The stuff was spouting from Teslas, Nissan Leafs, and all the other electric vehicles silently walking past dry gas pumps and frantic drivers filling all kinds of containers with rapidly dropping fuel. When the accumulators turned to plastic bags, the righteousness clean, green observers, no doubt, have reached the red line.
“Now is definitely a good time to become an EV driver,” said Matthew Lewis, a Clemson University economist, from his home in northwestern South Carolina. “There is no gas around here at all.”
Gas stations are slowly filling their tanks over the weekend, but will the Colonial Pipeline debacle – a hack that shut down the country’s largest gas pipeline and triggered panic that has exacerbated shortages – will it trigger a wave of sales of electric vehicles? The short answer, according to economists like Lewis: probably not. But there is a big “but” to consider.
Historically, gasoline is not a very elastic product, that is, drivers are not very sensitive to fluctuations in its price – at least not sensitive enough to change their driving habits or buy a greener vehicle. In fact, there is evidence that American drivers have become less sensitive to rising gasoline prices in recent years. A A 2006 study by economists at the University of California found a 10-fold decrease in gas elasticity between the late 1970s and early 2000s. The authors cited an increase in suburban development. and commuting, associated with a decline in public transport; more efficient vehicles may also have played a role, economists have argued.
When oil prices fell in 2014, sales of hybrid vehicles also fell, suggesting a weak correlation, according to BloombergNEF. However, the adoption rate of fully electric vehicles did not deviate, it remained stable, suggesting that the Tesla crowd was making buying decisions based on environment and personal choice rather than monthly gas bills. This is not surprising given the average price of electric vehicles at the time; almost all of the product category fell into the “luxury” segment.
For almost all products, the elasticity of demand depends largely on two things: duration and alternatives. For the first, people do not reduce demand unless the price hikes drag on. It appears to be the case this week: Even as gas stations dried up, prices have only climbed 4.8% in the past two weeks. AT $ 3.04 per gallon, the average price in the United States remains well below where it hovered between 2011 and 2014.
A bullish economy – especially in a tight job market – tends to trump any penny at the pump. Usually when we are working we are driving. When we earn more, we buy bigger, less efficient vehicles and drive more.
Electric kilometers can also run dry. Frank Wolak, a Stanford economist, noted that widespread blackouts are much more common today than pipeline shutdowns. Indeed, energy officials across the American West warn against a summer of power outages, as extreme heat forces utilities to shut down dirty factories and switch to wind and solar power generation.
What has changed is the second function of the elasticity equation: the alternatives. With the most price-elastic products, consumers tend to have other options. Beef is a good example; if steak gets expensive, people turn to burgers or chicken. As for vehicles, there have never been as many alternatives to gasoline as there are today and they have never been so affordable. In the oil crisis of the 1970s, the alternative to a long line at the pump was a bus pass; today it’s a Nissan Leaf, which can be new for $ 31,670, before any applicable federal and state discounts, or used for cents on the dollar.
Plus, potential car buyers have never been so curious about electric vehicles. About 4% of American drivers “definitely” consider buying an electric vehicle for their next purchase and 27% strongly consider buying one, according to a December survey by Consumer Reports.
Jonathan Levy, commercial director of the EVgo charging network, believes the pipeline drama is accelerating the winds for EV adoption. The cleaner air that came from COVID lockouts was another recent ‘check in the’ pro ‘column for potential electricity buyers, ”Levy said.
Even so, Nick Nigro, executive director of Atlas Public Policy, doesn’t expect immediate green shoots. But he said the pipeline problem was “planting more seeds” of potential EV drivers. “If we find ourselves this summer in a place where wild swings in the price of oil go up,” said Nigro, “you can expect a cumulative effect. “
“It’s a very unique event,” Clemson’s Lewis said of this week’s gas crisis. “There are a lot more people who are nurturing the idea and are about to have a lot more options. For people like that, this is new information. “