Have electric vehicles become a laughingstock? Perhaps in California. Under President Joe Biden, the United States has gone ultra-bullish on electrified automobiles. Well, except for consumers, of course. Across the country, all three levels of government have invested in EVs and the required infrastructure, from handing out billions in corporate welfare to subsidizing motorists' EV purchases. Officials touted the benefits of electric cars, but various reports and studies have highlighted the disadvantages of owning these automobiles.
California Might Punish EV Drivers
Gas taxes ain’t what they used to be, whether because automobiles require less fuel or drivers are switching to electric. Whatever the case, the government needs money. Estimates show that real gas tax revenues are forecast to decline by more than half over the next two decades. Even if politicians hike the gas levy, it would not be enough.
The government is attempting to be proactive in California, a state with heavy EV usage rates. With Gov. Gavin Newsom (D) trying to make all new vehicle sales emission-free by 2035, the Golden State risks losing a lot of revenue, especially as its infrastructure maintenance costs $8.5 billion per year. As a result, California is piloting a mileage fee program called Road Charge, an initiative aimed to replace or complement the gasoline tax. The government will compile data in the pilot program, and the numbers will determine if it is time to ditch the gas tax.
While an exact rate has not been set, reports suggest it could range between two and four cents per mile. The popular Autoblog makes a good point: "It's EV drivers that will end up spending more: they'd pay the same monthly Road Charge but they currently don't pay a gas tax." That is if there is enough range in these electric cars anyway.
In other California EV news, the state is apparently an “EV-charging desert.” According to the Department of Energy, only four fast-charging public stations are found throughout 4,500 square miles. Ouch. This is as bad as the "seven or eight" public charging stations nationwide, even after the federal government spent $7.5 billion to construct these apparatuses. Is this massive taxpayer investment in EVs turning out to be a boondoggle?
Biden Taps Gas Reserves
Gasoline prices had rocketed to kick off spring. However, in recent weeks, they have flat lined heading into the busy summer driving season. American Automobile Association data suggest that the national average for a gallon of gasoline is about $3.59, a penny or two higher than a year ago. The reasons vary, from the war risk premium vanishing from global energy markets to lackluster fuel demand.
The White House wants to be prepared in case of a sudden surge. This is why the administration announced it would be releasing one million barrels of gas from the Northeast Gasoline Supply Reserve to reduce pump prices. Energy Secretary Jennifer Granholm confirmed that supplies will be sold from storage facilities in Maine and New Jersey in 100,000-barrel quantities to ensure competitive bidding. The volumes, totaling about 42 million gallons of gas, will be given to retailers and terminals by June 3 at the latest.
The administration touted the "strategic action" as another step Biden is taking to help households lower energy costs, comparing it to more than 40% drawdown from the Strategic Petroleum Reserve. In total, US gas stocks stand at roughly 228 million barrels, and emergency inventories stand at nearly 368 million barrels.
It could only be described as a preventative measure since energy prices have struggled to sustain momentum in either direction. Even if there were a sudden rally in West Texas Intermediate futures, it would not justify selling emergency stocks for political purposes. That’s Bidenomics, baby!
The New Era of Higher Rates?
All the talk on Wall Street is about when the Federal Reserve will cut interest rates. The futures market is penciling in a quarter-point rate cut beginning in September or November. But while investors are looking at the near-term path of rates, what is the long-term trajectory? Well, even if the Eccles Building followed its own projections, the March Summary of Economic Projections, the benchmark federal funds rate will still be much higher than even where it was before the pandemic. The median policy rate is expected to be 3.1% by 2026.
However, with inflation trends mirroring the 1970s and 1980s, can the central bank afford to slash rates? If not, consumers and businesses from California to Massachusetts might need to brace for higher borrowing costs, be it auto loans or credit cards.
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