Report: Will Gas Prices Derail Auto Sales Boom?

March 23, 2012 by · Leave a Comment 

Pump prices keep rising

For automakers, 2012 looks like it will be better than expected — at least in the U.S.

USA Today reported that U.S. consumers are on pace to buy about 1.4 million new cars and trucks in March, or about 6% more than in the same month last year. That would put the industry on pace to sell 14.1 million for the year, which is higher than most industry analysts expected at the start of 2012, when they were predicting sales of less than 14 million.

“Results for the first quarter of 2012 suggest that the year will be better than current expectations,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. In March, LMC Automotive is predicting an annualized selling rate of 14.1 million cars and trucks.

That’s lower than the 15.0 million rate for February, but would be the third-straight month above 14 million.

But Schuster says the real test for the industry will come over the spring and summer. That’s when gas prices will test consumer confidence and as policymakers in Europe try to contain that continent’s debt crisis.

On Thursday, the average price for a gallon of gas was $3.88, or 33 cents higher than a year ago, according to AAA’s Fuel Gauge Report.

Higher prices aren’t hurting auto sales yet, Schuster said, but they are affecting what people are buying.

Through the first 18 days of March, subcompact and compact cars accounted for approximately 23% of retail sales in the U.S.

USA Today reported that over the last 18 months, almost every automaker has introduced a new or redesigned compact car, and the industry overall is offering features on those cars previously reserved for larger cars.

Examples include the Chevrolet Cruze, Fiat 500, Ford Focus, Honda Civic, and Hyundai Elantra and Veloster.

“I think the styling in many cases is more appealing and the content has increased,” Schuster said.

Today, consumers can choose from 41 small car models in the U.S. market compared with just 30 back in 2007.

The U.S. housing market, meanwhile, is only starting to show signs of a recovery, which means pickup sales are unlikely to outpace industry growth.

With higher gas prices, and more choices, the overall share of small cars in 2012 could climb to its highest level ever, at nearly 20% of industry sales, Schuster said.

[Slashdot] [Digg] [Reddit] [] [Facebook] [Technorati] [Google] [StumbleUpon]

Gasoline Cost Might Dent Consumer Confidence

March 20, 2012 by · Leave a Comment 

Inflation remains tame throughout the U.S. economy, with one big exception: gas prices.

The Associated Press reported that those higher prices haven’t derailed a steadily improving economy. But if they surpass $4 or $5 a gallon, experts fear Americans could pull back on spending, and job growth could stall, posing a potentially serious threat to the recovery.

A few weeks ago, economists generally agreed that the economy was in little danger from higher gas prices as long as job growth remained strong. But fears are now mounting that gas prices could begin to weaken consumer confidence.

The average pump price nationwide is $3.83 a gallon. Energy analysts say it’s bound to climb higher in the weeks ahead.

“It’s a thorn in the side of the consumer and businesses,” said Chris Christopher, an economist at IHS Global Insight. The economy this year “would have been better and stronger if we didn’t have to deal with this.”

So far, higher prices aren’t undermining the economic recovery, which is getting a lift from strong job creation. It would take a big jump – to around $5 a gallon – before most economists would worry that growth would halt and the economy would slide into another recession.

That’s because an improving economy is somewhat insulated from any threat posed by higher prices at the pump.

Even if prices ease after the summer driving season, don’t expect gasoline to fall below $3 a gallon. The government estimates that this year’s average will be $3.79, followed by $3.72 in 2013.

According to the Associated Press, most economists accept a rough guideline that a 25-cent rise in gas prices knocks about two-tenths of a percentage point off economic growth.

Gas prices also have an outsize impact on consumer confidence, Christopher noted. It’s a high-frequency purchase. Consumers notice the price whether they’re filling up or driving past a gas station.

Along with the unemployment rate and stock market levels, gasoline prices heavily determine how Americans see their financial health.

That effect was evident Friday when a decline was reported in the Thomson Reuters/University of Michigan index of consumer sentiment. The result surprised some economists who had assumed that higher stock prices and lower unemployment would lift consumer sentiment.

The Michigan report showed that “gasoline worries … are outweighing stock market gains and job growth” when it comes to influencing consumer attitudes, said Michael Hanson, an economist at Bank of America Merrill Lynch.

The price of gasoline has climbed 17% since the year began – to a national average of $3.83 a gallon. That’s the highest ever for this time of year. A month ago, it was $3.52.

[Slashdot] [Digg] [Reddit] [] [Facebook] [Technorati] [Google] [StumbleUpon]

Report: Gas Costs May Not Spur Small-Car Sales

March 15, 2012 by · 1 Comment 

The following is an article from Automotive News examining whether gas prices will push consumers toward smaller vehicles. To read the entire story click here.

It happens nearly every year: Gasoline prices rise in the spring and sales of smaller cars spike through the summer. Pundits declare that car-buying habits are changed for good. Then gasoline prices fall, and consumers go back to buying full-sized SUVs and cars with larger engines.

Some industry trackers believe 2012 will be different because this time Americans will realize that cheap gasoline isn’t coming back. But increasingly automakers seem to doubt that a permanent change in consumer behavior will ever occur.

As a result, they are focusing more on boosting the fuel efficiency of the entire vehicle lineup and not just adding small cars.

“I don’t see this reshaping the buying public,” said Bill Reinert, Toyota national manager of alternative fuel vehicles. “We’ve been through these cycles for two decades, but it’s never really taken. I don’t see this as a chance for a sales boom for the [Chevrolet] Volt and [Nissan] Leaf.”

Shopping behavior tracked by Compete Automotive in Boston shows that sudden spikes in gasoline prices lead to a sharp rise in demand for small cars. More gradual increases in the prices have less effect, “but at some point, even a gradual creep to insane prices is likely to drive behaviors,” said Lincoln Merrihew, Compete’s managing director.

Reinert says that the sales-weighted fuel economy of new Toyotas has gradually increased over the past several years, basically following the trend of gasoline prices. But sudden purchase spikes in fuel-efficient cars have been repeatedly followed by troughs once gasoline prices fall again. Reinert says that charting Toyota Prius sales in relation to gas prices bears this out.

Retail sales of the redesigned Ford Focus compact were up 123% in February in California, a market that bore the brunt of suddenly higher gasoline prices. But will that sales rate hold should gasoline prices decline?

“We saw increases in small cars and fuel-efficient vehicles move in tandem with the price of gas,” said Erich Merkle, Ford’s U.S. sales analyst. “Volatility shifts buyer behavior.”

To read the entire article click here.



[Slashdot] [Digg] [Reddit] [] [Facebook] [Technorati] [Google] [StumbleUpon]

Report: Spending Up Despite Rising Pump Prices

March 13, 2012 by · Leave a Comment 

Americans might complain about higher gas prices, but new government data show that hasn’t stopped them from driving to the mall, according to the Washington Post.

The Commerce Department reported Tuesday (March 12) that retail sales climbed 1.1% in February compared with the previous month. Consumers pulled out their wallets for new cars and clothes, electronics and sporting equipment despite spending 3.3% more at gas stations. The results boosted estimates of how fast the economy is growing, particularly as it comes on the heels of data showing a strengthening job market.

“Consumers are holding their own and have some extra cushion to withstand higher gasoline prices,” said Chris G. Christopher Jr., U.S. economist for IHS Global Insight.

The strong spending numbers offer a counterpoint to the public anger over rising prices at the pump.

What those pump costs mean for the economy has become a central question of the presidential campaign. A recent Washington Post-ABC News poll found that 65% of Americans are unhappy with the way President Obama is handling gas prices, driving down his overall approval rating. Republicans have seized on the sentiment to critique the president’s environmental and foreign policies.

Generally, economists worry that higher fuel costs will drive up inflation and leave households with less money to spend on other items. That can wind up depressing the nation’s gross domestic product because consumers are the backbone of the economy, accounting for roughly two-thirds of GDP.

But so far at least, those fears have not materialized. Sales in February rose in almost every category of retail. Automakers confirmed what had been reported as a strong month with a 1.6% spike in sales. And analysts were particularly heartened by increases in discretionary spending in sectors such as clothing, which was up 1.8% from the previous month. Even long-struggling department stores showed a hefty 1.5% gain.

[Slashdot] [Digg] [Reddit] [] [Facebook] [Technorati] [Google] [StumbleUpon]

RV Industry Staying on Track Despite Gas Costs

March 6, 2012 by · 2 Comments 

Despite the rapid increase in gas prices the past few weeks, a spokesman for the recreational vehicle industry believes it will not directly affect RV sales.

As reported by the South Bend (Ind.) Tribune, the RV market is coming off of a 5.1% increase in RV wholesale shipments in January compared with the same month a year ago, according to the Recreational Vehicle Industry Association (RVIA).

The RV industry employs more than 24,000 people in Elkhart County, including RV manufacturers and suppliers. Northern Indiana builds 82% of all recreational vehicles in the U.S., according to RVIA.

“The fuel prices don’t really impact RV sales quite the way a lot of people might think,” Kevin Broom, director of media relations for the RVIA, said. “Part of it is there’s so much savings already built into RVs that stay when fuel prices rise.”

The RVIA had San Francisco-based PKF Consulting look into that question, Broom said, and it concluded that fuel prices would have to get to nearly $10 a gallon before the most expensive RV — a Class A motorhome — would lose its economic advantage.

For travel trailers, fifth-wheels and folding campers, gas prices would have to rise to $15 to $20 a gallon before those vehicles lose their economic value, Broom said.

People may take shorter trips, Broom said, but people will still use them.

Rising fuel prices, though, can enter into the equation in other ways. The biggest is if they affect consumer confidence, he said. Another factor is the availability of consumer credit, which greatly affected RV sales in 2008.

In the recession, fuel prices did go up, but Broom noted, consumer confidence and credit availability were other key factors.

“There were so many things going on,” Broom said. “Fuel prices did go up, but at the same time we had home foreclosures and a credit freeze and this massive recession that went on. “Did RV sales drop because fuel prices went up or was it because there was this massive economic cataclysm?”

It’s hard to separate each factor, Broom said. “My guess would be that those larger economic factors like decline in home prices, like people losing employment, just the availability of credit,” he said. “Those were probably bigger factors than fuel prices.”

As it is, University of Michigan economist Richard Curtin is predicting a 5.1% increase for RV sales for the year in the spring issue of RV Roadsigns.

Curtin predicts RV shipments will reach 265,200 for 2012, which would be the third straight year of increased sales.

Curtin cited stronger economic growth, increased job opportunities and easing consumer credit as factors.

“We’re encouraged by that,” Broom said. “The economy is showing signs of growing, of recovering.”


[Slashdot] [Digg] [Reddit] [] [Facebook] [Technorati] [Google] [StumbleUpon]

Crude Oil Prices Jump, Gasoline May Follow Suit

February 21, 2012 by · Leave a Comment 

Consumers are feeling the pain at the pump

Oil prices rose Monday (Feb. 20) after Iran cut exports to Britain and France, raising worries that higher gas prices may follow suit.

CNN Money reported that Iran’s oil ministry said Sunday it would stop exporting oil to French and British companies. The announcement came just days after Iran threatened to cut supplies to some European Union (EU) countries in retaliation for sanctions put in place by the EU and United States.

U.S. crude for April delivery jumped nearly 2% to $105.08 per barrel.

Prices are already up nearly 9% from the start of the year. According to motorist group AAA, the national average price of $3.56 a gallon marks the 13th consecutive increase.

The price of unleaded gasoline in the U.S. will likely hit a nationwide average of $4 by this summer, said Dan Dicker, oil trader and author of “Oil’s Endless Bid.” The last time prices topped $4 was 2008 and Dicker said there’s a one in three chance that gas could reach $5 a gallon.

If gas prices do head to those lofty levels, that could put a crimp in the economic recovery as consumers will likely cut down on spending if they have to pay more to fill up their cars.

[Slashdot] [Digg] [Reddit] [] [Facebook] [Technorati] [Google] [StumbleUpon]

Marketing Survey: RVers Adapting to Gas Prices

February 15, 2012 by · Leave a Comment 

Kidd RV Resort Consulting, an integrated marketing firm specializing in the RV industry, has interpreted the results of its five-question survey to analyze the relationship between gas prices and RVers’ travel behaviors from the summer of 2011 to the winter of 2012.

According to a press release, respondents of the 2011 survey indicated that if fuel prices continued to increase, more than 70% of RVers would change their travel plans or behaviors. The percentage of respondents who would change their travel behaviors dropped to 27% in 2012, an indication that more RVers are adhering to their travel plans despite fuel prices. This fluctuation is potentially due to the 16% fuel price decrease that occurred from the summer through December, combined with an improving economy.

Based on survey results, RVers are more committed to paying higher fuel prices and traveling in 2012 as compared to 2011. In 2012, the majority of RVers responded that they would travel until fuel prices reached $8/gallon, while only 7.4% of RVers would pay $8/gallon in 2011. In addition, 55% of participants are planning on traveling more than they did in 2011, 36% planning to travel the same as in 2011 and only 9% traveling less than they did last year.

“Understanding how RVers are affected by industry trends, obstacles and new technologies aids Kidd RV for the purpose of creating more focused marketing objectives and maximizing positive results for our clients,” says Jerry Kidd, president of Kidd RV Resort Consulting.

For detailed charts of RVers’ responses to fuel prices and traveling, visit

[Slashdot] [Digg] [Reddit] [] [Facebook] [Technorati] [Google] [StumbleUpon]

Rite of Spring: Gasoline Prices Heading Higher

February 10, 2012 by · Leave a Comment 

Get ready for another round of pain at the pump: $4 (or higher) gasoline.

USA Today reported that after rising 19 cents a gallon in the past four weeks, regular unleaded gasoline now averages $3.48 a gallon versus $3.12 a year ago and $2.67 in February 2010.

Prices could spike another 60 cents or more by May. “I think it’s going to be a chaotic spring, with huge price increases in some places,” says Tom Kloza of the Oil Price Information Service. Kloza expects average prices to peak at $4.05, although he and other industry trackers say prices could be sharply higher in some markets.

Rising prices are an annual spring ritual, largely because of seasonal demand.

Refiners also switch from winter formulations to more expensive seasonal formulations to meet stringent environmental standards, which can tack on 15 cents a gallon, says Brian Milne of energy tracker Televent DTN.

This year’s earlier-than-usual run-up is more about anticipation than current supply and demand. Last week, the Energy Department reported anemic U.S. consumption — the lowest levels since September 2001. Domestic crude oil prices have fallen in six of the past seven trading sessions on the New York Mercantile Exchange and were about $98 a barrel Monday morning, near six-week lows.

Renewed tensions in the Middle East are bolstering crude prices, while speculators are boosting futures contracts, betting on global supply disruptions and tighter refining capacity. Kloza notes that several U.S. and overseas refiners have experienced temporary or permanent closures.

So far, $4 a gallon has proven to be the upper limit consumers will pay. Last April, national prices peaked at about $3.98 a gallon. In 2008, a sharp run-up ended when prices hit an all-time average of $4.11 a gallon that summer.

“Higher demand, Iran, lost refining capacity are all potential problems,” Milne says. “We’ll get over $4 a gallon, but it’s going to be tough to sustain that level. People will drive less.”



[Slashdot] [Digg] [Reddit] [] [Facebook] [Technorati] [Google] [StumbleUpon]

Unemployment Drops, Gas Prices Head Higher

January 6, 2012 by · Leave a Comment 

As the U.S. economy recovers and adds more jobs, Americans are paying the price at the gas pump.

According to an Associated Press report, the government said Friday (Jan. 6) that the nation’s unemployment rate dropped to 8.5%, the same day that gasoline prices hit an average of $3.35 a gallon, the highest ever for this time of year.

Gasoline prices are rising again after falling in the last months of 2011. Motorists are buying less gas than they did a year ago, but pump prices are rising with higher oil prices.

“It’s difficult to raise prices when gasoline demand is so anemic,” said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. But if the cost of oil goes up, “you have to pass it along” to the consumer, he said.

Kloza expects pump prices will average between $3.75 and $4.25 a gallon this year. They could be around $4 a gallon by spring.

Oil prices at the start of 2012 continued the climb they started last year. The price of benchmark U.S. crude rose 19% in 2011 to an average of about $95 a barrel. The price of benchmark crude rose 3% this week, though it fell slightly on Friday.


[Slashdot] [Digg] [Reddit] [] [Facebook] [Technorati] [Google] [StumbleUpon] Oil Rises, Pump Prices Retreat

November 17, 2011 by · Leave a Comment 

Wednesday (Nov. 16) WTI crude oil closed at $102.59 per barrel. It’s the first time ever that oil has closed above $100 per barrel in November. And gas prices are going down?

Yes, they are. According to, today’s national average price of gasoline ($3.41 per gallon) is notably less than the average price at the pump the last time crude oil traded in the $100-range. It wasn’t long ago. From February through March WTI crude on the New York Mercantile Exchange traded at the $100-plus per barrel level and the retail price of gasoline climbed steadily from $3.50 to $3.90 per gallon during the same period.

“Nobody wants to jinx the downward trend by actually asking the question, but everybody is wondering the same thing: Why are gas prices going down instead of up?” said Gregg Laskoski, senior petroleum analyst for” The answer, we believe, lies in the current disconnect between crude and pump prices. The two usually move in tandem, but this is one of those instances where the exception to the rule occurs, and when that happens, consumers notice immediately.

“WTI is now yielding to the pressure exerted by the increasing importance of Brent crude and the fact that Brent is a more accurate reflection of global value. As a result, WTI’s price is rising to close that gap,” he added.

At the same time, both refinery utilization and total gasoline production have increased according to the most recent data from the Department of Energy. Additionally, gasoline futures are at their lowest level since February 2011 and that facilitates the seasonal decline for wholesale and retail prices.


[Slashdot] [Digg] [Reddit] [] [Facebook] [Technorati] [Google] [StumbleUpon]

« Previous PageNext Page »