Abhinav Kandula ’27
On February 28, the global automotive industry hit a dramatic turning point. The current conflict in Iran is causing one of the most significant changes in the automotive industry since the introduction of the assembly line. With the Strait of Hormuz closed, a vital passage for seaborne oil, gas prices have skyrocketed. As a result, the shock is leading many Americans to reconsider the internal combustion engine (ICE) and switch focus to EVs. Car-buying platforms have already reported an increase of over 20% in EV inquiries on average. Furthermore, dealers have reported a flurry of appointments within a week of the conflict’s start.
The Strait of Hormuz controls about 25% of the world’s oil trade. The Iran conflict has sent crude oil prices to surge over $100.00 a barrel, an almost 50% increase since a couple of weeks ago. The average national gas price has risen to nearly $4.00, creating an economic hardship for families. Analysts at AAA predict the prices to continue to rise through the spring.
Economists warn that these prices disproportionately affect lower-income households, who are forced to spend a higher proportion of their income on gas. According to CNBC, this is creating a K-shaped economic situation. At the bottom of the K is a lower-income household, now facing a dilemma over basic necessities. Meanwhile, at the top, wealthier Americans continue to spend, creating a lopsided economic recovery model. While wealthy Americans don’t feel the burden, low-income households are forced to choose between gas and the supermarket.
The current crisis bears a striking resemblance to the energy challenges faced during the first two World Wars. During WWI, the US prioritized oil to stabilize its domestic industry and spur the growth of automotive companies. These substantial advancements culminated in the Roaring Twenties car boom. In contrast, in WWII, the US was forced to move oil domestically, fundamentally restructuring energy policies. These historical precedents demonstrate how geopolitical disruptions lead to adaptations in energy sources. Thunder Said Energy has stated that the Iran War is forcing us to pivot to the electrical grid. The Iran War is revealing a stark risk: Americans’ overdependence on gas, a very volatile fuel source.
Historically, Americans have a breaking point for gas prices. In 2022, gas prices hit $5.00, leading to 50% more EV sales than the previous year. With gas nearing $4.00 per gallon, prices have already risen by over 20%. TIME has said that prices over $4.00 a gallon are widely considered the key psychological point at which people begin considering EVs. CNBC has reported a 28% increase in EV inquiries and a 15% increase in inquiries about buying a used EV. Since the conflict, EV-related searches have tripled overall. However, there are hurdles to purchasing an EV. High prices, removal of tax credits and other financial incentives, and disrupted supply chains.
Furthermore, the International Energy Agency suspects that if gas prices continue to rise for over 12 weeks, there will be a significant shift to EV purchases. The 12-week milestone will end in late spring, potentially leading to a mass migration. This migration could spark another EV revolution.
With the rising gas prices, the war has highlighted the environmental impacts. The conflict has caused massive environmental harm through increased bombings and destruction, refocusing the public eye on the instability of fossil fuels. The smoke rising over the Persian Gulf is a reminder of the war’s harmful effects, another motivator for EVs, according to CNN.
The Iran War is likely to have a lasting impact on Americans’ views of the automotive industry. As a result of the conflict, there is an increased momentum towards electric vehicles. While the 1920s were considered the petrol age, the 2020s might be considered the electric age. The Iran War has given Americans a nudge to ensure a necessary revolution. The upcoming weeks will play a crucial role in the country’s future for sustainable transportation.
