The economics of petrol (gas) distribution and electric vehicles

General Questions
#21

Thanks, those are all good points.

I think the issue weighs on how steep the death spiral becomes. If we work on the assumption that it’ll be mostly cost sensetive drivers running used cars longest then the feedback effect could be very steep as even a small rise in gas prices pushes them away from used ICE vehicles. There are a lot of unknowns here, not least how government will intervene to help those later to the transition.

One thing I have definitely learnt is that this is more complicated than I thought and that I’m not going to get a firm answer.

#22

I only have EIA data back to 1983, but at that point, a avgas sales were less than a percent by volume of gasoline sales. Were they that much higher before? Because otherwise we’re taking about a drop in demand that didn’t affect the refinery output mix or overall petroleum demand much, whereas a drop in gasoline demand will.

That doesn’t mean your conclusion is wrong though.

#23

Strongly disagree. In the US, income, sales, and property taxes already make up the roughly 50% shortfall in gas taxes that fund highways, as well as the overwhelming majority of funds for the surface street network that doesn’t receive gas tax money at all. The money spent on roads to accommodate deliveries, trash pickup, emergency services, walking, and biking is a tiny fraction of what’s spent to accommodate commuters, parking, and inefficient land use patterns. The ultra-wide highways, major surface arterials, and huge spaghetti-bowl junctions aren’t clogged with trucks, buses, and delivery vans but cars with only 1-2 occupants. Generally poorer non-drivers already subsidize the generally better off drivers. Doubling down on that is a path to further inequity.

As @Procrustus said, a mileage tax is probably a better way to go. Gas taxes are already weird because they’re set up to be a road tax. That worked OK when gas was the only available fuel, but by being abstracted it also became a political hot button leading to the inability of the Feds and many states to raise it, thus dipping into the general funds instead. Have a road tax that’s an actual road tax. Some combination of miles multiplied by a factor of the vehicle’s weight. Then ALSO have a gas tax. It may be lowered from where it is now, depending on what (if anything specific) it’s used for. Usually taxes aren’t specifically earmarked. That way road use is taxed directly, regardless of fuel type, which is more fair, and hybrids and electrics pay little or no gas tax either, which is also more fair.

#24

I think you should model it as three distinct populations. Die-hards with a cherished ICE car that they’re not going to give up until it’s a major pain, people with special vehicles that aren’t easily electrified, and the above group.

It’s true that people who care most about cost could find themselves on a rapid transition, but the other two groups will provide less elastic demand floor. I’m not sure how large those other groups are (and it will depend somewhat on what kinds of of tech advances there are).

Another thing that will slow the death spiral is that the infrastructure already exists and is largely automated. It just doesn’t cost that much for places that mostly stop being gas stations to leave the tanks in the ground and a pump or two at the surface. At some point use becomes so low that you’d rather have a few parking spaces, but that’s a long way off.

#25

I find these sorts of conclusion to be against the basics of economics. Demand is likely to shrink faster than supply, therefore prices to the gas stations are likely to drop. Ability to stay in business with razor thin margins on the product (not quite a loss leader but the thin margins made up for by the convenience store profits) will be diminished, so margins will increase.

From the producer POV there will be less investment in new oil - be it shale or deep water - but sunk costs are sunk costs and the current operations will continue to make supply until prices are too low to support the marginal costs

Probably a mileage tax IS the better way to go, but do note that a mileage tax is also a bit regressive. Often poorer workers need to commute farther to work than more well-to-do one. Funding roads by way of (a progressively graduated) income tax increase would be fairer from that perspective. The other side remains the use of taxes to motivate behaviors. There is the pro-social good of motivating getting rid of the inefficient ICE vehicle and of driving less when possible in all cases, and taxes have traditionally been the carrot/stick in that regard.

#26

If the mileage tax is electronically determined from the GPS on the car, it can easily be varied by time and place. A driver on rural roads at 3 am might pay nothing, while a driver in the city in the rush hour may pay a premium.

Workers with a longer commute already pay more than those who live near their work.

#27

Yes the current gas tax is a very regressive approach. VAT in general is regressive unless limited to luxury items, and one restricted to an essential product potentially more essential to poorer members of society is more regressive yet.

The GPS approach runs into huge objections from the privacy crowd and taxing city drivers more than rural ones will be a hard sell politically. In America anyway.

#28

Only if you assume everyone drives to get around, but that’s not the case. It also doesn’t account for vehicle size/weight or the amount of driving done.

That would seem to be more the case outside the US where the suburbs are relatively poorer while the jobs and most expensive housing is in the center. Instead downtown USA may still have the most jobs, but the wealthiest tend not to live there too (with a few exceptions), and jobs also sprawl out into the suburbs more. I can totally understand poorer people spending more TIME commuting, especially if they have to take multiple slow bus routes with poor connections, but I’m not sure about them traveling a greater distance, whether by car or otherwise.

Because of how much driving is subsidized it distorts the market away from potentially better alternatives, so those have to be subsidized as well rather than fixing the original distortion, and they still tend to perform poorly compared to other countries where they don’t subsidize driving to the same extent. Lack of options and choice also leads to pervasive behavior.

That seems to be a non-starter for privacy reasons. It would certainly be more accurate and fair, because it can be set up to not charge you for miles driven on private property, and it can track driving out-of-state which could help with allocating tax revenues in metros with a lot of cross-state commuters (New York City, Philadelphia, Cincinnati, St. Louis, Kansas City, Washington DC) or give a discount for road trips to Mexico or Canada. Instead I think the only politically acceptable route would be an annual mileage report though.

#29

Why would that be the case? City residents who drive tend to drive less than their exurban or rural counterparts. Taxes from cities already flow out to rural areas now because there’s more rural roads and highways per capita, and more of them are state and/or federally funded with gas taxes whereas city streets are mostly not.

#30

The range issue will never be as bad as the current range issue for electric vehicles since with a gas can and a hybrid you can have a well over 500 mile range. Some vehicles are there already without a gas can. It would at worst make driving slightly more convenient than electric is today, having to map out your route to find gas, but every 500 miles instead of 250 and taking significantly less time to fill up.

#31

Actually, much of the expense comes at the point of taking the underground tank out: required soil tests for pollution leaked from the tank over many years, expensive work to correct that, etc. There are already cases where the tank is left underground and a single pump above it, just to avoid the expenses of removing it. even though the gasoline sales are negligible. (And probably likely to decline further, as the word gets out that their gasoline is stale and contaminated with condensation.) But it’s still there, so legally they are a ‘gas station’.

#32

Not really. There’s no practical way to carry extra electricity with you. On the other hand, it’s very simple to carry 10-15 extra gallons of gas.

#33

There are already mobile gas stations. You book via an app and tell them where your car is, they come by and fill it up for you. Even if all fixed gas stations disappeared in a city, you could still service a city relatively affordably with mobile gas stations.

A good historical analogy might be the phase out of leaded gasoline. Leaded gas gradually became harder and harder to find, making older cars more inconvenient. The last remaining users of leaded gas weren’t the poor, they were people with collectible classic cars. I wager the same will happen with gas cars. The phase out will happen slowly enough that even the poorest people will have switched to electric cars, the ones supporting the transition and slowing it down will be rich collectors.

#34

You might think but the poorer increasingly commute farther to get the jobs, which increasingly are not in the cities.

#35

Out of curiosity, I checked for supplies of leaded petrol near me. The nearest is >30 miles away, and predictably, all of them are located in upmarket areas where vintage cars are more likely to be found.

#36

We had an old tractor that ran on leaded gasoline; we bought gasoline and added . . . something, I’m guessing a tetraethyl lead solution. I’m assuming that’s still an option but this was a while ago.

#37

Yeah, there was a run on it by the Flint water district…

#38

While appreciating this was in jest, just in case others don’t know, and because we’re still in GQ, the source of lead in Flint was the same service lines (between the main and the house) that had already been in use for decades and are still in use. We can get into the chemistry elsewhere if people are into that.

#39

Right now, where in less “progressive” areas EV changing options are limited, there’s an app for finding nearest charging options -also very useful on cross-country trips. (Of course, most EV vehicle owners, like me, charge at home - starting each day with a “full tank” is a different driving mindset.) I’ve no doubt when fueling for ICE vehicles is hard to find, the internet and options like the above-mentioned refueling apps will be available to fill in the gap.

But yes, it will be a progressive spiral. We’ll go from 3 stations on every block to seeing one every mile or so. Then - every 10 miles. Drivers will have to be more cautious, plan ahead, etc. But I expect as the intense competition fades, the profit margin will go up.

Gas stations used to include service bays. However, modern cars are complex sensitive computerized devices. Much service work needs to be done by a specifically trained mechanic; the days of a generic mechanic tuning your engine timing or fixing the carburetor are long gone. More and more items involve electronics and need the specific training. Meanwhile, common tasks like oil changes or tires are being done by specialized shops. As these vehicles become less common, so will the trained mechanics and available shops. (For example, if you live in rural Iowa, who fixes your Roll Royce or Alfa Romeo nowadays? And what’s the cost premium to do so? Maybe that’s the future of ICE repairs… it won’t be the poor people stuck with them, it will be the rich indulging themselves, enjoying that annoying engine noise they make.)

Worse yet, EV’s have far fewer maintenance issues. There’s no coolant, regular oil changes, oil and fuel filters, spark plugs, emissions testing, mufflers, valve repairs etc. A vehicle that does not have a giant lump of metal that heats to hundreds of degrees and cools down over and over again is less stressed, so less maintenance issues. Auto-pilot safety features will limit the number of collision repairs needed; which may even impact the insurance business heavily. My Tesla does not even have recommended regular maintenance work required. Car dealers that depend on repair work for a lot of their income will also suffer.

One thing not mentioned is the work required to add home charging infrastructure to places other than generic suburban single-family homes. Apartments, townhouses, urban housing (those classic NYC brownstones with street parking). I’m imagining adding 240V high amp service to these will be expensive and tricky. OTOH. if every hotel, restaurant or shopping mall wants to they can add reams of chargers - after all, it requires a lot less human supervision, and has fewer safety issues than a gas pump.

#40

That already happened. Looking around the city where I live there used to be gas/service stations every few blocks. In the very early days there was just a pump on the sidewalk and you’d pull your car up to the curb to get gas. There were four gas/service stations within about three blocks of me, plus one independent mechanic/body shop, all built in the 1920s or 1930s. The indy shop remains but the rest were demolished or converted to different uses decades ago. Now you have to go at least a mile. I don’t know if we’ll see them spaced out quite to 10 miles in urban areas until gas is as niche as CNG or biodiesel is today. Having a BP, Shell, Marathon, and Speedway all clustered around the same intersection or highway interchange will be much less tenable though.