Tuesday, November 11, 2014

Low Gasoline Prices Leading To More Guzzler Purchases

Over the last month consumers have shown a fresh interest in the kind of SUVs — Hummers, Lincoln Navigators, Ford Explorers — that typified America’s bigger-is-better mindset of twenty years ago. The new mindset among some car buyers is a consequence of a domestic oil boom that has helped cause global crude prices to plummet in recent months, with the cost of a gallon of gas now below $3. 

As oil prices hit a three-year low, it creates the potential to push the U.S. further away from its dreary post-recession mindset, leaving instead a nation with more affordable air and road transportation options, higher consumer confidence, and more gas guzzlers driving around.
Demand in developed countries (including the United States) is down over the last few years, the result mostly of improving automotive fuel efficiency. Meantime, supply is way up, helped by U.S. wildcatters riding the “fracking” boom in the prairies of North Dakota and the plains of Texas.
The current $78 for a barrel of the benchmark West Texas Intermediate could scale back exploration and production plans if prices continue to drop.
Before the financial crisis, trucks almost always outsold cars, in some months grabbing as much as 59 percent of the market. Post-recession, the industry has flip-flopped; cars are more popular.
But not in recent months. In September, the truck market share was 53.5 percent. In October, it was 53.6. That is the best sustained two-month stretch since 2005.
The environmental concerns are significant. All told, automobiles account for about 50 percent of an average household’s emissions, but that can swing widely based on the vehicle. A big SUV will produce about three times the annual greenhouse gas tonnage emitted by a Prius. (Wash Post, 11/10/2014)

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