Overhaulin'

At what point will rising oil and gas prices effect new car sales?

The price of oil and thus gas is rising, it was predicted to hit over $4 a gallon before the turmoil in the middle east. Now with everything going on in Egypt, Libya and elsewhere it certainly will hit that mark and probably go much higher before years end. At what point will the rising cost of oil/gas cause people to stop buying new cars again, mainly larger vans and SUVs that companies like GM build? One of the things that led to GM hitting hard times several years ago was the rising cost of gas, will this happen again?

Public Comments

1. Cars with a better MPG rating will increase in sales and the guzzler's sales will decrease. I think 4.50 a gallon will be the last straw.
2. It will happen again, though most manufacturers have a larger stable of efficient cars than they had 4 years ago. To address your question, higher gas prices will likely help new car sales in some cases, as folks with non-efficient cars look to change. Do the math on someone driving 1,000 miles a month, paying an extra $2 a gallon for gas (conservatively). What's the difference between a car that averages 18 MPG and one that averages 31 MPG? 1,000 / 18 = 55.56 gal/mo * $2 (the increase in a gallon of gas) = $111.11 / mo 1,000 / 31 = 32.26 gal/mo * $2 (the increase in a gallon of gas) = $64.51 / mo You'd save $50 a month on gas, just for starters. Drive more than that? Save more. And if they are still paying on the larger vehicle, switching to a smaller one may actually end up with a net savings each month.
3. If you recall, we had another spike in gas/oil prices during the summer of 2008 before the elections. Gas went up to about $4/gal. The train raised its prices on all its tickets for the 2nd time in 3 years. Suddenly America was crying out for better mileage and alternative fueled cars. US car companies finally started making hybrids, and started talking about vehicles powered by bio-diesel, hydrogen, as well as fully electric cars and other solutions. It was also the height of the "Green" movement. Suddenly everything had to be green. It wasn't because it was the right thing to do - it was because green had become a marketing buzzword. Then after the elections, gas prices went back down to a "reasonable" $3/gal and almost all the complaints from the public about better cars disappeared. Within weeks, Americans were back to buying huge SUVs again, and the oil companies posted the largest profits of any company in the history of mankind. In case you haven't been paying attention, the oil companies raise the price of oil whenever they feel like it. We'll complain a bit, but still buy gas because we have to. However the oil companies aren't stupid. They know exactly how high or fast they can raise prices before Americans start demanding better cars, or even stop driving altogether. Other countries aren't quite so addicted since their governments have long used taxes on gas to build and subsidize public transportation. This is why gas is 3 to 4 times as expensive overseas. So we may complain about $4/gal gas but in Europe and Japan, they've been paying $10-12/gal for years. And while US car commercials boast about cars that get about 30mpg, Europe has had diesel powered cars that get 70mpg. No that's no typo. 70 miles to the gallon. This means a typical sedan with a 15 gallon tank could go over 1000 miles without a fill-up.