The Inescapable EV Push!

In the midst of surging gas prices, it can be tempting to look at alternative options. The immediate response may be to pick up an electric car, and while that may be an excellent solution for some, let me explain why it\’s not currently a realistic answer for everyone.

Let me preface this with the fact that I have owned five fully electric Tesla vehicles up to this point. So I am not here to recommend a slowed adoption of these vehicles, but instead to provide a realistic perspective on how feasible the EV solution is as of current.

It seems like every day, a new EV car is born, even outside of the strictly EV car companies like Tesla, Rivian, and Lucid. But let\’s take a look at a couple of examples from the most prolific EV company, Tesla.

Closer Look at Tesla

The starting price of an entry-level Tesla Model 3 after a 6-month waitlist is currently $44,990, and the price goes all the way up to $150,990 for a fully-equipped Model S Plaid. Note that neither includes the $1,200.00 destination charge for new cars or delivery, depending upon your location.

Source: Tesla

Source: Tesla

Average Car Cost

According to Kelley Blue Book in an article released last week, as of February, the average new car cost is $46,085.00, which places the Model 3 right in line with the average price.

Whether you typically buy used or new, this may or may not be surprising.

The parent company of KBB stated, \”Prices remain historically high. February\’s average is $4,719 higher than prices from just one year before — an increase of 11.4%.\”

They go on to say that, \”Consumers are paying near top dollar for new vehicles as prices remain high and incentives fall to a record low,\” said Michelle Krebs, executive analyst for Cox Automotive. \”With prices for oil and gas, along with commodities like metals used to build vehicles, soaring due to Russia\’s invasion of Ukraine, automakers may be compelled to try to offset their increasing costs by raising vehicle prices. The Ukraine situation is causing additional disruption to the automotive supply chain, which makes the likelihood of growing inventory, which remains stuck at low levels, less of a sure thing.\”

This doesn\’t even touch on the insane used car market, which is artificially elevated more than 34% year-over-year, according to CarGurus.

The car market operates far from its norm with these inflated prices, materials shortages, and limited availability. If the change in upfront cost wasn\’t enough, add to that surging gas prices. 

Rising Gas Prices

The surging gas prices are a combination of lessened demand over the last couple of years due to many being quarantined, followed by a resurgence of demand from people wanting to get out and travel and return to their commutes. Add to that the issues around motivating people to get back to work and a reduction in U.S.-based operations, and you have a perfect storm when adding in the sanctions placed on Russia last week.  

According to a Yahoo! article, \”One effect is already clear: Markets have anticipated possible energy sanctions on Russia by discounting Russian crude. Refiners who aren\’t obligated by firm legal contracts to take delivery of it are shunning spot, or non-contract, cargoes exiting Russian ports.

One trade publication estimates that this has resulted in roughly 1.6 million barrels per day of Russian oil failing to find buyers The result is a large-scale disruption in global oil supplies that is already boosting prices, even though the physical oil is still available in principle.\”

According to an MSN article, \”Russia is the world\’s third largest producer of liquid fuels according to the U.S. Energy Information Administration, which is why Ukraine\’s president, Volodymyr Zelensky, has tried to rally support for an international boycott. While all NATO countries may want to heed that call to show support, it\’s more feasible for countries like the U.S. and U.K. to actually go for it. They get about 3% and 8% of their crude oil imports from Russia. Germany and the Netherlands, on the other hand, rely on Russia for more than 30% of theirs. Conversely, the U.S. is not a critical trade partner for Russia—only 1% of its crude oil is directed to the U.S., while more than half goes to Europe and Eurasia.\”

All of the reports I have read point to less than 10% of the U.S. crude oil provided from Russia. Nevertheless, according to a MarketWatch interview, \”Americans have never seen gasoline prices this high, nor have we seen the pace of increases so fast and furious,\” said Patrick De Haan, GasBuddy\’s head of petroleum analysis.\”

De Haan further stated in an MSN article, \”We\’re also entering the spring and summer driving season, when gas prices typically increase because of higher demand,\” he said. \”So we are expecting that this is going to be an expensive summer at the pump for consumers.\” De Haan predicted that the national average could reach $4.50 per gallon. \”I\’m betting on this being a longer period of higher prices,\” he said.

One of the difficult aspects to answer in relieving the upward pressure of pricing on fuel is whether we should listen to U.S. Charlie Munger, Warren Buffet\’s long-standing business partner, who believes that we need to preserve the U.S. and drill off-shore to preserve our liquid gold. On the other hand, how do you balance the immediate needs with the long-term sustainability and preservation of resources? 

In a Tweet last week, the founder of Tesla Motors, Elon Musk, stated, \”Hate to say it, but we need to increase oil & gas output immediately,\” Musk tweeted Friday. \”Extraordinary times demand extraordinary measures.\”

In a Tweet by President Bided, he stated, \”Loosening environmental regulations won\’t lower prices. But transforming our economy to run on electric vehicles, powered by clean energy, will mean that no one will have to worry about gas prices. It will mean tyrants like Putin won\’t be able to use fossil fuels as a weapon.\”

Source: twitter

On the one hand, Elon\’s tweet is looking at the genuine concerns of massive inflation in prices as diesel prices surge and rising transportation costs affecting aspects like food. This would address at least a short-term tapering of fuel costs. In contrast, President Biden tweeted about a long-term agenda to provide relief that gives no hope for consumers\’ current challenges.

The massive push for green energy needs to be called for what it is: a long-term implementation strategy allowing auto manufacturers to make the transition to hit target EPA ratings for their vehicles while the infrastructure is developed and deployed.

Simply stating that Electric Vehicles for everyone is the answer to increasing transportation costs is short-sided.

According to Pew Research, \”Solar and wind power use has grown at a rapid rate over the past decade or so, but as of 2018 those sources accounted for less than 4% of all the energy used in the U.S. (That\’s the most recent full year for which data is available.) As far back as we have data, most of the energy used in the U.S. has come from coal, oil, and natural gas. In 2018, those \”fossil fuels\” fed about 80% of the nation\’s energy demand, down slightly from 84% a decade earlier.\”

If more than ¾\’s of the U.S. energy demand comes down to coal, oil, and natural gas, we have a long way to go to get to an adoption level that would sustain the current demand.

If accomplished through solar and wind energy, we need to find a solution that builds up these energies while maintaining our current energy sources until we can fully transition. Currently, cities across America are not well prepared for the mass adoption of EVs. We are already dealing with rolling blackouts with the current aging grids that are less and less supported since the Fed is pushing funding to advance technologies like wind and solar. So if everyone runs out to buy an EV and plugs that EV into the grid, it will only further exacerbate and expose the issue at hand. Pulling the boat up to the doc first, before just shutting down, cutting off, or burning the ship before we have a sustainable solution is pure idiocracy. 

Now, I believe you can care about the environment and still understand the transition to more sustainable fuels. But like most things that are worth doing, it will take time and bipartisan support.

Additional Article Used

https://www.msn.com/en-us/money/markets/gas-prices-are-hitting-new-highs-heres-why-%E2%80%94-and-how-long-the-surge-could-last/ar-AAUQJqY?ocid=BingNewsSearch

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