The Effect of Hybrid Cars on Gas Prices
Introduction
There have been many arguments made about the possible effects of hybrid cars on certain industries. These industries range from car manufacture, energy and oil among others. The number of hybrid cars has been increasing and is though to keep increasing as more technology is used to make them more efficient, less costly and able to meet the demands of consumers. However, how the hybrid cars will really affect the market remains to be seen.
Because of their alternative source of energy, hybrid cars will most definitely affect the prices of gas. Because they do not use gas, the hybrid cars will exert some pressure on the gas companies to lower their prices so that consumers can be encouraged to keep their fueled cars. The government has also introduced tax incentives to encourage more people to purchase hybrid cars (Darrel and Anderson 84).
According to Sovacool and Hirsh who examined the expected benefits of the plug in hybrid vehicles, the hybrid cars could reduce gas prices (1095). This is because people are becoming more open to options which reduce the use of gas. In the past people bought a lot of the cars that were introduced in the market as fuel efficient. For this reason it is very likely that they will continue patronizing these hybrid cars. In order to compete the those selling gas will have to reduce the prices to encourage the sale of fueled cars.
People have in the past demonstrated a willingness to make investments on commodities which will give them savings over time. With the cost of gas rising steadily in many parts of the world, there are those consumers who are looking to make long term investments on the hybrid cars. Diminishing sales of fueled cars will mean that those who sell gas will have a less market share than they currently do.
Gwartney, Stroup, Sobel and MacPherson argue that the case of the effect of hybrid cars and gas is an example of the market forces (62). According to economists the price of one good has the ability to affect the demand for another which can be deemed as the substitute. The second good will replace the first one even even they do not share all the characteristics. The important thing is for the second good to satisfy the need of the consumer. The hybrid cars are becoming the substitute for fueled cars for those who find the prices of gas exorbitant.
These consumers are therefore substituting gas with electric energy. However, since the electric energy comes with hybrid cars the demand for hybrids is consequently increasing as the demand for fueled cars is decreasing. The monopoly of the gas industry is slowly being eroded. As they try to maintain sales they will have to compete and prove that gas can also be affordable. Gwartney, Stroup, Sobel and MacPherson state that demand for goods can also be affected by expectation about the future (62).
Thus, the revolution that is going on and the environmental consciousness that many countries are showing will reduce the use of gas. A major incentive for gas distributors will be to make the prices lower. Unless future policies restrict the use of gas the public will be encouraged to continue using gas. This is especially true if the prices of hybrids do not come down.
According to Beresteanu and Li, the effects of increase in use of hybrids has been increasing and statistics show that in the USA the use of the hybrid cars has affected the reduction in gas use and co2 emissions (161). The prices of gasoline have been adversely affected by the political situations in major oil producing countries like Iraq. As a a result, the prices have been increasing due to scarcity. This situation, however, has made more consumers interested in finding ways in which they can avoid the consequences of oil supply fluctuations.
The gas prices in 1999 were much lower compared to the prices today. American have responded by increasing their purchasing of hybrid cars primarily because of the high prices ( Beresteanu and Li 161). Tax incentives have also worked. With less expenditure on the gallon the gas companies are looking at reduced consumption. If they keep the prices high they can only continue to alienate the consumers and lose them.
The gas companies will have to act contrary to what is happening in the market in order to counter the effects of the high gas costs and the incentives offered by the government. Without these changes, hybrids will be the best options for those looking to reduce the impact of high gas prices on their budgets.
Conclusion
The monopoly of gas companies in the automobile use is slowly being reduced. The more the price of gas climbs, the more that consumers are turning to hybrids (Darrel and Anderson 117). The high cost might be unavoidable given the problems in the distribution chain of oil. However if the companies do not reduce their prices they will lose a lot of consumers. The hybrid cars will drive the reduction of gas prices. To compete and retain their customers the gas companies will have to prove that gas is still competitive and that can be through reducing gas prices.
Works Cited
Beresteanu, Arie and Li, Shanjun. Gasoline Prices, Government Support and the
Demand for Hybrid Vehicles in the United States. International Economic
Review 52:1 (2011): 161-182.
Darrel, Anderson Curtis and Judy Anderson. Electric and hybrid cars: A History.
Jefferson, NC: McFarland and Company Inc, 2010. Print.
Gwartney, James D. Stroup, Richard L. Sobel, Russell S. and MacPherson, David.
Economics: Private and Public Choice. Mason, OH: Southen Western
Cengage Learning, 2008. Print.
Sovacool, Benjamin K. and Hirsh, Richard F. Beyond batteries: An Examination of
the benefits and barriers to plug-in hybrid Electric vehicles (PHEVs) and a
vehicle-to-grid (V2G) Transition. Energy Policy 37:3 (2009): 1095-1103.
Annotated Bibliography
Beresteanu, Arie and Li, Shanjun. Gasoline Prices, Government Support and the
Demand for Hybrid Vehicles in the United States. International Economic
Review 52:1 (2011): 161-182.
The article examined what determines the demand for hybrid vehicles in the US. They particularly look at the effects of gas prices and incentives on income tax as important on the decisions to buy hybrid vehicles. Comaprisons are made from data in the year 2006 to show how the government tax and rebates can be used to further the demand for hybrid cars.
Darrel, Anderson Curtis and Judy Anderson. Electric and hybrid cars: A History.
Jefferson, NC: McFarland and Company Inc, 2010. Print.
This book explored the use of hybrid cars and the changes that have occurred in their history including public reception and continued growth of the cars with the help of the government.
Gwartney, James D. Stroup, Richard L. Sobel, Russell S. and MacPherson, David. Economics: Private and Public Choice. Mason, OH: Southen Western
Cengage Learning, 2008. Print.
This book explores the dynamics of economy with special emphacis on the private and public choices that happen in business and in the market. Factors which influence these choices are discussed with attention to the role of price in influencing demand, they preference of one good over another and the changes that occur in relation to how well the substitute goods perform. .
Sovacool, Benjamin K. and Hirsh, Richard F. Beyond batteries: An Examination of
the benefits and barriers to plug-in hybrid Electric vehicles (PHEVs) and a
vehicle-to-grid (V2G) Transition. Energy Policy 37:3 (2009): 1095-1103.
In this article the authors explored the benefits and possivble pitfalls of the hybrid cars that have been introduced particularly the plug-in hybrid electric vehicles (PHEV) and vehicle-to-grid (V2G). They also reveal other factors which inhibit the use of these cars beyond the technical reasons like, the social reasons, business practices and culture. The article also suggests how policies can be used to overcome these barriers.
Quotes (Paraphrased)
Sovacool, Benjamin K. and Hirsh, Richard F. Beyond batteries: An Examination of
the benefits and barriers to plug-in hybrid Electric vehicles (PHEVs) and a
vehicle-to-grid (V2G) Transition. Energy Policy 37:3 (2009): 1095-1103.
1. Immediate effect of widespread use of PHEVs could be lower gasoline prices.
2. Recall, too, how consumers initially bought fuel-efficient cars in 1970s.
Darrel, Anderson Curtis and Judy Anderson. Electric and hybrid cars: A History.
Jefferson, NC: McFarland and Company Inc, 2010. Print.
1.Tax incentives for hybrid cars since 2005.
2. The cost of batteries and fuel needed is less for hybrid cars.
3.
Gwartney, James D. Stroup, Richard L. Sobel, Russell S. and MacPherson, David.
Economics: Private and Public Choice. Mason, OH: Southen Western
Cengage Learning, 2008. Print.
1. Economists define goods as substitute when there is a direct relationship between the prices of one and the demand for the other.
2. Gasoline and hybrid cars provide another example of a substitute relationship. As gasoline prices have risen over the recent years, the demand for gas-electric hybrid cars has increased.
3. Consumer expectations about the future can also affect the current demand for a product.
Beresteanu, Arie and Li, Shanjun. Gasoline Prices, Government Support and the
Demand for Hybrid Vehicles in the United States. International Economic
Review 52:1 (2011): 161-182.
1. Hybrid vehicle sales in 2006 would have been 37% lower had gasoline prices stayed at the 1999 levels
2. Under the program, the cost of reducing gasoline consumption was $75 per barrel in government revenue
