While Team Pebble News may be cautiously optimistic over the Inflation Reduction Act we would like our readers to keep a single chart in mind.

The chart is simply the rise in electric vehicle purchases in Norway versus overall Norwegian oil consumption.

Here it is:

As you can clearly see, oil demand has remained very steady despite the rapid takeoff in electric vehicle sales.

This should perhaps not be that surprising. As we have detailed in this newsletter several times previously, cheaper subsidies for one type of energy (in this case electric vehicles) does not often lead to reduced energy consumption. In fact, it increases it which makes total economic sense.

If you make it cheaper for people to consume a good, they will simply consume more, not less of it.

Please keep in mind, this takeoff in EVs is intentional. Norway has mandated that fossil fuel vehicles are phased out by 2025 and it is the first country to have surpassed 50% EV adoption.​

Norway is doing so well in fact, that it actually became the first country to sell nearly 100% electric vehicles during the month of April. Overall, their fleet percentage is now around 80%.

This is wonderful progress in a way and demonstrates that it is possible to shift very quickly with the right incentives.

(and make no mistake, those incentives are real! Gasoline has average over $8.50 a gallon in Norway this year)

But that is what makes the above chart so striking. If it isn't going in cars then why is oil consumption remaining so stubbornly high?

Perhaps because subsidies for one type of energy do not inherently lead to less consumption of another. This may (hopefully) shift over time but for now it should make us very cautious about the ability of the Inflation Reduction Act to curb energy usage.

As we have pointed out any number of times, we know how to discourage consumption of a good: you tax it.

What is particularly concerning is the fact that Norway is about as capable of doing something about climate change as possible. The Scandinavian country is:

• Small in terms of population size.

• Incredibly wealthy.

• Relatively homogenous, ethnically and otherwise.

• Educated.

• Most crucially, capable AND interested in combating fossil fuel usage.

And if Norway struggles to get its oil consumption down then, frankly, we are far more nervous about many, many other countries. That list most certainly include the United State of America who are embracing the Norwegian "well, we will all just drive EVs and the world will be healed" subsidy route

And yet once again, this is the perfect case. Norway is trying to do everything right and, if anything, is beating its own internal deadline and targets and yet its economy remains very attached to fossil fuels.

Where does this leave us?

Concerned. Subsidies simply aren't taxes. It is hard to really suggest that something that hasn't happened yet will for sure happen but it is worth keeping in mind. There are a lot riding on some of the economic assumptions being very easily tossed around as sure things.

In our experience, there are no sure things. And there are also no obvious layups.

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