$3-plus-per-gallon gasoline doesn't hurt enough to make people change
Perhaps we're talking about moving the goal posts here, but BusinessWeek has an article out today that figures the breaking point for getting American consumers to change their car shopping and lifestyle habits is, drumroll, $4 a gallon. I'm sure no one was predicting that precise line ten years ago when average prices were around $1.20 a gallon and SUVs were flying out the door. Perhaps at that time the economists thought $2.50 would be the point of no return, but that's come and gone and here we are. I'm not saying BusinessWeek is wrong, I'm just saying this type of predicting the future might look silly in hindsight. Or maybe not. I certainly don't know. Then again, I don't know why anyone would buy a family vehicle with an EPA rating of <15mpg in the first place.
So, what do the analysts this is coming down the pike if $4-per-gallon is the new reality, whether that's driven by high crude prices or a gasoline tax increase? Well, "many experts and politicians believe the demand for smaller vehicles would drive the average fuel economy in the U.S. to 35 mpg inside of 10 years, up from 24 mpg today." So, that would solve, partially, the Senate panel's request. When gas prices went up in Europe (due to taxes), "consumers quickly moved to smaller vehicles. In response, General Motors (GM), Ford (F), Toyota (TM) and the rest have been selling smaller, more fuel efficient vehicles there than they sell in the U.S for the past decade." writes BusinessWeek's David Kiley. It wouldn't be exactly surprising if the same thing were to happen here. But who can predict?
[Source: BusinessWeek]
Reader Comments (Page 1 of 1)
Ron Fischer 1:14AM (5/22/2007)
$4/gal is the new $3/gal ;-)
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1985 Gripen 10:31PM (5/21/2007)
The problem is that when gas prices go high they come back down. So some people panic and go and buy up all the Toyota Yaris and hybrids they can get their hands on just in time for gas to get cheap again after the summer driving season is over.
The whole "$4 per gallon tipping point" is nothing new. I remember reading this just after Hurricane Katrina hit and the gas prices were high as a result. Some economists at that time were saying that consumers on the whole wouldn't change their buying habits until gasoline prices rose above $4 a gallon and stayed at that level.
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frank78 11:35PM (5/21/2007)
Well, you have a point. Yes, gas prices are going to go down again in the late fall. However, they'll be higher than last fall. Instead of dropping to $2.20 in the winter like it did this winter, we're probably looking at a low of $2.50-2.60 this winter. Then prices will go up to $3.60-3.80 next year for 5 months, then back down to $3 next year's winter. What's the trend??? Prices are going to go up for awhile. In 2010, we'll see $4.25 summer gas and $3.50 winter gas prices.
Basically- buying a large SUV or truck is moronic at this point unless you absolutely need one. Got 2-3 kids??? Go buy yourself a friggin sport wagon or a crossover. For those who don't, they lose the right to bitch about it later on.
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1985 Gripen 12:39AM (5/22/2007)
The problem, frank78, is that people have a short memory. They'll cry and bitch and whine like mad when gasoline costs $3.25 a gallon, but then when it goes back down to $2.60 they'll buy another big SUV or full-size pickup truck.
Not until gasoline stays around $4 a gallon will people really get the picture.
It's like in "An Inconvenient Truth" (did you see that one) when they show the frog in the pot being heated. If the water's really hot the frog will jump in and then right back out. But if he's sitting in a pot of water slowly being heated he just sits there until he dies. Same thing with this gasoline thing. People will not change their ways unless there is a sudden change in the price of gasoline, unfortunately it's human nature.
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Yago Bal 5:08AM (5/22/2007)
In Europe, the prices are alredy over 4$ a gallon, and nothing changed.
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Kardax 8:42AM (5/22/2007)
I think many Americans will keep their SUVs even when gas gets over $10 a gallon.
What I expect to see is what we have already been seeing--a steady decline in SUV sales in favor of smaller vehicles as gas prices increase.
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gsolman6 8:52AM (5/22/2007)
I think the top third income bracket hasn't given $3/gallon a second thought while those in the bottom third are the ones making the changes to lessen their fuel usage. I also haven't seen too many empty bus stops in my town of late while I am now seeing mopeds scooting along every day on my way to work.
Is there still a possibility of another oil glut like the one we had around 1998 when gas was around a buck? What if the Chinese and Indian economies overheat and their usages decreases or holds steady?
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Rick 9:55AM (5/22/2007)
The title is misleading. No, people haven't changed their DRVING HABITS, but they have changes their SPENDING HABITS. So, there are repercussions to the gas prices, it's just not being seen at the pump, it's being seen everywhere else.
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BILL 10:41AM (5/22/2007)
Apparently we have given up on the concept of increasing our fuel supply. Not building a new refinery in 30+ years is not a formula for reducing gas prices. The U.S. is swimming in untapped oil reserves, but our politicians keep the lid on exploration and the building of refineries. Why do you suppose that is? Did we vote to shoot ourselves in the foot, or have we been electing idiots more than willing to shoot their own country in the head? If I hear about one more dumb plan to boycott gas stations for a day, I may have to die laughing. What we have today is self inflicted. It must be what we want, so why are people bitching?
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Steve 11:17AM (5/22/2007)
I still want to know, where is the congressional plan to mandate higher fuel octane ratings? So we in the U.S. can start running those small displacement/high compression engines that the Europeans get!
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calguy 12:13PM (5/22/2007)
The tipping point is now, for anyone with a car that specs high-octane. In San Francisco, most 91 octane is now $3.97 a gallon.
Tip..
Tip....
Tip......
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Charles S 12:43PM (5/22/2007)
@BILL
Actually, you may want to do some research on that matter. This administration has just about given a free pass to ANYONE who wants to drill. It doesn't make the Talk Radio circuit, cause it's nothing that will inflame the masses.
Closer to reality is that it's not cost effective to drill EVERY well here in the US; in other words, it's still cheaper to rely on crude from imports. The US companies that are drilling new wells here in US has launch all the best projects that they are willing to invest into. In fact, there are so many projects that there is a shortage of drilling equipment!
On the refinery front, again, so some research, please. Refinery capacity has increase dramatically in the last 3 decades, the problem is that we are gobbling up the delta and still need more.
Yes, we can build some refineries now and see the results 5-10 years from now. Does the oil companies want to rush this? Of course not. What if the public fully embraces conservation? Then all the excess capacity will be a major loss. What if refineries abroad under cuts the profits of US refineries in 5-10 year? What if US gov't start to step in and build its own refineries? That would be great, except we'd be no different than Venezuela, and the international oil companies will just bail on us.
As frustrated as people can be about this, the truth is, we are ALL a factor in the situation we're in today.
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John Metcalf 5:07PM (5/22/2007)
I live in the land of SUVs and crew-cab trucks (central Michigan.) Lot's of people who own these vehicles use them to tow boats or snowmobiles a few times a year. (Don't get me started on the whole "why they don't rent?" thing.) If you need it, I undersatand why you've got it.
What I DON'T understand, is why the second vehicle in the driveway is also an SUV. I see lots of driveways with multiple vehicles, and the only one that gets over 20 mpg is the high schooler's 8-year-old Neon.
If you have to have the truck for those (few) times you need to tow something, how about considering a small car as the alternative for commuting. Try to get your FAFE standard (family average fuel economy) into the 21st century.
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iamsancho99 10:08AM (5/23/2007)
@bill, great post. If only people took the time to gather the facts instead of repeating the crap from their favorite radio talk show. Its the good old profit motive. Big oil wont spend to build refineries or drill wells when its cheaper to do it somewhere else. Plain and simple. As we approach peak oil and prices continue trending upward, we have to reduce consumption pretty dramatically for several reasons.
1. the govt could mandate greater fuel economy. not likely given the cowardice of our politicians.
2. they could impose a hefty tax to discourage consumption and use the proceeeds to fund any of a long list of needs. Not likely see #1.
3. we'll just pay more to the oil companies who will get even richer and tighten their hold on our country. Most likely , almost a certainty.
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Bill Peters 1:25PM (5/24/2007)
$3 gas is not an option for me period, let alone $4 or more. I'm sick of a lazy no good bunch in Congress not allowing or encouraging America to get their own gas, we do not have to buy a drop from the Arabs or our fantastic buddy to the South. For me, I'm buying the Honda Civic CNG auto as fast as I can get my hands on one and will buy another within a year. I'm through buying gasoline just as soon as I can get converted to CNG. Hey, it works and America needs it. I see on the internet Chev Cavalier has a dual feed CNG system as well, but when I went to look this morning they don't know a thing about it. So, I'll buy the Honda as soon as I can even if I have to go to California to get it. Thanks, Bill
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iamsancho99 12:10PM (5/25/2007)
I have a friend who drove a route for Schwann, they sell frozen foods house to house. All their trucks were natural gas. It must be practical or they wouldnt be doing it. Lower maintainence costs too. We have a lot of nat gas and I read there is a lot of it in locations too far from markets. It is difficult and expensive to transport in a gaseous state. An economical gas to liquid technology would add greatly to the supply.
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Robert Warburton 9:11PM (5/30/2007)
To my knowledge the CNG vehicle that Honda puts out is not available to an ordinary buyer. Honda likes to sell the Civic GX to fleets. Natural gas could be a long term alternative to gasoline and diesel. Unfortunately, the CNG stations closest to me are in the Dallas area. Right now there are sufficient numbers of CNG stations in the DFW area to suport a significant number of CNG vehicles.
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