Electric Vehicles and the Real Cost of Gasoline

Something called the “real” cost of gasoline often comes up when the prices of electric vehicles (EVs) are compared to the costs of conventional cars. The basic argument is that electricity could compete with gas on cost, if there were no subsidies or other forms of government support for the oil industry. However, from an employer perspective, that misses the point. Even if electric cars were more affordable, switching one for the other still leaves a host of problems to solve.

The “real” cost of gasoline is…complicated

Even with oil industry subsidies, the overall cost of owning EVs has already moved into competitive territory with gas. EVs cost more up front due to the expense of the battery pack, but over time the “total cost of ownership” calculation can level out, due to lower fuel and maintenance costs for an all-electric drive.

Given this context, the bottom-line case for electric vehicles becomes even more clear if car buyers have to pay higher prices for gasoline.

Estimates vary, but the figure of $15.00 per gallon for unsubsidized gasoline in the U.S. seems to have caught hold in the current conversation.

That’s actually an old estimate, from a 2011 analysis undertaken by the Center for Investigative Reporting (now Reveal News). Their analysis factored in costs related to the cost of environmental and health impacts as well as direct financial subsidies.

Another analysis from the same year pegged the cost at $12.75 per gallon. A 2018 study also suggests that the cost of military protection for shipping routes and other elements of the global oil supply network should be part of the equation, too. That study arrived at an additional figure of more than 70 cents per gallon for military costs alone.

The social safety net could include gas…

All in all, it seems fair to assume that the cost of a gallon of gas would be far more without various oil industry subsidies.

It is also fair to assume that many drivers can easily put money down for a new EV if they don’t want to pay more for gas. However, many households cannot afford to trade in their old car for another, electric or not. Removing the subsidies will force them to absorb higher fuel costs into budgets that are already stretched thin.

One solution would be to expand the social safety net to include fuel. Tattered as they are, social programs still underwrite basic needs for millions of low-income households including food, housing and utilities. Gas costs could also receive support, too.

A household subsidy program could also account for the use of fuel by self-employed drivers, small business owners, and workers in the gig economy who depend on their own vehicles to make a living.

…but accessible transportation access is the real issue

Either way, the back-and-forth over the real cost of gasoline is a distraction from a far more complicated problem that has impacts on businesses as well as on individuals. Unequal access to transportation is both a social issue and a bottom-line challenge for commerce.

For all the opportunities created by car culture, the focus on individual ownership leaves millions out in the cold, limiting the ability of employers to connect with potential employees, customers and clients.

The simple fact is that millions of low-income workers and consumers in the U.S. do not drive. They walk, drive, bike, use mass transit, rely on community networks for rides, or get ferried to a worksite by their employer. They will not benefit from a gas assistance program, at least not directly.

Income is only one limiting element. Millions of workers and consumers in the U.S. also don’t drive due to eyesight issues and other physical factors. In addition, the U.S. court system routinely pulls millions more out of the driving pool by suspending their licenses, while concerns over legal status can keep keep millions of non-citizens from owning or driving a car.

On the flip side, the need to accommodate individual car ownership can result in burdensome requirements for businesses that must subsidize employee parking, either through in-house parking lots and garages or through a voucher system.

To the extent that businesses need to have their own parking infrastructure, their choice of location can be limited, forcing a tradeoff between other bottom-line considerations and on-site employee parking.

The electric vehicles solution, fleet manager edition

While the impact and benefits of knocking out subsidies for gasoline will be spread unevenly among individual car owners and the general public, the effect on fleet management would be definitive. Higher gas prices will help push the fleet electrification movement into overdrive.

The fleet electrification movement has already begun to accelerate in recent years, even under relatively low gas prices. The latest price spike has further clarified the bottom-line advantage of EVs under a total cost of ownership scenario. In addition, up-front costs are expected to decline as the cost of EV batteries continues to fall.

Today’s fleet managers – and their employers – are also more sensitized to the public relations benefits of transitioning to more environmentally sustainable automotive technology. Community relations and driver health can also improve when noisy, smelly gas and diesel vehicles are replaced with clean and quiet-running EVs.

In addition, an electrified fleet can participate in workplace charging initiatives and demand-response programs that save money while contributing to overall grid reliability. Bi-directional EV batteries can also reduce or eliminate the need for noisy diesel generators in case of a power outage.

The case for fleet electrification is crystal clear, regardless of oil industry subsidies. As for individual car ownership, electric vehicles have finally gone mainstream. The early work of convincing individual car buyers to go electric has been done. Advocates for electric vehicles who have been leaning on the environmental case for electrification can shift gears and embrace a more fair, equitable and sustainable distribution of transportation resources beyond personal car ownership.

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