Buck-a-Gallon Gas for Life?
Posted November 17, 2011
Tomorrow, I’ll be at the Los Angeles Auto Show, where several of the up to 50 plug-in electric vehicle models coming to America’s streets over the next several years will be on display. When you buy your next car, ask yourself this question – “How would you like to drive on a fuel that costs the equivalent of a buck-a-gallon gasoline for the next two-and-a-half decades?”
The blue, red, and green lines in this chart display the Energy Information Agency (“EIA”) forecasts for the price of gasoline in constant dollars under EIA’s “Reference,” “Low,” and “High” oil price scenarios. The purple, light blue, and orange lines display the EIA forecasts for the price of electricity under the same oil price scenarios, converted into “Dollar per Gallon Equivalent” prices (what the price of gasoline would have to be for the fuel cost of driving a 30 mile-per-gallon gasoline car to be equivalent to the fuel cost of driving an electric car with the efficiency of a Nissan Leaf).
If you can’t make out the purple “Electricity - Reference” line, that’s because it’s obscured by the light blue “Electricity – Low Oil Price” and orange “Electricity – High Oil Price” lines, all paralleling the buck-a-gallon mark for the next 24 years. All three lines are basically identical because the price of electricity doesn’t care about the price of oil. Electricity is virtually oil free, made from a diverse supply of sources, and its price is heavily regulated. In contrast, the future price of gasoline is basically anybody’s guess because it’s subject to the violent fluctuations of a speculative world oil market. In reality, the price of gasoline won’t be nearly as smooth as any of the EIA predictions but will jump up and down on a monthly basis.
Here’s chart from the Edison Electric Institute which displays both the historical price of gasoline and electricity in dollars-per-gallon equivalent prices, as well as major world events.
Like the price of oil, the price of gasoline is a news junkie. Everytime there’s a war, a stock market crash, or a huricane, it freaks out. In contrast, the price of electricity looks more like the steady heart beat of a long distance runner, following a predictable seasonal pattern and never straying far from the $1.00/gallon equivalent mark. Which would you choose to fuel your car?
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