How could rising gas prices affect the EV market?

As the war in Iran drives gas prices skyward, some consumers are considering electric vehicles as a cost-saving measure. AAA reported that the United States’ national average gas price is now over $4 per gallon (and in some states over $5), which means many Americans are understandably looking for less expensive transportation modes. But not all experts believe that this sudden spike in gas prices will automatically lead to a surge in the EV market.

Many drivers look to EVs because they “assume their electricity prices won’t be affected by the crises” around the world, said The Associated Press. The fickle nature of oil prices means consumers with gas-powered vehicles are “more vulnerable to fluctuating prices that result from global conflict than those who charge their cars.” Electricity prices are “regulated and much less volatile than gasoline prices,” Erich Muehlegger, an economics professor at the University of California, Davis, told the AP.

A 2022 AAA survey found that “$4 a gallon is the threshold at which a majority of Americans will make changes to their driving habits or lifestyles,” said Vox. This is especially true in California, where the $5 per gallon gas price means the “state has already passed the point at which EVs are the cheaper option.”

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Drivers who switch to EVs can save up to $2,000 per year on gas, according to the U.S. Department of Energy, while hybrid drivers still see savings of up to $1,500. And while Congress “eliminated a federal tax credit that could close the price gap between new electric vehicles and cars that run on gasoline,” there are still some states that “offer credits, rebates or other financial support for electric car buyers,” said The New York Times.

However, potential savings in gas prices could be offset by an increase in energy costs. Electricity prices “have been increasing nationally for a variety of reasons, including surging power demand from new data centers,“ said the AP. Increased natural gas prices can also “increase the cost of generating electricity,” though these costs “haven’t risen as quickly or as much as oil prices have recently.” And the upfront sticker cost of an EV is “still more than that of a gasoline-powered vehicle.”

Iran. The limited “availability of chargers for electric vehicles is another barrier to adoption.” Rising gas prices and a general economic downswing can also “put a damper on consumer confidence more broadly.”

For now, the EV market seems to be swinging upward for many car companies., March 2026 represented Subaru’s “best month ever for electric vehicle sales,” the automaker said in a press release. Toyota Motor North America, which runs the U.S. operations of Toyota and Lexus, saw EV sales in March “up 2.5% on a volume basis and up 6.6% on a daily selling rate basis,” the company said, representing more than half of its total sale volume.

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