Tuesday, December 28, 2010

Want a Small Car Yet? You Will Soon

USA Today, 12/9/2010. Yes, this report was a under three weeks ago. Shows you how quick things can change.

Ford FiestaAutomakers are offering more conventional cars that cross the 40-miles-per-gallon threshold in highway driving, but relatively low gas prices continue to hold off buyers.

In past years, few models were able to get a 40-mpg rating without using more expensive hybrid or diesel technology. Now automakers are starting to show they can hit that mark with improved conventional gasoline powertrains for a smaller price premium — or none.


But getting buyers to sweep them off the lots hasn't been easy. Gas prices averaged $2.968 a gallon nationally on Wednesday for regular, AAA reports. While that's up 33 cents a gallon from a year ago, it's still short of the $3-a-gallon threshhold.

"When gas is cheap, no one is going to be rushing out to buy a small car," says Gabriel Shenhar, senior auto test engineer for Consumer Reports.

But automakers are keenly aware of how many were caught short in 2008 when gas prices shot up to a $4.14 per gallon peak in July, so they are adding 40-mpg cars as a hedge.

"We don't get fooled again". Even though the nay-sayers scoffed, it looks like that was a good bet to make. My local Speedway is now at $3.19 a gallon, just like that - and there are some dire predictions about gas prices floating around the news today. Michigan Public Radio:

Patrick DeHaan is an analyst with GasBuddy.com. He says demand for gasoline is up five percent over year-ago levels, and supplies of crude oil have dropped.

"We typically see prices increase in spring as we approach summer, anywhere from 30 to 50 percent," DeHaan says. "So we could be looking at new records, at least four dollars a gallon come springtime. It's not going to be a pretty picture out there."

Four? That's nothing. The former president of Shell Oil is predicting $5 by 2012.

The former president of Shell Oil, John Hofmeister, says Americans could be paying $5 for a gallon of gasoline by 2012. In an interview with Platt's Energy Week television, Hofmeister predicted gasoline prices will spike as the global demand for oil increases.

"I'm predicting actually the worst outcome over the next two years which takes us to 2012 with higher gasoline prices," he said.

Tom Kloza, chief oil analyst with Oil Price Information Service predicts $5 in the next decade, but probably not by 2012. Cold comfort.

What this does to the national economy? Unknown at this point, but it can't be good. The last time gas went over $4 in 2008, we were in the middle of the national Great Recession due to the housing collapse/credit crunch. Michigan unemployment shot up like a rocket and slow sales contributed to the downfall of the Big Three by the end of the year.

This time around, we are still dealing with the housing problem, but credit is easier to obtain, and the economy seems to have stabilized for now. And this time around, the Big Three are ready with new models of smaller cars and hybrids that get great mileage. So, if the consumer is still in the market for a new car, we should be OK - but keeping the consumer in the market might be the next problem we face.

That Chevy Volt looks better all the time...