Climate Protection: Gas stations are going out of business. 

Dec 05, 2023

Introducing Climate Protection, a new monthly column from Nick Maxwell

A friend of mine just got an electric car, a used Nissan Leaf. Nissan Leafs do not cost like Teslas, especially not used Leafs. Part of his thinking was that he didn't have to gas up at gas stations. He charges up in his condo's garage overnight.

My friend has a lot of company. In 2022, electric vehicles were 12% of Washington dtate new vehicle purchases, up 40% from 2021. Continued 40% annual growth would bring electric vehicle purchases to 100% before 2030.

Electric vehicle sales will probably speed up as Washington State and the federal government sweeten the deal on electric cars. The Federal Inflation Reduction Act passed in 2022 includes tax deductions up to $7,500 for new cars and up to $4,000 for used cars for some buyers. Washington State gives a break on sales tax for some electric cars and trucks.

Most auto manufacturers plan to completely phase out gasoline-powered cars and trucks by 2035. Chances are that Washington will phase out earlier than other states because Washington folks are more aware of the harms of climate change. And Washington state has the cheapest electricity. It is cheaper to drive an electric car here than anywhere else in the country.

By about 2030, over a quarter of the vehicles on the road in Washington state will be electric. Gasoline sales will drop by 25% or more. Some gas stations will go out of business. This will accelerate the drop in the number of gas stations that has been going on nationwide since the 1980s.

The Washington State Legislature has recognized this trend. Lower gas sales means lower gas tax revenues. Road maintenance depends on gas taxes. If nothing was done to make up for the lost revenue from the switchover to electric vehicles, the Department of Transportation would be strapped. To make up for the coming drop in gasoline sales, the Legislature added fees for car tabs for electric vehicles. Eventually almost all Washington state vehicles will be electric, and road maintenance will be mostly funded by fees like these electric vehicle tab fees.

As gasoline stations become harder to find, demand for gasoline-powered cars will drop. Gasoline cars will be inconvenient. People who shop for cars will find trade-in values for gasoline cars dropping. Dropping trade-in values will diminish how much they can spend on their next car. Business will be tough for dealerships and for cities that depend on auto sales taxes because profits and taxes from car sales will drop temporarily. Eventually, the gasoline trade-ins will be out of the system and profits and sales taxes will recover.

Some families who buy used cars will find themselves stuck with old gasoline-powered cars without easy ways to fill up their tanks. As gasoline-powered cars become less and less convenient, car loan defaults will rise, lowering personal credit ratings, and lowering buying power. This trouble for the used car market will also take care of itself after the gasoline cars are out of the system. Until then, some used car dealers will go out of business, having invested in unsalable stock.

All of this will play out over probably about 20 years. Even after all new cars are electric, there will still be older gasoline cars on the road. There is no urgent need for dealership bailouts. There is no need for a cash-for-gas-powered-clunkers program. A solution is for everyone to be aware that the length of convenient use of a gasoline-powered car is no longer 20 years. Gas-powered cars can now be expected to be easy to gas up for another 10 years or so. If purchase decisions are based on that understanding, Washington state will gracefully navigate this part of the transition to electric vehicles.

All of the coming disruption will not be a problem for my friend and his new Leaf. He is now all done with trying to get a good trade-in deal on his gasoline-powered car, and he is all done with gas stations.