Gasoline prices have risen steadily for the past 15 months, buoyed by the reopening of the economy and now pushed by concerns about the fallout from Russia’s invasion of Ukraine.
Average gasoline prices in the Phoenix area have risen from about $2.23 a gallon in late November 2020 to about $3.80 Friday and have increased steadily so far in 2022, according to Gasbuddy.com.
They’re even above that in states with higher fuel taxes such as California, where pump prices are approaching $5 a gallon on average in the Los Angeles area, for example.
If that continues as the conflict goes on, rising prices may help push consumers toward electric vehicles.
That trend is coming already, with a surge in new zero-emissions cars and trucks hitting the market this year and carmakers across the board planning to transition mainly to electric within the next couple of decades. That backdrop could support Arizona’s nascent electric-vehicle manufacturing base and offset concerns such as where to find a charging station on extended trips.
Many people do have “range anxiety” about taking these vehicles on extended trips, but that concern increasingly is being offset by “not having to go to the gas station,” said Jason Church, chief operating officer at Courtesy Automotive Group during an electric-vehicle discussion at the Barrett-Jackson auto show in Scottsdale last month.
“Range anxiety will evaporate, and it will happen pretty quickly,” said Church, whose Phoenix-based dealership network is aiming to sell more electric vehicles and help consumers service them.
More green transportation choices
It will happen even faster if gasoline price inflation continues, though fuel costs aren’t the only consideration for car buyers. There also are federal income-tax credits on some electric models, a concern for not polluting the environment as with gasoline-powered cars and the potential for reduced maintenance because electrics feature fewer parts.
Of roughly 25 people approached Feb. 25 by The Arizona Republic, none expressed concern that rising prices would cause major financial problems for them, and most scoffed at reducing fuel consumption or switching to an electric vehicle.
However, that transformation is happening anyway, with automakers in the process of introducing about 50 new electric models this year, Church said.
Fuel costs have become more of a factor lately as oil prices skirt above $90 a barrel, propelled by jitters that supplies could be disrupted by the war now being waged on Ukraine by Russia, one of the world’s largest petroleum suppliers.
“As the conflict escalates with more sanctions and retaliatory actions, the oil markets will likely respond by continuing to increase the price of crude oil to reflect more risk of disruption to tight global oil supplies,” according to AAA, which also tracks gas prices in Arizona.
Should gas taxes be suspended?
U.S. Sen. Mark Kelly, D-Ariz., and other lawmakers have suggested suspending the federal fuel tax for the rest of 2022, to provide some relief to consumers. However, that proposal has drawn criticism from groups concerned about the loss of government revenue that would crimp federal highway spending.
“The federal government would be out $20 billion this year alone — and much more if the (tax) holiday were extended,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
Besides, she argued, suspending the tax would further boost demand for gasoline in a rising-inflation environment, undercut the Biden administration’s efforts to address climate change and result in a likely shock to consumer pocketbooks in early 2023 or whenever the tax was reimposed.
At about 18 cents a gallon, federal gasoline taxes exert a relatively modest cost to drivers. Nor have they risen in nearly three decades. Taxes in many states are higher, including a levy of about 63 cents a gallon in California. Arizona’s tab of 19 cents a gallon (including a penny in a related tax) ranked the state near the bottom nationally, according to a January 2021 study by the Tax Foundation. California topped the list.
Kelly also has called on President Joe Biden to help lower gasoline prices by releasing supplies from the nation’s Strategic Petroleum Reserve.
Arizona manufacturers gearing up
As noted, rising gasoline prices make electric vehicles more attractive for some buyers although they probably exert a modest appeal for those able to afford luxury vehicles like the new Lucid Air, with a base price (before federal tax credits) of about $77,400. The vehicles started rolling off Lucid Motors’ assembly plant in Casa Grande last fall as the company ramped up hiring. Lucid expects to produce about 20,000 vehicles in Arizona this year.
The model was anointed as MotorTrend’s car of the year but also faced a bit of a road bump this week as Lucid said it would recall about 200 of the vehicles over a suspension problem that could affect braking.
At the other end of the price spectrum, fuel costs could make a big difference for buyers of vehicles like the new three-wheel, one-seat Solo car being delivered by ElectraMeccanica, initially from a production partner in China but eventually at a factory going up in Mesa.
The company has touted the low costs of driving the Solo and has inked deals with about a dozen commercial buyers including a late-February order for 20 of the vehicles from Phillip Dade, a Mountain Mike’s Pizza franchisee in Arizona and Utah.
ElectraMeccanica claims the vehicles can operate at roughly one-fifth the cost of gasoline-powered alternatives. About 15 standard-sized pizza boxes can fit in the Solo’s 11.8-cubic-foot trunk. The Solo’s consumer model is priced at $18,500.
Other early Solo customers have included Skechers USA, the city of Mesa and the University of California, Berkeley.
Rising diesel costs also have become a concern for truckers. Phoenix-based Nikola Corp. has begun delivering zero-emissions heavy trucks on a pilot basis to select customers in Southern California, including brewer Anheuser-Busch. Nikola soon will complete the first phase of its new factory in Coolidge, where the company said it will have the capacity to produce 2,500 trucks this year. Nikola also will manufacture trucks in Germany.