Posted By RichC on March 16, 2011
Joe White wrote about $4/gallon gasoline this morning in the Wall Street Journal and wondered at what price Americans switch to subcompact car? While he acknowledged that we’re not quite as bad as we were during the 2008 spike, prior to domestic carmakers shifting to more fuel efficient engines and CUVs rather than SUVS, we are still driving trucks, large minivans and up-sized small cars.
The hyped vehicles like the Nissan Leaf and Chevrolet Volt have had lackluster sales and acceptance so far, but are just getting out of the gate. Hybrids like the Prius have been successful, but pretty much fall into a niche group of owners not unlike Volkswagen TDI diesel buyers.
One of the difficulties in the U.S. compared with Europe is that the price for fuel rises and falls drastically; this make it much more difficult for consumers to know what they want … or in many cases what they want to “settle for.” Why buy a low powered sardine can if in 6 months the price of gasoline drops 50%.
What gives car makers fits—and makes it tough on car buyers—are gas prices that ride a roller coaster the way they’ve done in the U.S. since early 2008. With crude prices recently surging above $100 a barrel, the $4-a-gallon level has already been breached in parts of California. Yet on Tuesday, oil prices lurched down again on concerns that the economic impact of the Japanese earthquake would slow global petroleum demand.
"Volatility paralyzes customers," says Ford Motor Co. Chairman Bill Ford, adding they can be left wondering: "Am I making a decision today that I am going to regret six months from now?"
In the summer of 2008, when regular gasoline prices shot up, industry analysts declared the death of gas-guzzling SUVs. Motorists reacted by driving less and turning toward smaller cars and hybrids. Dealers, saddled with fleets of SUVs and large pickups ordered when gas was cheap, held fire sales to clear their lots and restock with more efficient models.
Then, gas prices collapsed, along with the economy. Consumers started driving more, and they went back to buying larger, less fuel-efficient models.