GAS IS CHEAP, and getting cheaper every day. Motorists everywhere are thrilled and why not? A $40 fill-up is now $30 or less. And if that little windfall were only going into our pockets, all would be well. But that’s not what’s happening: Instead, we’re wasting it. Public policy — federal, state, and even local — pushes us to conserve and be efficient. But basic economics now pulls the other way.
I figure this out while gazing longingly at an image of the Tesla Motors Model S, the all-electric luxury car that’s taken the automotive world by storm (even the curmudgeonly Consumer Reports gushed it’s “not only the best electric car we’ve tested, it’s now our top-rated model overall”). Getting the equivalent of about 90 miles per gallon, the natural question, posted on the company’s website, is, “How much can I save?” Tesla provides a handy calculator to come up with the answer: A whopping $4,270 a year in gas savings when netted against the cost of electricity.
But I take a closer look at the numbers and things look less rosy. Tesla figures gas is $3.90. Not these days. It assumes I drive a car averaging 22 miles per gallon. More like 30. Electricity? The company uses an average of 12 cents per kilowatt. In Massachusetts, it’s 16.9 cents. And Tesla expects I drive 30,000 miles a year. Really, it’s more like 15,000.
Run the numbers again and I’m only saving $683 annually — about $13 a week. It’s still something, of course, but hardly enough to justify paying $74,000 or more.
Looks like I’m sticking with my Honda.
Or, for that matter, if gas prices continue to fall, maybe I’ll just pick up a light truck.
For the problem that Tesla faces in my little test is one afflicting all manufacturers of fuel-efficient cars. When the cost of gas rises, we panic, trying to get rid of the behemoths and looking for something smaller, lighter, electric, or hybrid. We don’t need lectures from greens about why it’s good for the environment. We do it simply because it’s good for our budgets. That means not only more fuel-efficient cars, but also carpooling, public transit, or simply cutting down on casual jaunts about town.
Until the price of gas drops. Then the opposite happens.
GasBuddy.com now reports regular unleaded in Boston is as low as $2.85 per gallon, making it the Two-Buck Chuck of the automotive world. Moreover, industry sources are saying it could go lower still. That marks a steep slide from just three years ago, when gas averaged over $4.
And the impact of that? The University of Michigan Transportation Research Institute reports that in September the average miles per gallon of newly sold cars declined from 25.8 to 25.3. It’s a small change, but significant, reflecting “the reduced demand for fuel efficient vehicles of all types because of the falling gas prices,” according to the research institute. And as long as that continues, it’s a safe guess that October’s sales will show yet another decline in average miles per gallon.
We all know better, of course. Oil is a limited resource. Even with booming domestic production, we still import too much of the stuff. And, most critically, consumption contributes mightily to greenhouse gases. That’s why we’ve put in place an array of measures to try to encourage greater efficiency. Corporate average fuel economy standards force manufacturers to squeeze out better mileage. Highly efficient cars get preferences for parking, buyers of plug-in cars get big tax breaks, and hybrids get to drive in HOV lanes.
But against the power of the almighty dollar, all of these falter. It’s an old truth: Economics is a powerful, maybe irresistible force. Our best intentions and government policy notwithstanding, it drives our decisions.
The drop at the pump reflects a multitude of factors. The world economy is slowing, which reduces demand. Summer is turning to winter, and winter-blended gases are less expensive to produce. And new production — especially in the United States — has produced a glut in supply.
Still, if you’re contemplating purchasing an automobile, consider this: Eventually, all of these will change. The economy will rebound, summer will come, and supplies will tighten. Cheap gas is ephemeral. Any new car will be around for years.
This column originally appeared in The Boston Sunday Globe on October 19, 2014.