligned not with the automakers or their customers but with the oil cartel. At minimum, this represents a very serious conflict of interest. Barring a change in circumstances, it is unlikely the car companies will take actions that would imperil OPEC’s control of the market.