This story was originally published by Grist and is reproduced here as part of the Climate Desk collaboration.
Gasoline prices continue ticking higher as the United States and Israel’s war with Iran continues. As of March 23, the national average stands at $3.96 per gallon, nearly a dollar higher than at the start of the conflict. It’s also just shy of a tipping point that could push consumers toward electric vehicles.
When gas prices top $4 per gallon, BloombergNEF estimates that the total cost of ownership for EVs becomes lower than for gas-powered vehicles. The exact crossover point depends on local prices for both gasoline and electricity. “[But] even when I run the model using the more expensive electricity cost, we are still seeing this very similar pattern,” said Huiling Zhou, an electric vehicle analyst at BloombergNEF. In California, for example, where electricity costs are high, gas is also expensive. At more than $5 a gallon, the state has already passed the point at which EVs are the cheaper option.
According to a AAA survey from 2022 — when Russia’s invasion of Ukraine drove a monthslong price spike — $4 a gallon is also the threshold at which a majority of Americans will make changes to their driving habits or lifestyles. Stephanie Valdez Streaty, director of industry insights at Cox Automotive, agrees that “the high gas prices definitely start the conversation with a consumer.”
“There is no meaningful policy tool to mitigate this.”
— Robbie Orvis, Energy Innovations
Edmunds.com has reported an uptick in search traffic for EVs since the war started on February 28. It’s too soon to tell whether that interest will convert to more purchases, said Valdez Streaty. But when prices surged at the outset of the war in Ukraine, sales of electrified vehicles rose as well. From January through March 2022, EVs’ share of car sales in the US climbed 69 percent, with hybrids jumping 32 percent. Robbie Orvis, who directs modeling and analysis for the think tank Energy Innovations, said the general trend pre-dates electric powertrains.
“In the past, when prices have gone up, people would start choosing more fuel-efficient cars,” he said. The oil shocks of the 1970s and 1980s, for example, led to a focus on fuel efficiency and helped make relatively efficient Japanese cars more popular. Avoiding gas guzzlers could become trendy this time, too.
“If you drive an EV, you’re nicely insulated,” Orvis said. “Your retail electricity rate isn’t going to double from one month to the next, like it can with gasoline.”
Still, Orvis highlighted some factors that might mitigate a rush toward EVs. For one, it’s unclear how long high fuel prices will last. Limited availability of chargers for electric vehicles is another barrier to adoption. People also tend to put more weight on upfront costs than long-term financial gains. Then there’s the fact that higher oil prices can put a damper on consumer confidence more broadly.
“The current situation is very likely going to lead to higher prices all around,” Orvis said. That pressure could mean people are more hesitant to make a big purchase like a car. As Valdez Streaty put it, “if they can delay it, they’ll delay it.”
At the same time, EVs are in many ways more attractive than ever. Cox Automotive reported that, last month, the price premium for EVs compared to new gas-powered cars was the lowest on record, at $6,532. The pre-owned market had an even narrower $1,334 gap, with 18 of 26 brands now having an average used EV price below their used gas equivalents.
“If you can have access to charging, now is the perfect time to get an EV,” said Jenny Carter, a professor at Vermont Law School who has researched consumer EV adoption. But higher gas prices, she continued, also put a spotlight on equity issues.
“Low-income people have the most to gain by owning and driving an EV, but they’re the hardest market to reach,” she said. Those households often spend the highest portion of their incomes on gasoline, she explained, but are the least likely to be able to afford alternative vehicles or have access to charging. “It’s a real paradox.”
Orvis thinks that part of the problem is the dearth of information available to prospective buyers. Because dealers generate much of their revenue providing maintenance that EVs don’t need, he said, they may not fully explore the financial benefits of going electric with customers. He suggested that shoppers use one of the many online calculators that can show how, even when the upfront cost of a gasoline car might be lower, the monthly costs of ownership could be higher when you consider fuel and maintenance costs.
“There’s a real issue with how EVs are marketed,” he said. “It’s very hard for a new buyer, especially if you’re not really versed in this stuff, to get a real sense of what the trade-offs are.”
For those who either can’t afford electric cars or don’t have access to charging, Valdez Streaty points to hybrid vehicles, which can be 25 to 45 percent more fuel efficient than their standard counterparts. A HondaCR-V, for example, gets around 29 mpg while the hybrid version gets 37.
Even if soaring oil prices don’t last long, electrified cars can help soften the blow the next time they spike. A report released Wednesday by the energy think tank Ember found that EVs already displace around 1.7 million barrels of oil per day. While a far cry from the roughly 20 million that normally flow through the embattled Strait of Hormuz daily, it represents about 70 percent of Iran’s oil output.
“The main thing to watch is national plans of how to respond to this,” said Daan Walter, a principal at Ember. He is optimistic that many countries will use moments like this to start turning to climate-friendly policies that help reduce their dependence on fossil fuels, including gasoline.
So far, President Donald Trump doesn’t appear poised to lead the United States in that direction. Last summer, a Republican-led Congress gutted the Inflation Reduction Act, which included tax rebates for electric vehicles. But, particularly in the short term, American policymakers also lack levers for keeping rising gas prices in check, so people may very well start to shift on their own.
“There is no meaningful policy tool to mitigate this,” Orvis said. “The only way to do that is to just get off the roller coaster, and EVs allow you to do that.”
