Elon Musk is brilliant, but he also has fortunate timing. That’s because leaving technological advances aside, his electric vehicle vision likely wouldn't have taken flight in the 1980s and 1990s.
Evidence supporting the above claim can be found in a recent New York Times cost comparison of gasoline versus electric cars. The Times reported that “Driving 100 miles in a typical gas car that gets 25 miles per gallon costs, on average, about $13. In an electric vehicle, if recharging at the average home electricity rate, it would cost $5." In those numbers, those old enough to remember the Reagan ‘80s and Clinton ‘90s can surely see why electric wouldn’t even have attracted funding at the tail-end of the 20th century.
To understand why, particularly younger readers need to be reminded that in the 1980s, the price of a barrel of oil fell as low as $7. During the Clinton 1990s, a barrel fetched as little as $10 in 1998.
Notable about the two decades mentioned is that U.S. energy extraction was largely non-existent. Why was it? It’s only economic to extract oil stateside insofar as oil is artificially expensive.
Which leads to an obvious question: why is oil artificially expensive? The answer can be found in a U.S. dollar that is quite a bit weaker than it was when the Reagan and Clinton administrations both made a strong dollar their policy. Presidents generally get the dollar they want, and with the currency strong, commodities like oil that were priced in dollars were very cheap.
All of this revealed itself in at-the-pump prices for gasoline that were below $1. This was true even in states like California that substantially tax gasoline sales. Despite states taking their cut, per gallon prices were less than $1.
Looked at through the prism of gasoline versus electric, if the dollar hadn’t begun a long and economy-sapping descent in the 21st century, it’s safe to say that the cost of 4 gallons of gas necessary to drive 100 miles would be quite a bit less than $13. Try something more like $3, and a little below $4 in California.
After which, gasoline versus electric isn’t just about cost. There’s a convenience problem for one. Remarkable as Teslas are, and remarkable as BYD cars may well be (as Americans we don’t yet know due to mindless protectionism within the political class that has unsurprisingly revealed itself alongside a falling dollar), there’s a time factor that comes with charging an electric car even a little, not to mention the truth that by virtue of the fact that they’re cars, we’re not always at home to charge them when the power runs down. And while charging stations are becoming increasingly evident, their density is nowhere close to that of gas stations.
Which is a long way of saying that the present isn’t the only way to measure gasoline versus electric. In the strong dollar era that reigned in the final fifth of the 20th century, the clear winner of this comparison would have been gasoline.
Where the irony is even greater is that a weak dollar subsidizes an electric vehicle industry that U.S. oil interests don’t think much of. Just as interesting is that absent the weak dollar that has helped give electric vehicles life, there wouldn’t be robust “U.S. oil interests” to heap scorn on electric vehicles. Something to think about...
