Gasoline Prices as a Catalyst for Electric Car Renaissance?

Gasoline prices are up to a national average of $3.89 per gallon [2]. In order to save money, many people have been trying to reduce the amount they drive. Mastercard SpendingPulse helps paint a crude picture on the state of gasoline consumption in the United States. In the past year, gasoline consumption is down by about 3% [2]. However, this has done little to ease the pain on people’s pocketbook as spending on gasoline rose by about 20% in this same time period. This can be attributed to an approximate 24% rise in the price of gasoline in the past year [2]. So, one thing is clear: gasoline prices are rising enough that people are making a concerted effort to reduce consumption. To predict what this could mean for the future of transportation it is important to understand why gasoline prices fluctuate and what are the options in the market today for people who want to reduce their consumption.

Worldwide, gasoline prices increase primarily based on the price of crude oil. The price of crude oil varies due to worldwide demand and occasionally due to disruptions in exporting countries such as Iraq, Venezuela, and Nigeria [1][2]. Additionally, short term gasoline price variations can be caused by seasonal changes in demand. Worldwide demand is steadily increasing due to growing populations and economies in India and China. If we aim to decrease the price of gasoline by decreasing demand, it will have to be within our borders. Exporter disruptions on the other hand are erratic and cannot be controlled. The only way to avoid disruptions is to decrease dependence on foreign crude oil sources.

So, what are the options in the market today for the consumption conscious citizen? As of now it is battle between highly efficient cars and completely electric/ primarily electric vehicles. Due to lower prices, highly efficient petroleum cars are currently more attractive. However, looking long term, it might not be unwise to bet on electric.  First of all, buying electric seems to be the only ‘cure-all’ for the driving forces for high gasoline prices: demand and foreign dependency. Currently in the United States, about 95% of transportation relies on gasoline [5]. If primarily electric cars were to be widely used, the worldwide demand for oil would decrease, thus decreasing oil prices. Consequently, when trips surpassed the 25-50 miles (the limit of the current batteries in electric vehicles [4]), reserve gasoline would theoretically be cheaper. Additionally, the United States is much more capable of producing electric power locally with vast coal, natural gas, and renewable reserves. This would help solve the problem of exporter disruptions by making the United States more energy independent.

This being said, electric cars were decidedly not very successful in sales in their first year on the market. However, new policy and new venders give electric cars some hope. Many other car companies besides Chevrolet are releasing electric cars in the coming year. These companies include Ford, Mitsubishi, Coda Automotive and Tesla Motors [3]. As far as policy goes, Jerry Brown, the Governor of California, is recorded saying he would spend $100 million dollars on plug-in stations for electric cars throughout the state. Additionally, AAA, the popular car service organization, has started testing roadside service specifically for help with recharging vehicles [3].

Although electric cars still face many challenges including high prices and short capable distances, it is possible consistently rising gas prices could act as a catalyst to encourage production and consumption of this new type of vehicle.

[1] http://www.house.gov/forbes/newsroom/editorials/2008/gaspricesprimer.htm

[2] http://www.sooeveningnews.com/newsnow/x1531707146/Stuck-with-high-gas-prices-drivers-just-pump-less

[3] http://newsroom.aaa.com/2012/03/president-obama-talks-gas-prices-in-one-on-one-with-aaa/

[4] http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/03/24/BU771NOQ0U.DTL

[5] US Dept. of Energy, “U.S. Primary Energy Consumption by Source and Sector, 2008” (2009)

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3 Comments

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3 responses to “Gasoline Prices as a Catalyst for Electric Car Renaissance?

  1. sahtt

    Obvious to those who have considered purchasing an electric car, owning one requires analysis of several unique variables. Gasoline and diesel are readily available throughout the world. While electricity is at least as dispersed, there is more to the story.

    In Austin, for instance, one can utilize Austin Energy’s 116 charging stations network for $5 a month (2). If you visit any major park, Wholefoods, or many other places at least once or twice a week it is possible for this network to supply most if not all your charging needs. I failed to determine the longest contract rate available, but locking in $60 a year for “fuel” costs results in serious simplification of the economic analysis of buying an electric car. Austin Energy’s $1,500 rebate on Level 2 at home charging stations is also another important local consideration (1). For those who do not own a home outright or know they move every few years (a huge portion of the population), this provides at potential solution for charging an electric car that most areas do not have.

    If the two programs above were offered in every major city (more distributed regions would degrade the effectiveness of a centrally located charging network), who knows what the electric car market penetration would be.

    Once a few charging stations are built between Austin, Dallas, Houston and San Antonio (or new technology doubling range), it will garner the interest of many commercial operators. For example, I know pipeline companies, often staffed with dozens of technicians driving non-stop all over Texas checking various metrics, would jump at the opportunity to cap/fix their “fuel” costs for pipeline maintenance workers transportation. It will take very little time and convincing to totally shift the system once the economics become overwhelming. On the same note, until the economics and convenience are there, it will be close to impossible to efficiently expand electric car utilization. I think even the moderate success of the Tesla Model S at $50,000-$75,000 will quickly become a game changer as long as it proves to be even somewhat reliable and Tesla can meet production demand.

    (1) http://www.austinenergy.com/About%20Us/Environmental%20Initiatives/plug-in%20Partners/aboutThePilotProgram.htm

    (2) http://www.austinenergy.com/About%20Us/Environmental%20Initiatives/plug-in%20Partners/chargeOnTheRoad.htm

  2. Cost(price) is really an incentive. I’ve been noticing a lot of new Nissan Leaf in my neighborhood (Far West Area) and asked people about their opinions. They all seemed to like it very much. Nissan’s website has a pretty detailed introductions on this new car, including charging [1], battery [2], design, incentives etc. I was pretty impressed and the electric car definitely raised my interests. However, I think the electric car is not a long-term solution for energy but it is absolutely great for the transition time when we try to bridge conventional oil/gas dominated energy to a relative flexible renewable energy solution in the future. The electric car works best in big cities with dense population and bad traffic. Drivers wait longer in traffic jam during rush hours and hit more breaks per day when they commute from home to work everyday. Driving an electric car is sure gonna save more gas than driving a truck. In major big cities, charging stations can be built densely and the charging station can be made the most use of as well.

    We used a lot of rare earth element to make no matter a hybrid vehicle or an electric car. We can’t fully substitute all the cars to the hybrid or electirc cars because there will be threat to rare earth element shortage [3] pretty soon. Rare earths used in wind turbines, hybrid cars, missile defense systems and many other essential applications. “China provides about 97 % of the world supply and they are restricting exports [4] . The price of rare earth elements and compounds have gone through the roof over the last few years.” said Dr. Patrick Taylor from Colorado School of Mines. Those rare earth elements are the same limited natural resources as oil and gas and other minerals. We can deplete it really soon and the distribution of this resource is even unfair in the world. But for the short term energy solution, the electric car is great without a doubt.

    [1]http://www.nissanusa.com/leaf-electric-car/tags/show/charging#/leaf-electric-car/tags/show/charging
    [2] http://www.nissanusa.com/leaf-electric-car/tags/show/charging#/leaf-electric-car/tags/show/battery
    [3]http://www.hybridcars.com/news/threat-rare-earths-shortages-hybrids-and-evs-remains-unclear-34571.html
    [4]http://www.fas.org/sgp/crs/natsec/R41347.pdf

  3. Pingback: Hybrids: Vehicles for the Future | Bites With Brandy

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