Electric Vehicles, Horses, Oats, and Ethanol. Does the last Transportation Revolution Reveal Anything about the Next One?

By John M. Crespi and Joshua L. Rosenbloom

August 2022 was quite the month for energy-related headlines. First, Congress passed and President Biden signed into law both: (a) the bipartisan CHIPS and Science Act, which is structured in part to reduce bottlenecks in semi-conductors that green energy businesses such as electric vehicle (EV) manufacturers had been facing; and, (b) a substantial package of green-energy stimulus in the Inflation Reduction Act (see the detailed discussion at the Center for Agricultural Law and Taxation). Coupled with the previously passed (November 2021) bi-partisan, Infrastructure Investment and Jobs Act, which includes funding to upgrade energy transmission and increase vehicle chargers, both urban and rural areas should see significant developments in clean energy transportation infrastructure.

Then, on August 25, California Governor Gavin Newsom an end to sales of newly manufactured gasoline- and diesel-powered vehicles beginning in 2035. In reality, California cannot legally implement this ban without the Environmental Protection Agency granting a special waiver for the Clean Air Act. Attorneys general from other states have been fighting California’s waiver request (see Saiyid 2022), alleging California, which has 11% of US vehicles (USDOT 2020), has an outsize influence on US transportation needs. Indeed, when coupled with 17 other states that have set part or all of their emissions standards to California’s regulations, arguably up to 40% of US vehicle sales may be impacted (CARB 2022).

Are US drivers ready to get rid of their gas tanks? There was a 60% increase in EV registrations in the United States in the first quarter of 2022—the overall share of EVs represent nearly 5% of the new vehicle auto market and about 2% of all EVs in the United States (see figure 1). Blanco (2022) cites studies predicting 40%–45% of new car sales could be EVs by 2035. However, a frequent question that arises is whether the energy infrastructure exists or if the United States can build it in time to match such a movement. Without the infrastructure, it is argued, EV usage could hit a ceiling despite government intervention.

Electric and hybrid sales over the last 20 years

Since 2000, when hybrid vehicles were nearly absent from the US market, the total number of hybrids grew to about 800,000 in 2021. By 2021, plug-in hybrids grew to about 174,000 vehicles while the number of pure EVs grew to about 460,000 (see figure 1).
 

Two arguments about the growth in EVs are worth examining by means of analogy. First, US infrastructure is not ready for a switch to EVs. Second, a move to EVs necessitates an end to ethanol and biodiesel. There will be much written on both issues in the years to come, but for this article, we simply compare the last time a revolution happened in the transportation sector, near the beginning of the twentieth century.

Horseless buggies will never catch on!

By 1930, internal combustion engines had clearly replaced horses and mules as the preferred transportation in the United States. One of the first US car builders, Alexander Winton (1860–1932), recalled to The Saturday Evening Post how people reacted to the horseless buggy industry at its inception. “But in the [18]90s, even though I had a successful bicycle business, and was building my first car in the privacy of the cellar in my home, I began to be pointed out as ‘the fool who is fiddling with a buggy that will run without being hitched to a horse’” (Winton 1930).

Like hybrids in 2000, horseless carriages were still curiosities in 1900, although entrepreneurs and early adopters began to see their potential. Iowan William Morrison (1855–1927) used electric batteries instead of gas in his horseless carriage; and, in fact, at the dawn of the horseless buggy era about one-third of all cars sold in the United States were electric (USDOE 2022). However, by 1900, only 4% of US roadways were paved. Local governments funded most roads in the United States in the late 1800s and early 1900s—federal support for highways did not really begin until the Federal-Aid Highway Program in 1916, and the interstate highway system did not begin construction until 1956 (TRB 2005). In short, the horse and buggy were usurped before the infrastructure was in place.

Where figure 1 presents roughly the first two decades of the emerging EV era, figure 2 compares horse and mule numbers with vehicle registrations in the United States from 1900 to 1921 and shows that the number of horses and mules only slightly declines after approximately 1915, whereas the number of vehicle registrations increases greatly around the same period. The number of car registrations increases as a proportion of total “vehicles” (=registrations+horses+mules), to about 40%, which is much more than we see so far today with electric and hybrid vehicles as a share of total vehicles.

Let us now expand figure 2 into figure 3 to show the true decline of the horse as a mode of transportation. Ending our graph at around 1960 is good enough to make the point—the number of horses and mules in existence today is not much more than it was in 1960.
 

An interesting way to examine the change in transportation is to look at the change with the data transformed into logarithms (base 10) to see the rate of change. Figure 4 shows that by approximately 1924, the increasing growth rate of automobile registrations overtook the low growth rate of horses and mules (in logarithms shown as a nearly flat line). The two lines cross about 1924, which was arguably the end of the growth path for horses, mules, and buggy whip stores. The end of the era of the horse-drawn carriage in the mid-1920s is consistent with that proposed by Grübler et al. (1999) in a much more thorough study of the data. Less than 30 years from the introduction of the automobile, horses were heading out to pasture.

Of course, one important factor in the success of the automobile was the rapid decline in prices brought about by the application of assembly line mass-production techniques (Hounshell 1984, ch. 6). Average prices (in current dollars) fell 51% from 1906 to 1940, dropping from $3,290 to $1,611 (Raff and Trajtenberg 1996). After adjusting for the effects of inflation the decline was even more dramatic, resulting in a more than two-thirds decline in the real price. In constant 2022 dollars, the average auto price dropped from $107,930 in 1906 to $33,984 in 1940. During this period, vehicle quality also increased greatly. Raff and Trajtenberg (1995) calculate that the quality adjusted price of autos fell by more than 80% in this period, with most of the decline occurring by the early 1920s.

Comparable reductions in the purchase price of EVs seem unlikely today in view of the perfection of assembly line manufacturing techniques that has already been achieved. Probably the greatest potential for cost reduction in EVs is in battery production, where continued technological progress is expanding battery capacity relative to cost. Castelvecchi (2021) reports that the cost of lithium has fallen 97% since 1991. Plante and Howard (2022) report that between 2012 and 2021 the ratio of vehicle price to its range in miles has fallen about 50% for Tesla, and a bit more than 60% for other electric vehicles.

What about infrastructure needs at the birth of the automobile revolution? Figure 5 shows the expansion of public roads (paved or unpaved) along with the expansion of the US oil industry (measured in terawatt hour (TWh) energy equivalences to account for differences in oil usage). Until the 1970s, the United States was mostly self-sufficient in oil production; thus, unlike the metals used in EV batteries, domestic gasoline and diesel production was able to provide for US automobile needs. As figure 6 shows, when we convert public road mileage and US oil production into logarithms to show the rates of change and add vehicle registrations, it appears that motor vehicle registration led the charge. After about 1924, the rates follow similar growth trends. In other words, US infrastructure did not come first, nor did it increase in proportion to the number of cars, at least not at first.

If cars lose their tanks, what happens to ethanol?

Does the end of the buggy era tell us anything about biofuels? Consider ethanol, which is essentially a fuel additive. So, too, were oats in the buggy era, and ethanol seems dependent on the internal combustion engine just as oats seemed dependent on horse-drawn carriages.

Unlike a car, livestock can eat a variety of feeds; and, in the 1900s, horses and mules were foraging on pastures and fed hay and grain complemented with high-energy oats. By 1900, oats were widely produced in the United States for farm rotations and soil management and oat straw was used for livestock bedding. Similarly, corn is a multi-faceted product for which ethanol is just one use. Oats did not immediately vanish as cars increased because oats still had other uses and because there was not another crop ready to replace oats on the farm to build income (see figure 7). Figure 7 extends well past the 1960 cutoff of the earlier graphs in order to show that the eventual decline of oats commenced well past the decline of horses and mules—it was not commensurate.
 

In figure 7, we see that the rise in oat production after 1900 begins to peter out in the 1920s, around the same time that automobiles overtook horses and mules as the main means of transportation. However, oat production did not immediately decline—oat production survived at around its mid-1920s’ levels for another 30 years. By the 1960s, however, US agriculture had begun moving to more of a monoculture with fewer rotations and fewer farms growing oats. The year 1958 was the last year in which oat production was about what it was in 1900 when horseless carriages started to spook their animal-powered cousins.

For Iowa specifically, the growing popularity of soybeans displaced oats and hay (see figure 8). Nationally, oats outlasted horses and only declined because of changes in the farming industry—especially a more profitable use of farmland (soybeans). Ethanol, likewise, can find new uses in hybrids, hydrogen, jet fuel, or as a greener fuel than natural gas or coal for power plants to produce electricity for the coming EV fleets.¹ Will ethanol’s usage decline as cars move from gas to EV? This is likely, but it is not clear what the “soybean” of the future representing a more profitable use of farmland looks like right now. It may still be for ethanol or biodiesel or other green fuels such as biogas, but instead of going in the tank of passenger vehicles it will go into the tank as jet fuel, long-haul trucking fuel, or in farm and construction equipment that need more power per unit of fuel than EV currently provides. As figure 9 shows, the energy equivalent of a battery still lags behind other liquid forms of energies. Ethanol, biodiesel, and other forms of plant-based, liquid fuels will still be needed for now, even if passenger vehicles may discard their tanks because of their lighter weights per mass of battery. Pronouncing the end of ethanol just because of the rise of EVs is akin to pronouncing the end of oats because of the rise of the internal combustion engine. These liquid fuels may eventually be replaced, but they have other uses, arguably even more uses than the oat-based fuel supplements had in 1924.

Conclusion

It is sometimes difficult to see change happening when you are living through it. With the benefit of hindsight and a comparison to the last transportation revolution in the early 1900s, we can see similarities and differences to today’s movement toward EVs. It is easy to forget that most roads in 1900 were unpaved, that oil production was also in its infancy, and that the growth in automobiles outpaced the growth in roads and oil production for about 20 years. This is not unlike what we are witnessing with EVs today when considering the infrastructure constraints of battery material, charging stations, and energy transmission. Relatedly, we may wonder what happens to plant-based fuels like ethanol as drivers choose vehicles without fuel tanks? A similar question might have been asked about the future of oats in the early 1900s. There we see that because oats, like ethanol and biodiesel, had other uses besides horse fodder, oat production survived longer than horse production, only eventually succumbing to changes that would have been hard to foresee. Ethanol has a green energy potential and, if history is a guide, ethanol will have a place in the US energy portfolio because some transportation and machinery require a greater energy per unit than EV batteries can currently provide. Obviously, there are differences between the transportation revolution of the early 1900s and the EV movement today; however, there are also similarities worth examining.

Footnotes:

¹See chapter 6 of Schulte Moore and Jordahl (2022) for discussion of how ethanol is low carbon and can be made a carbon-neutral fuel. Brazil has built an ethanol-powered electricity power plant, for example. Airlines will struggle to find green jet fuels, ethanol is a potential candidate.

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Suggested citation:

Crespi, J.M. and J. Rosenbloom. 2022. "Electric Vehicles, Horses, Oats, and Ethanol. Does the last Transportation Revolution Reveal Anything about the Next One?" Agricultural Policy Review, Fall 2022. Center for Agricultural and Rural Development, Iowa State University. Available at www.card.iastate.edu/ag_policy_review/article/?a=147.