A lot has happened in the past two months. Our nation is involved in a war with Iran, which has threatened world oil supplies, leading to a spike in gas prices in California. For years, our state has had the highest gas prices in the nation. But last week the average daily gas price hit the second highest price ever in California at $5.930 per gallon.
When gas prices rise, we see a direct impact on our economy and our wallets. Rising gas prices contribute to higher operational costs for businesses, supply chain disruptions and delays, and increased inflation. This causes higher prices for consumers not only to commute, but also to purchase imported goods or services that rely on fuel (like traveling by air). This reduces household disposable income, forcing consumers to cut back on discretionary spending for dining, travel, entertainment, and shopping. These price hikes act as a regressive tax, disproportionately affecting lower-income households who spend a higher share of their budget on fuel.
But for all of these downsides, recent high gas prices may have at least one upside. Research shows that higher gasoline prices in California spur an increase in consumer interest and research in electric vehicles (EVs). And when gas prices exceed $5.20 per gallon, consumer demand accelerates, resulting in more consumers purchasing or leasing EVs to avoid high refueling costs.
While higher gasoline prices drive interest, EV demand is also influenced by car affordability, sometimes resulting in used EV prices becoming more competitive. But what about the cost of new EVs? Well, that is where the news is not so bright.
The elimination of the $7,500 federal EV tax credit at the end of 2025 led to a huge drop in EV sales since gas prices were relatively affordable. When this occurred, both consumers and auto manufacturers responded. Consumers dramatically reduced their purchases of EVs, and manufacturers cut billions in EV investments turning their focus back to hybrid or gas-powered vehicles, which are more profitable.
This year, several major car manufacturers have significantly scaled back EV manufacturing, and others are canceling or delaying previously announced EV models. Ford is taking a nearly $20 billion write down by cancelling its electric F-150 Lightning model. General Motors scaled back production of EVs, delayed factory work, and reported a $1.6 billion write-down, with more expected. Honda halted three upcoming electric vehicle projects.
On top of these developments, most of the EV models still in showrooms tend to be high-end luxury EVs introduced in recent years to compete for high income buyers. There are very few mid-range and lower priced models available. For instance, the Nissan Leaf, originally introduced as a budget hatchback has been redesigned as a more expensive compact crossover for 2026, and Nissan cancelled plans to introduce a new lower-priced base model.
Even Chevrolet, which is set to revive its affordable Chevy Bolt EV for 2027, only plans a limited 18-month production run to free up factory space to produce gasoline-powered vehicles, according to several auto industry publications.
This means that lower-income consumers who can least afford to keep their gas-powered cars due to higher gas prices will have the most difficulty finding an affordable EV alternative to save them money on fuel, upkeep, and repairs.
Lower-income individuals face much higher rates of lung disease and respiratory symptoms, including asthma and COPD, compared to those with higher incomes. Yet, asthma-related emergency room visits drop 3.2% for every 20 additional EVs on the road per 1,000 residents, according to researchers from the Keck School of Medicine. That's because EVs improve air quality by replacing gasoline and diesel-powered vehicles that generate harmful air pollution.
We know the problem (chronic lung disease). We know its cause (transportation-related air pollution). And we know the solution (more EVs on the road). But, as always, implementing the solution is always easier said than done.
I'm hopeful that higher gas prices will lead to more EVs on the road, and that will lead to cleaner air… But, for now, I'm not holding my breath.
In Health,
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