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Electricity Still a Buck-a-Gallon For Life

Max Baumhefner

Posted June 13, 2012

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When you buy a car, you make a long-term commitment to purchasing the fuel required to make it go.  Which would you rather choose: electricity, a reliably cheap, domestic fuel that gets cleaner every year you own the car, or gasoline, a notoriously unpredictable fuel made with foreign oil that will only get dirtier over time?

A year ago, violence broke out in Libya and oil prices surged.  This year, experts predicted the cost of a barrel of oil would “skyrocket” if Iran closed the Strait of Hormuz.  Thankfully, the regime backed down, but the posturing still sent oil prices soaring.  These headlines invariably led to calls for drilling in our most wild places, an effort that would have no impact on gas prices.  Meanwhile, electricity remained blissfully unaware of the political uproar, ticking along at a price that is roughly equivalent to buck-a-gallon gasoline.  The Edison Electric Institute chart below contrasts the latest data for the two fuels.  The blue line displays the price of electricity in “dollars per gallon equivalent” (the price at which the cost of driving a 30 mile-per-gallon conventional car is equivalent to driving a modern electric car).  It never deviates far from the one dollar-per-gallon mark, following a predictable seasonal pattern with little variation.  It is boring.  In contrast, the price of gasoline freaks out every time there is a recession, an international crisis, a hurricane, etc.  Which do you think is a safer bet?

Gas v Electricity.PNG

The price of gasoline is directly linked to the price of oil, which is determined on a world market we cannot control.  In contrast, the price of electricity is closely regulated by state public utilities commissioners.  Following the 1973 Arab Oil Embargo, those regulators and the utilities under their jurisdiction made a concerted effort to rid the electric sector of oil.  It worked. Today, electricity is virtually oil-free, made from a mix of largely domestic resources, including natural gas, coal, hydro, nuclear, geothermal, wind, and solar.  That diversity, combined with the watchful eye of state regulators, results in a degree of inherent price stability that gasoline cannot touch.

Electricity is cleaner too.  On today’s mix of generation resources, driving an electric car emits half as much pollution as the average conventional vehicle.  In states where electricity is cleaner, like California, electric cars emit only a quarter the amount of the average gasoline vehicle.  When charged with electricity from renewable resources, plug-in cars are virtually emission-free.  As old coal plants are retired and more renewable resources are integrated, the environmental benefits of driving on electricity increase.  Twenty-nine states have policies in place that require increasing amounts of renewable generation.

While electricity is expected to get cleaner, oil is expected to get dirtier.  Big Oil is drilling in deeper waters, in more remote locations, using unconventional methods, seeking dirtier supplies like tar sands.  Not a promising future. 

Interested in a different option―breaking Big Oil’s monopoly on the transportation fuel market? Check out one of many new cars models that plug-in to take advantage of buck-a-gallon fuel for life.

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BSJun 15 2012 05:42 PM

Still claiming that additional drilling doesn't lower oil prices? That's hilarious considering that as global oil demand has leveled off, the price of oil has fallen about $20/bbl because of an excess in supply.

Where do you think that excess supply came from?

That said, with the $0.04/kwh I'm paying off-peak, I wish I had a plug-in vehicle. But buying a new car to save a little on fuel is not a good investment. So I'll hold off until I actually need one.

Even before the price dropped, areas of the country with the best access to the increase in US production enjoyed much lower prices for fuel than the rest of the country. You're telling me that these lower prices were not caused by increased oil production in the US?

BSJun 15 2012 05:51 PM

One thing you conveniently leave out is the nearly $0.50/gal road tax paid on gasoline.

With electricity, that tax is not paid, and our roads deteriorate further. You also neglect the fact that oil companies pay significantly higher tax rates than electricity producers.

And you also fail to point out that today's $2.50/MMbtu price for natural gas will not last.

BSJun 15 2012 05:58 PM

Some other things not pointed out in this article:

Considering the high cost of an electric car, one could easily buy a 40mpg car, instead. Comparing it to a 30mpg is not appropriate.

Also, I could be mistaken but the 3.4 mile/kWh efficiency seems to be higher than what is typical for a Nissan leaf. And then you have to also factor in losses while charging, which I'm sure is at least 20%.

And lastly, since you are specifically mentioning California drivers, you need to adjust the blue line for California's very high electricity prices as the graph appears to show a national average.

When you figure all these things in, the difference isn't quite as significant, and you also still have the problem of reducing funds available to repair roads.

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