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EVs Help Blunt Impact of Jumps in Oil Prices

by | December 21, 2023

Oil prices declined for months, taking gas prices down with them. However, that’s turn in recent weeks, but the price of gas continues to fall. Discover the role electric vehicles are playing in the fossil fuel trends below.

Jeep Wrangler charging port

Electric vehicles are playing a significant role in the price of oil and gas these days.

No one is about to predict the price of oil — the foundation for motor fuel — is heading down permanently.

However, as the debate about why sales of electric vehicles in the U.S. are stalling, the global acceptance of EVs, the overall improvement fuel economy and other changes, including the widespread adoption of battery-powered mini-busses in South Asia and Africa, is exerting pressure on oil prices around the world, a spate of recent reports suggest.

Electric vehicles and plug-in hybrid electric vehicles improved average fuel economy in the U.S. by 1.2 mpg in model-year 2022, a new report from the U.S. Environmental Protection Agency this week noted. Numbers for the 2023 model year are not available yet, but since MY 2004, carbon dioxide emissions have decreased 27%, and fuel economy has increased 35%.

Impact of Industry Changes

“Most manufacturers have made improvements in fuel economy over the past five years, and they continue to use a wide array of advanced technologies to achieve CO2 emissions, fuel economy, and performance goals.

GM and EVgo deal

Electric vehicles and plug-in hybrid electric vehicles improved average fuel economy in the U.S. by 1.2 mpg in model-year 2022

“In MY 2022, the combined category of electric vehicles, plug-in hybrid vehicles, and fuel cell vehicles increased from 4% vehicles produced for sale in the U.S. in MY 2021 to 7% in MY 2022 and are projected to reach 12% in MY 2023.

“This trend will likely continue as EV production is expected to grow across the industry in coming years,” the EPA noted in its new report.

While sales of EVs appeared to slow this year, electric vehicles still accounted for a larger market share even as the average price of a gallon of gasoline dropped in recent months.

On the Rise

Oil prices rose this week due to attacks on tankers in the Red Sea, leading to re-routing vessels around the Cape of Good Hope, which increases transportation costs. Additionally, the EIA reported that total domestic commercial crude inventories rose by 3 million barrels to 443.7 million barrels last week, AAA reported this week.

Los Angeles gas prices on 11-21-21

Gas prices have been on the decline for months now, but that could flatten out in the next few weeks.

AAA noted the national average for a gallon of gas fell to a 2023 low of $3.06 on Dec. 18, only to rebound six cents to $3.12 in the first weekly increase since September recorded by AAA.

Andrew Gross, AAA spokesperson, said, “Daily gas prices will likely move back and forth for the next month or so.”

Longer term, however, Saudi Arabia and OPEC are struggling to maintain prices by slashing production as the price for a barrel of crude fell this fall, according to Reuters.

Despite erroneous claims by critics of President Joe Biden, who insist the president has deliberately hobbled U.S. oil production, American oil production — already higher than any other country — is setting new records and helping to push down gas prices.

Record Production

Getting gas

AAA noted the national average for a gallon of gas fell to a 2023 low of $3.06 on Dec. 18.

U.S. oil production, according to multiple sources, including those inside the oil industry, is up over 13.2 million barrels per day, topping records set in 2019, the year before the pandemic cut production. The U.S. market share of global oil production also has increased this year.

Renewables are reaching the point where they are outcompeting fossil fuels on price — setting the stage for their predicted dominance of the energy sector by midcentury.

When it comes to the surging demand for new electric generation, wind and solar prices are now the cheapest options almost everywhere, according to the International Energy Agency (IEA).

Building new wind and solar projects is also cheaper than running existing coal plants, according to a report from Energy Innovation, a nonpartisan climate policy think tank.

The fall in price has led to a global rush to install new wind and solar — which the IEA noted expanded by 25% in 2023, powered by record installations.

In 2021 — before the passage of the sweeping subsidies for clean energy included in that stimulus — the U.S. government estimated that no matter what, solar power was likely to make up half of the electric generation capacity by the middle of the 21st Century.


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