Will Rising Gas Prices Fuel a Surge in Electric Vehicles?
Motorists are meeting eye-popping figures when they stop to top off their tanks. Gas prices are over $4 per gallon in every state — and reaching as high as $5 to $6 in some regions. As fuel prices skyrocket around the world, the question is obvious: Have we finally reached the tipping point toward electric vehicles?
Electric vehicles, or EVs, are more desirable thanks to companies like Tesla and popular models like the new Ford Mustang Mach-E. It’s only a matter of time before electricity supplants gas, but analysts claim it will take more than sky-high gas prices to force a pivot.
Gas prices have reached all-time highs, but …
Climbing gas prices are the direct result of disruption in the global oil market, stemming from bans on Russian-exported crude and the increased cost of buying oil from fewer global producers. Russia provides as much as 10% of global crude oil, so the substantial shift in demand will leave other producers struggling to accommodate demand while sanctions remain in place.
According to a report by the New York Times, gas prices will continue to jump. Researchers found the price of Brent crude — an international benchmark for the price of oil — has jumped as high as 7% per day in March. In December, the cost hovered around $65 per barrel; in early March it blew past $139, up over 100%. As of Sunday, March 13, Brent crude prices fell 1.6%, to $110.85 a barrel, as news broke of planned talks between Russia and Ukraine.
Gas prices are the furthest downstream measure of global oil markets. As barrel costs remain volatile, consumers will continue to pay the price at the pump.
… So have nickel prices.
It’s natural to speculate that inflated gas prices would push more people to consider EVs, but electric vehicle producers face their own challenges.
While the demand for electric vehicles is there, manufacturers are struggling with rising materials costs — specifically, the rising cost of nickel. Nickel is an essential component for EV batteries, and the conflict between Russia and Ukraine has almost doubled prices. Russia is the world’s largest producer of nickel.
With nickel prices on the rise, electric vehicles have become expensive to buy despite being cheaper to own. It’s a paradox that’s keeping consumers behind the wheel of their gas-guzzlers for the time being.
Demand is growing for electric vehicles
The demand for electric vehicles is likely to continue growing over the next few years due to rising concerns about climate change and the cost of fuel. France and England have announced plans to stop selling fossil fuel-powered vehicles within the next two decades. Germany already offers financial incentives for those buying EVs. Even China is mandating 40% of all automobiles sold must be EVs by 2030.
While there are still obstacles for EV manufacturers to overcome, these vehicles will have their day. Rollout is limited for the moment, but an electric future is all but certain.
Correlation does not imply causation
We will see more electric vehicles on the road in the coming decade — but not necessarily because of rising gas prices. For many, the upfront cost of EVs remains a barrier to entry, and with global supply chains making it difficult to obtain raw materials and critical electronic components, gas prices are simply the current problem for motorists — not the one to drive a mass migration to EVs.