On the news of OPEC's decision to keep oil production at current levels, there is almost certainly going to be a rout in the price of oil.
As of this writing, Gasoline futures are below the $2 mark, while West Texas Intermediate (the North American crude oil benchmark) is sitting at about $71.50, down from a high of $105 this summer. Gas prices are sure to sink even lower alongside the expected dip in crude.
The big question in my mind is how this will influence consumer behavior in the auto sector. Since the Great Financial Crisis, auto makers have positioned themselves for marked increases in fuel economy, spurred by equal parts consumer demand and government mandates (CAFE and Euro emissions regulations). This has manifested itself in everything from incremental (more efficient powertrains) to extreme (the aluminum F-150).
With gasoline at record highs, the demand for smaller, fuel-efficient cars is acute. But when the price dips, consumers tend to forget about the hard times and gravitate back towards pickups, SUVs and all manner of gas guzzlers.
Or do they?
Over the following months, we'll be able to track what happens to auto sales and the price of gasoline. Our sales guru Tim Cain will be able to plot the results in one of his trademark charts.
Personally, I suspect that we'll see more short-term thinking when it comes to vehicle purchases. Sales of SUVs, trucks and larger crossovers will keep rising. Small crossovers will eat into sales of passenger cars, likely stealing market share from compact cars once nameplates like the Chevrolet Trax and Honda HR-V hit the market. The hard times will quickly be forgotten…until the next rise in gas prices and economic contraction. In the mean time, it's going to be a rough market for hybrids and EVs.
But I'm curious to hear what you have to say. With no formal training in economics or business, all I can do is go with my gut. I'm curious to hear your analysis, whether its rooted in the same methodology as mine, or something more concrete and quantitative.
The post Question Of The Day: This Time It's Different? appeared first on The Truth About Cars.
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