Backwards Induction and the Demise of U.S Gas Stations in the Year 2045

 General Motors has announced that it will only produce electric vehicles starting in the year 2035.  Suppose that there no more new fossil fuel vehicles purchased by U.S consumers in the year 2035 and going forward.  There are 270 million vehicles in the United States right now and most of them are used.  This webpage says that 13 million new vehicles are purchased each year in the U.S.

In the year 2040 as the gasoline vehicle fleet ages,  the count of gasoline stations will decline (especially in EV areas such as West Los Angeles).  As the count of accessible gaso stations declines, the Gary Becker full price of refueling (including the time it takes to get to a gas station) will increase.  This will be a tax on poorer people who own the used gasoline vehicles.

Given the complementarity between gas stations and driving gas vehicles, interesting issues will arise concerning local market power and price gouging. Individual gas stations will charge more for gas (as predicted by the Hotelling retail model) and this will further nudge some drivers to substitute to EV vehicles.  

An interesting question is what will be the value of used gasoline vehicles in the year 2040?  If their prices sink (because of carbon pricing and the dearth of gasoline stations), then a future entrepreneur will purchase millions of these vehicles and prepare to ship them to the developing world.  This entrepreneur’s path to wealth will be accelerated by the demise of the local gas station.  

The economic incidence of the rise of new EV market merits new research.