Rising Gas Prices May Hasten Move by Consumers to More Efficient Vehicles
By Brendan Moore
There is an article in The New York Times this morning about the damaging effect the increase in gasoline prices is having on many household incomes. The article states that the price of a gallon of gasoline could be an average of $4 a gallon by the second quarter of 2008.
Here is a quote from the end of the article:
Oil prices are unlikely to drop anytime soon, analysts said. Barclays Capital recently increased its long-term prediction, saying prices could reach $137 a barrel in 2015, up from a previous target of $93 a barrel.
“The remorseless move up in long-run prices has not yet fully played out,” Barclays analysts said in a note to investors.
While demand keeps growing, producers are struggling to catch up. They are not replacing the oil they are pumping out of the ground fast enough because of restrictions on access to fields, as well as rising costs. Meanwhile, demand in China, India and the Middle East is expected to push oil consumption up by more than one million barrels a day, each year, for the next decade.
“An oil crisis is coming in the next 10 years,” John B. Hess, the chairman of the Hess Corporation, said at a recent conference held by Cambridge Energy Research Associates. “It’s not a matter of demand. It’s not a matter of supplies. It’s both.”
Our focus here is on cars and the car business, so when I read an article like the one in the NYT, I start to wonder if the “sustained higher prices” scenario that people say will effectively move people to more fuel-efficient vehicles is finally here.
I am a disciple of that premise, as are many others, but I have to admit, I thought the market would have seen a little more movement towards fuel-efficient vehicles than it has so far at the $3 a gallon mark, so those results have left me a little unsure just what price-point that migration will show up in a big way. But, I can say with a great deal of certainty that if we end the year at an average $4 a gallon here in the U.S., then the migration towards purchase of more fuel-efficient (and generally smaller) cars will pick up considerably over the current positive trend in that direction.
So, if most Americans come to believe in the next few years that the price of gasoline will never go back down to, say, below, $3 a gallon, what does that mean for the auto industry?
My opinion is that it means that whatever efforts are occurring now regarding development of PHEV vehicles, hydrogen-powered vehicles, clean diesel, etc. need to be re-doubled by the players in the industry. Right now. Shifts in public consciousness tend to build slowly towards a tipping point, and then, suddenly, the attitudinal about-face arrives with a bang. I have a feeling that’s the way it’s going to work with this cultural sea change and woe to the auto manufacturer that gets caught out with a vehicle lineup that’s behind the curve of newly-minted public desire for the most-efficient car available.
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