Whenever the price of gasoline starts on one of its periodic climbs, Americans tend to ditch their Expeditions and Suburbans for a Toyota Prius . Some time later, gas prices fall again. Now’s the time to buy that loaded luxe-ute you’ve always wanted! Time to buy the bass boat and the tow rig to match! And it’s back to the pickup trucks, luxoboat SUVs, and carefree gasoline consumption.
The price of a barrel of oil fell by 70 percent between July 2014 and February 2016, hitting $26 a barrel, and the average price of gasoline across America, $2.22 per gallon, is almost ten cents cheaper than it was the same time last year. This isn’t just a cycle, it’s a trend—two years in the making.
For years, the average fuel economy of our cars has climbed steadily, despite the whims of pump prices, recessions, presidential debates, migratory bird patterns, or the return of the muscle-car horsepower wars. Not anymore: According to a report by the University of Michigan’s Transportation Research Institute , the average fuel economy of all new vehicles sold in America has hovered at 25.3 miles per gallon for the past three years. This, after miles-per-gallon ratings steadily climbed from October 2007—the time period of the last gasoline-price spike—which indicates at least some correlation in consumers’ minds between cheap gas and feeling free to buy whatever size vehicle they want.
But the thing is, although it might be cheap to buy gas right now, it’s not cheap to buy big.
Our cars are getting expensive. In April 2016, Americans paid an average $33,560 for a brand-new car—nearly 3 percent more than the month before. One of the poster children of living large is, of course, the Chevrolet Suburban, a hulking SUV that starts at $51,110. (Its slightly smaller sibling the Tahoe starts at a slightly smaller price, $48,410.) Similar full-size SUVs such as the Nissan Armada start just above $45,000. If you plan to haul boats or humans, the high cost may be justified. If not, well, a 2017 Toyota Prius MSRPs at $24,685, a bargain in the evolution of the hybrid car. The latest Prius Liftback models have the world’s most thermally efficient gas engine to boot, going further than 50 miles per gallon (highway; city gets 54 mpg). Come to think of it, boat owners make up only about 10 percent of U.S. households anyway.
According to an MIT study published in September, low-emissions vehicles are actually cheaper : cheaper to buy, cheaper to fill up, cheaper to maintain over time. “Smaller hybrids and electric vehicles such as the Toyota Prius fare very well and are among the cheapest per mile driven,” according to the report, which makes sense since hybrids generate their own supply of electricity and store it in their batteries at a fixed cost—no need to pay for the electricity. Gas prices then are all drivers need to be concerned with. The study classified the overall emissions of these cars by taking into account the emissions from building the cars themselves, how the fuel they consume is produced, and what emissions the car itself will produce over its lifetime—bringing together multiple supply chains from both fuel and vehicle production. “Our results show that popular alternative-technology cars can already save a considerable amount of emissions today, while being quite affordable when operating costs are considered,” commented study co-author Marco Miotti. “Notably, the benefit of the efficient electric powertrain far outweighs the added emissions of manufacturing a battery.”
This perfect intersection of low gas prices, high car prices, and the freedom to make sound financial decisions or not, how do our driving habits fit in?
Americans have been driving more every year since 1971, when the Federal Highway Administration began keeping track. Other than a dip from 2008 to 2012, reflecting the Great Recession, we are hitting the road with fervor. This year, we’re on track to exceed 3.17 trillion miles, up from 2015’s count of 3.09 trillion. That’s a lot of miles under our respective belts. People are enjoying their cars and—feeling that there’s nothing stopping us from doing so—driving farther to see more of this great land.
If the perception is that cheap gas will last forever, what does the current affordability of gasoline mean for fuel-efficient vehicles? It makes sense that the more we drive our cars, the more we seek out technology that allows us to use it more efficiently—low gas prices or not. The growing sales numbers for electric vehicles are showing this to be true. Just look at the people buying electric cars, or hybrids like the Toyota Prius.
Electric vehicles make up less than 1 percent of overall vehicle sales, but still, EV sales shot up by 60 percent last year, reported Bloomberg , while the prices of their batteries fell 35 percent. If the prices of batteries can continue on this steep downward trend, it would result in “a trajectory to make unsubsidized electric vehicles as affordable as their gasoline counterparts in the next six years,” wrote Bloomberg’s Tom Randall. “By 2040, long-range electric cars will cost less than $22,000 (in today’s dollars), according to the projections.”
That’s good news for electric cars—as well as for hybrid and plug-in hybrid cars that use similar batteries but with much lower capacity, making them far cheaper. Extrapolate that 60 percent growth year after year, buoyed by falling electric/hybrid prices and the tantalizing prospect of spending little to no money on gasoline, and by 2020 there could be an actual impact on the demand for 2 million barrels of oil per year.
One could think that we’re all just twiddling our thumbs while we wait for a self-driving car to pull up in the driveway. But as the numbers show, never underestimate the public’s ability to adapt to change and think forward right now.