Gas stations in Kentucky and Oklahoma became the first cities this week to see pump prices fall below $1 a gallon. Forecasters predict that many regions of the country, starting with the Great Lakes region, will also hit 99 cents a gallon or lower. The drop, due to the coronavirus, brings the price of fuel for combustion cars closer to what EV drivers pay.
What’s happening at gas stations across the country is a sign of things to come when electric vehicles become mainstream. Paul Bingham, head transportation economist at IHS Markit Ltd., told Bloomberg about the drop in demand for gasoline:
You almost can’t even give it away. The price elasticity has totally changed. It’s full-on demand destruction.
Lower oil and gas prices won’t stop the long-term, industry-wide shift to EVs. The combination of environmental and performance benefits – and falling battery prices – make the shift to EVs inevitable. However, the short-term drop in gas prices undermines (but does not eliminate) the dramatically lower cost of an EV’s operations.
The cost of electricity for an EV fluctuates based on many factors. But the general rule of thumb is that electric fuel is about the equivalent of one dollar per gallon. In California, by far the biggest electric-vehicle market in the US, the average price remains stubbornly high at $3.16 a gallon.
On a national level, retail gasoline is expected to average $1.99 this week. By next month, it could fall to about $1.50 – its lowest levels in 16 years. Gas stations in Oklahoma City dropped below $1 a gallon yesterday. Ohio, which has low gas taxes, could be the first with many stations selling below 99 cents.
The more significant concern related to the sharp decline in gas prices is what it tells us about the US economy. Some economists, according to Bloomberg, believe that unemployment could rise by 30% – and the GDP could drop by 50%.
Low prices at the pumps are expected through the summer.
In the long-term, the grid gets cleaner every year, so that EVs will also have a greener profile. But it cannot be overlooked that our electric grid still heavily relies on natural gas. As the price of fossil fuels drops, so does the cost of electricity.
Branko Terzic, senior fellow of the Global Energy Center, at the non-partisan Atlantic Council explains:
In the United States, low global crude oil will mean lower prices at the gasoline pump, and lower natural gas prices will mean lower electricity bills for consumers.
But Terzic offers this warning:
These lower prices will make it difficult for new clean energy development sources to be introduced.
In essence, lower prices at the pumps also mean a lower price for charging your EV. Unfortunately, it’s not much of a consolation for electric cars to maintain their price advantage when considering the havoc wreaked on the economy and the forestalling of our shift to cleaner energy.