Drivers wonder if they should go electric as the war spikes gas prices

Electric Vehicle Owners Weather Gasoline Price Spikes as Mideast Tensions Rise

As tensions in Iran push gasoline prices higher, electric vehicle owners like Kevin Ketels are finding themselves insulated from the financial shock affecting millions of American drivers. Ketels, who purchased a Chevrolet Blazer EV last year, wasn’t primarily motivated by fuel savings, but the recent surge in gas prices has validated his decision.

“Electricity can go up, but it won’t go up nearly as much as gas will and it won’t go up nearly as fast, either,” said Ketels, a 55-year-old assistant professor of global supply chain management at Wayne State University in Detroit.

The national average for regular gasoline has jumped to $3.57 per gallon this week, up significantly from $2.94 just a month ago, according to AAA. This rapid increase highlights the vulnerability of conventional vehicle owners to global oil market disruptions.

“Residential electricity prices are regulated and are much less volatile than gasoline prices,” explained Erich Muehlegger, economics professor at the University of California, Davis. “As a result, EV owners are largely unaffected by oil price shocks.”

However, experts caution that electricity prices have been trending upward nationwide for various reasons, including growing power demand from data centers. While the Middle East conflict will have inflationary effects, energy analysts suggest it won’t be the primary driver of electricity price increases.

“This is an inflationary event,” noted Holt Edwards, principal in Bracewell’s Policy Resolution Group. “Is this the driver in electricity prices? I think probably not. But it’s certainly a contributing factor.”

The degree to which electricity prices might eventually respond to oil and gas conflicts remains uncertain, with multiple factors in play. A key consideration is the power generation mix within local electric grids, which varies significantly across regions.

Residential electricity rates are typically set annually by regulators, providing households some buffer against month-to-month fluctuations in natural gas costs. Additionally, natural gas prices haven’t experienced the same dramatic spikes as oil prices during recent tensions. The electric grid also draws from diverse energy sources including coal, nuclear, and increasingly, renewable energy.

“The energy component varies depending on the energy you’re using and the price of the energy that you’re using to generate electricity,” said Pierpaolo Cazzola, an energy expert at Columbia University’s Center on Global Energy Policy. “What happens is that in the U.S., the variation of the price of the energy component is smaller than it is elsewhere.”

Energy experts warn that prolonged conflict could eventually impact electricity bills, underscoring the importance of transitioning to clean power.

“Clean power and electrification combined is what provides the most security,” said Euan Graham, an analyst at energy think tank Ember.

Michael B. Klein, a 56-year-old software developer from Evanston, Illinois, has driven electric vehicles for eight years, motivated by both environmental concerns and cost savings. He appreciates how EVs benefit from ongoing grid improvements.

“Every time electrical grid efficiency improves — especially as renewables are added — I get that benefit no matter what,” said Klein, who drives a Chevy Bolt. “They can improve the efficiency of gas engines, but you have to get a new car in order to reap the benefit of that.”

Market data suggests high gas prices are already driving increased interest in electric options. Car-shopping resource Edmunds analyzed consumer behavior during the week after tensions escalated in Iran and found that interest in hybrids, plug-in hybrids and battery EVs accounted for 22.4% of vehicle research activity, up from 20.7% the previous week. Similar spikes occurred during fuel price surges in 2022.

However, experts note that sustained price increases are more likely to drive actual purchases, as consumers need confidence in long-term savings. A sudden surge in EV demand could also drive up prices.

“I think the real step change would be in whether this causes governments to shift tax, tariff policies around EVs,” Graham said, suggesting policy changes could accelerate the transition away from fossil fuel dependence.

Despite higher upfront costs—new EVs averaged $55,300 last month compared to $49,353 for all vehicles, according to Kelley Blue Book—the lifetime savings remain substantial.

“We’re talking about thousands and thousands of dollars” in savings, said Peter Zalzal, an attorney with Environmental Defense Fund. “And as gas prices increase, those savings are only greater. Fuel costs are a big piece of overall vehicle costs, and increases in fuel prices have significant impacts on people.”

Ketels believes electric vehicles and renewable energy should be strategic priorities both individually and nationally, as they can be produced domestically without exposure to international market volatility.

“It puts us at a disadvantage globally,” Ketels said regarding recent reductions in government incentives. “I think it’s been a terrible mistake to withdraw these incentives and to attack the sustainable energy industry, and the war is just making it that much more obvious.”