Buying an Electric Car Creates a Buffer Against Rising Gas Prices

By · May 08, 2018

Driving an EV means that you don't have to worry about rising gas prices.

Amid global economic growth and growing geopolitical tensions, the U.S. price of oil this week topped $70 for the first time since 2014. With a resulting increase in gas prices by about 50 cents a gallon compared to last year, interest in electric cars is on the rise. But how much will the desire to avoid pain at the pumps accelerate EV adoption?

In 2013, Mike Omotoso, then a senior manager of powertrain forecasting at LMC Automotive Inc. told, “As long as gas is relatively cheap and batteries relatively expensive, demand will remain low.” So, for the first time since the introduction of modern EVs in late 2010, we could a flip in the script—providing a glimpse of consumer interest in electric cars in a time when gas prices are up, and battery prices are quickly coming down.

A new AAA study—conducted before the recent gas-price increases—reveals that one in five Americans is interested in an electric vehicle for their next purchase. Respondents stated a concern for the environment and lower long-term costs as the primary reasons. However, historical spikes in gas prices have been a more powerful and immediate catalyst for increased purchases of efficient gas cars, hybrid vehicles, and plug-in cars. Unlike previous rises in gas prices, dealerships now offer a wide selection of about 40 models that are either pure electric or plug-in hybrid.

Also, Americans today are less concerned about running out of electricity in an EV, according to the AAA study. “Range anxiety is less of a concern than it has been in the past,” said Greg Brannon, director of automotive engineering for AAA. “People rarely run out of charge when they’re on the road, so it’s kind of an unfounded fear,” he said.

The national average price of gasoline was $2.81 this week. As the 2018 driving season approaches, the prices are expected to rise further. When combined with a likely jump in oil prices if President Donald Trump imposes sanctions on Iran, we could see the highest pump prices of the past several years—with a likely jolt in EV interest. American car buyers often make their decisions based on short-term factors even though car ownership commonly last for several years.

While the price of electricity for use in an EV can be difficult to calculate, the rule-of-thumb is the equivalent of about $1 per gallon. Meanwhile, if gasoline prices eclipse $3.00 (or even approach $4.00) the economic benefit to consumers would be substantial. Moreover, the psychological impact of knowing that electricity is a cheaper (and cleaner) fuel— combined with lower EV maintenance costs, benefits to the environment, and quick and quiet performance—could push unprecedented numbers of consumers who had shown some interest in an EV to finally make the switch to electric.

New to EVs? Start here

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