As the U.S. economy craters, the price of gas is about to fall below $3 a gallon. Most experts believe that lower fuel costs will not lead American consumers into gas-guzzling SUVs anytime soon. If at all. Given the sudden arrival and frentic pace of the last gas price spike, even an extended period of low, stable fuel prices wouldn’t convince American consumer to “trust” lower pump prices. In other words, an entire generation of drivers may have suffered “pump trauma.” And until somebody buys the damn things, and lots of ‘em, SUV and pickup truck residual values will remain low enough to make an ant’s ankles look like Godzilla’s eyeballs (or something like that). But hey, that’s the 411 from “experts,” not TTAC’s Best and Brightest. So I turn to you for a more thoughtful analysis. Will Americans “forgive” their gas guzzlers and “forget” their pain at the pump, plumping for ye olde guzzlers when the economic crisis passes? If so, how long would it take? What effect would cheap gas have on eco-oriented whips like the Chevy Volt and Toyota Prius?
62 Comments on “Question of the Day: Will Cheap Gas Resurrect Gas-Guzzlers?...”
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I hope not. At least as far as commuter SUVs go. It would be nice to be able to see on the roads.
Yes and no.
Yes, they could regain some market share.
No in that the entire economy is melting down, and virtually all new car sales are collapsing.
I dunno. People who like trucks like trucks (and tend to have short memories). Furthermore, we may be entering an era of cheap (<$3) gas and real-cheap trucks (ie $10K Silverado’s from a Chapeter 7/11 GM).
No. Americans are stupid, but they’re not that stupid.
Also, like Berkowitz said, the entire economy is collapsing. Asking people to buy a two-ton hunk of metal at this time–especially one that will take a lot of money to operate–is asking a lot.
No, not in this credit market.
As for the Volt: as TTAC has pointed out, this will be a $40,000 niche vehicle for clean green true believers, who don’t need to count the dolars they spend on transportation.
The Prius on the other hand will continue a slow rise in numbers, with ToMoCo cutting prices if and when required.
Hello — I have a bit of a different perspective on this (don’t ask me why, it’s not my fault).
Yes I know many people said no to SUVs (real or future purchase intentions)because of gas prices. But I think the bigger motive behind the startling abandonment of SUVs is actually rooted in social behaviour and not economics — that is, it suddenly became EVIL to own an SUV. I mean, it used to be cool. Remember Marge Simspson in her Canyonero? (Hyah! CanyoneroooOOoooooOO) And then — with amazing speed, really — it became Just Plain Wrong. And since most people buy cars based on what their neighbour will think, it just became…’inappropriate’ to purchase an SUV.
I mean, think about how much money people waste on a daily basis. People still eat out, go to movies, spend ridiculous amounts on weddings (as guests, too — how many friggin wedding registries are bloated with useless trinkets? 100%? More than 100%? But I digress…). My point is that people still ‘drop’ lots of cash on things that don’t make any basic microeconomic sense. So in that light, I don’t think people dropped SUVs because of the money. I think it just became embarassing to own one.
This is actually very good news for cheap people like me. You see, 5 years ago, if I bought a econobox I’d just be cheap. I mean, that’s what you were if you bought, say, an Accent or Elantra or Civic back then (I mean if you were over 30). But now?? You’re a damn ecological HERO for ‘downsizing’ to a Fit, Versa or Yaris (note: the ommission of domestic vehicles is not intentional; it’s un-impossible).
If somehow — don’t ask me how — SUVs become stylish again (I can’t see it happening, but what I can’t see could fill the LOC), then they will resurrect.
CanyoneroOOOooooooooOOO!
Falling gas prices will help the used SUV market a bit. The market for new large SUVs is DOA because the American version of what Brits call chavs can no longer get a HELOC or subprime 72 month auto loan.
Even people with money aren’t going to buy new large cars and trucks because of economic uncertainty, and because the new small cars and trucks are really good. I would take a Civic over an Accord, and some people would take a Fit over a Civic. And that is regardless of price – if I was offered a free Accord or a free similarly equipped Civic I would take the Civic.
Luckily (for me because like NetGenHoon I like to see the road) any possibility of a resurgence of masses of bad drivers in oversized SUVs will be killed by CAFE.
Those that don’t study history, tend to repeat it….
Who knows? My guess is that gas guzzler’s won’t make anything close to a full come back. That’s partly because of the credit crunch and recession — those SUVs were darned expensive. Beyond that, the market’s mindset has changed.
That said, we saw in the mid-70s that the market could gyrate wildly. One year high MPG was all the rage; two years later big cars were back. Then another oil shock and most of the porkers were majorly downsized. Sure, CAFE helped, the market also shifted significantly.
Sub three dollar gasoline would tempt me to drive my ‘79 Continental and park my ‘09 Corolla a little more.
Fuel consumption on those Lincolns are breathtaking. Full tank of 25 gallons allows you to drive about 175 miles before the “Low Fuel” light comes on (with about seven gallons left in the tank) Gives a whole new meaning to “Gas Friendly”
To me the ’79s are the newest Lincoln worth owning so I won’t be running to the LM dealer anytime soon though.
My initial answer is “Yes, they will. Just like they did after the crises of ‘73 and ‘79.”
But I think, wishfully or otherwise, that more people today are aware of the environment impact of their fossil fuel choices. Voyons nous…
I don’t think people will rush out to buy SUVs but the lower fuel prices might tempt a lot of people into the new “muscle cars” that are appearing.
Challenger RT doesn’t sound bad now.
You’ll just need a 40% down payment.
I for one was amazed at what less than 9 months of “high” gas prices did to America. ALOT of people were actually cutting back on driving and the HUGE shift to smaller cars all happened in a matter of months. Imagine what we could do after a few years
I think alot of what scared people is how drastically the price per gallon was changing. I would like to see some government regulation on the price of a gallon. Just like on a gallon of milk. Then once things stabilize, the government should put a 25% tax on a gallon of gas. This would do two major things, A- help fund the government/economy/etc and B- keep the momentum we currently have to “go green”
Ill deal with $4/gallon if i know its going to help people in our country and not some tool in the middle east that needs another Veyron
Nope. Not only have Americans grown wary of cheap pump prices (knowing that oil prices in this day and age are anything but stable) but in a virtually frozen credit market, they can’t even get the auto they need even they wanted to buy the damn things.
Those that don’t study history, tend to repeat it….…
I concur. If gas stays down, the guzzlers will be back. Right now, until this fiscal mess gets sorted somewhat, not much of anything will be moving…
I hope not, but considering how cheap SUVs are now, especially used… well they sure do make a bargain. From a strictly financial standpoint, all things considered, it does make sense to buy a used SUV, even right now. God I hate them so much. I wish it weren’t so. I have the displeasure of driving one now on a regular basis (girlfriend’s dad’s on loaner to us). It sucks so bad I can’t stand it. But we use it for its intended purpose, that is, getting lotsa stuff from costco and home depot. I use my little sports car for everything else (it guzzles too, but worth every penny).
1. If, in ear future, an alternate, viable source of credit for car buying is found, and
2. If gas prices stay where they are or go down further,
then:
3. Yes indeedy, the SUV and truck sales will go right back up, possibly through the roof via pent up demand. MoTown will be saved __and__ have $25 bil loan of our money to put towards their next gen cars.
One reason these monsters sell is that people feel __safe__ in them compared to smaller vehicles. And given all the insecurity everywhere these days, the temptation to feel __safe__ by buying that big SUV will be a sales factor.
Also, as pointed out above, they haul a lot of stuff, or big trailers, or a lot of people. For those reasons, they will sell provided the credit and gas cost are resolved to the buyer’s satisfaction.
It’s funny, but SUVs/Trucks still make up almost 50% of new vehicle sales, even in this market.
As mentioned above, if gas gets cheap for a sustained period of time, and people can get credit, SUV/Truck sales will come roaring back.
But right now, with the tight credit market, very few people are buying anything, regardless of size or make.
I spend a week in Beverly Hills and Malibu, and all I see all day are rich folks driving big giant SUVs. Obviously they are the only people who can afford to feed them.
Cheap gas would be 99 cents a gallon. Cheaper gas will help me off set the projected 2500$ it is gonna cost me to heat my house this winter.
for 22 grand I can buy for my spouse:
new Honda Element – basic
new Toyota RAV4 – basic
loaded 2yr old Caddy SRX with 25k miles
gas is gonna be 2 bucks / gal by Christmas
I’m ridin in style
(hopefully the economic meltdown will suppress any cheap gas induced resale value increase)
If the last cycles mean anything, we will need several years of relatively low fuel prices before consumption behavior resembles that of the muscle car or SUV eras.
These price shocks tend to sit with people for awhile. But eventually, they lose their fear of the water and creep back in. Eventually, most everyone is swimming again and forgets all about the sharks.
I don’t particularly buy into short-term or paranoid views of “peak oil”, but it would be wise if we would modify our habits based upon the presumption that it could one day prove to be true. We are really foolish to consume an imported resource, much of which is produced by people who don’t particularly like us, as if it is going out of style.
I guess we must be in significantly different earning brackets if <$3 a gallon gas is “cheap” to you. To me it is obscenely expensive, and there is no way I would consider anything below 26-27 mpg combined cycle until gas price drops below $1.50.
And there I was thinking I was doing pretty well, paying mortgage in Silicon Valley, and having no other debts.
Then again, most people around here who drive the gas guzzling monstrosities work for Walmart and rent rooms. Go figure.
I have four vehicles in my ‘fleet’. The biggest is a full size van – with three kids, their friends and the need to haul our toys to go play, kids to practice, etc, – it is going to stay in the fleet, especially since it is paid for. Also – at 17 MPG on the highway, with a seven passenger capacity, the ‘passenger MPG’ is way higher than our most fuel efficient vehicles, a four cyl sedan and a four cyl pickup.
The last member is a six cylinder luxury sports sedan. I bought the six instead of the eight cyl version just because we already have one eight cyl and that is enough. Fun to drive, though and decent economy – 25.5 long term MPG – three years in February.
With the price of used large trucks/SUV’s in the toilet, will I buy another large vehicle should the van be stolen, damaged, etc? Absolutely!
Again, you need to look at the usage needs. I use the pickup for hauling anything small enough to fit, but use the van with a utility trailer for large stuff or lots of passengers. This will not change no matter what the price of gas costs.
BTW, the van is the oldest vehicle, but has the lowest mileage – used when it makes sense and definitely what I want my daughters using when driving to school (3 miles each way).
Yes, many Americans will return to their lumbering SUVs if gas prices stay low. Why? Because most people are dumbasses, and the same dumbasses that jumped on the SUV Lemming Craze in the first place will do so again, because they lack the cerebral cortex to think ahead and see the big picture. That, and companies like GM will be stupid enough to keep building them…
With the general economy in the tank, people may still like the idea of saving money by putting less gas in their tanks, at any price. I may be overstating the ability of the general population to recognize a wake-up call, but there is hope that conspicuous consumption mat be set aside for a brief, shining moment. Kumbayah.
Unfortunately this question comes at the same time that US automakers are taking it in the shorts. SUVs and full-size trucks will be so cheap that people will pay the extra money for gas because their payments will be low.
People don’t think about saving money. They only see a monthly payment. If the monthly payment is comprised of gas + insurance + car payment, a reduction in any one of those three allows an increase in another.
guzzler sales will increase before the closing bell rings at the dealership saturday eve. It’s on like donkey kong baby, you guys are overthinking it.
Its like asking “would american men prefer larger breasted women, even though they had a poor experince with a well endowed ex wife”
negro pu leze, the answer is yes yes and yes.
green my ass.
It depends how long they stay low. If the 80s and 90s taught us anything it is that extended periods where fuel costs are below the pain threshold result in people buying more guzzling vehicles.
But, what is the overall economic situation going to be for people in the months ahead? If the layoff notices keep flying they more and more people are going to be very cash poor. Frugal is suddenly in again.
In the near term I don’t think we will see much if any uptick in the sale of guzzlers even if fuel drops back below $2/gallon. The recent around 50 to 75 cent drop in fuel prices seems to have been met with even further demand reductions. The tide is changing.
The high end of the Canyonero market (ie BWM, MB, Lexus etc) won’t be effected unless fuel prices stayed really high for years.
Now the the Tahoe, Durango and Expedition part of the market will stay down. The fire was fueled with subsidized leasing that assumed high residuals.
It will take 3-5 years of sub $3/gal gas before people go back using guzzlers as commuters.
No doubt there’ll be some rebound as gas prices fall. But like some novelist whose name I forget said, “you can’t go home again.” Not even to that misty SUV on the mountaintop. Whew!
What’s interesting is a look at the latest EPA MPG and technology trends data, which show that while average MPG has turned up and weight gain has leveled off, horsepower continues to rise on trend. (I’d past a chart I made of here if I knew how — happy to e-mail it if anyone’s interested; for the raw stats, see http://www.epa.gov/otaq/fetrends.htm). So, at least so far, a turn down in heavy metal isn’t matched by a slow down in fast metal. So whatever happens, looks like we’ll still find ways to burn more gas.
God, I hope the SUV craze stays dead. I prefer small cars for their nimble handling, and wouldn’t mind being able to see on the road. Additionally, small cars tend to be much safer than SUVs in a crash, provided you’re running into a similar car or stationary object. A small car getting hit by an SUV is bad news, though, so pulling the SUVs off the road will make life slightly safer for the SUV drivers and far safer for everyone else.
The one thing I don’t understand, though, is what’s so compelling about SUVs that they’ve been replaced by crossovers. They tend to be normal front-wheel-drive cars with lift kits. You get the bad handling of the SUV and the standard, boring sedan functionality with none of the utility of the full SUV. People ought to be buying hatchbacks and station wagons.
I guess it goes back to visibility. Until everyone is driving smaller vehicles, most people will want something tall so they can still see the road around them. I suppose it’ll take several iterations over the next decade or so to bring the US down to the size standards of Europe. I hope it happens that way; I can’t wait.
The price of gas around here is now around $2.999 per gallon. I’ll bet all the people who took Chrysler up on their gas card for a few years instead of cash on the hood are kicking themselves and Cerberus is laughing all the way to the bank. They knew there would be folks who would take them up on their deal (the sucker factor) which is why they gave them options. And those same folks will be back when it’s time to get another new vehicle.
History teaches some people nothing.
The ONLY way Americans wills stay away from large trucks and SUVs is if gas stays expensive.
I don’t know where some of you guys live, but I haven’t seen much of a difference on the ratio of small cars and large trucks/suvs. I see just as many Expeditions, Tahoes, and F150s on the road than before gas prices spiked.
If gas gets cheap and stays cheap, EVERYTHING that has happened in economy car trends and conservation to be forgotten!
Here in Mississippi the big SUV/truck thing never completely left us. People love big 4WD extended-cab heavy-duty trucks here, even if they don’t farm or do construction for a living. Big SUVs remained popular with the family/soccer mom crowd, possibly because they couldn’t sell them or weren’t willing to take a bath on them to do so. Some of them, no doubt, are paid for, which, even with high gas prices, is cheaper than buying a new car of any kind in many cases.
I lived through the 70s with conservation being important during the Carter administration. He turned down the heat in the White House, addressed in the Fireside Chat in a sweater, and was calling for us to not be so dependent on foreign middle-Eastern oil. Remember Kheomini’s overthrow of the Shah of Iran and the hostage crisis of 1979-1980. Back home we had high gas prices and shortages and gas lines, then small cars started getting popular (tooled around in a Chevette and later a Ford Fiesta). Once oil prices fell in the 1980s, back came the gas guzzlers in different forms and so began the big-ass SUV/truck craze to replace the Brady Bunch station wagons of yore.
This has all happened before. Unless we find some huge reserve here or find other energy sources, we will be at OPEC’s mercy and have a volatile oil market. It was true 30 years ago and remains so until other solutions are found. It’s just that many folks are too young to remember 30 years ago. We survived then, and we will this time. Not without pain, but we will make it.
I have to believe that with our creative and innovative minds, we will eventually come up with feasible alternative fuel sources and solutions. It won’t be tomorrow, but it will happen. I hope so anyway, because I have an 11-year-old son who I hope will have a chance for a decent life.
B-b-b-but I read here that oil would never be under $150 bbl again! We’d all be driving little fairy cars!
Think of the decreased smug emissions! Buy! Buy! Buy!
Return?
I (and many others) never sold the truck. The savings just weren’t there with cratering trade-in values for trucks and SUVs.
When I bought the truck, I knew it would be my first and last V-8 I would ever own. We will be driving it for many years to come, especially with the gas prices coming down again.
a couple of comments…
1) I never saw ANY reduction of large vehicles on the road even when gas at the urban stations in chicago was $4.50′ish… Sales might have suffered but nobody around here really bothered changing vehicles. I do see more scotters & bicycles though, but no changes in car traffic.
2) Where is this “Sub $3″ gas? I have seen a SINGLE station in chicago less than $3.60 in recent memory (months..). Everything else is up to $4. I think the place closest to me JUST reduced their regular to $3.99 and premium to $4.19
3) Now that it still isn’t snowing, I continue to use my motorcycle. On my gas guzzler bike I have done 120 miles on the trip meter and haven’t hit 3.5 gallons of usage yet. Alot better than the car @ 16mpg city :)
Not if the guzzlers are SUVs, most especially the new “Crossovers.” Such as the Flex or Enclave. No one can any longer afford to pay $38k for those.
Actually I shouldn’t say can no longer afford. They could never afford those. I should say they can no longer service the debt on one of those, nor are there any longer any lenders to help them do so.
It says something really big when the automakers are no longer willing to lease their own vehicles, because they know they will lose money because the resale of their own vehicles is in the gutter.
In other words, automakers are saying it is a bad business decision for us to get involved in hanging on to rapidly depreciating sinkholes.
Understandable, yet they still expect customers to be willing to do so.
Robstar, gas here in Mississippi is below $3 in some places.
It would take a period of low gas prices and rising American wealth. It will be a long long time before those two things coincide.
I just noticed that, like the presidential candidates on debate night, I blabbed on and on but did not answer the question directly. I do believe that Americans are capable of being that stupid again now that gas prices are down. After having seen this in the late 70s/early 80s, I know it’s true. Hopefully we won’t go as far back the other way, but yes, there will be gas-guzzler trust again due to our very short memories.
The SUV craze was a growth economy phenomenon, and people aren’t climbing on board that again.
At any rate, the reason the price of oil is falling is depressing beyond belief. While some still thought that supply would outstrip demand, and thereby keep prices low, the fact that oil is finite and waning is providing a reality check.
Combine that with an economy in a tailspin…
Still we’ll only see a temporary situation where supply will match or even exceed demand – though as we move to alternative modes of propulsion, demand related to cars and trucks may fall, and thereby keep prices in check.
But as the awareness grows that the world is running out of easily accessible oil, you’ll find oil producing nations will be restricting production, as they wait for (and game) a rise in prices (again.)
The drop now is due to speculators having taken positions that are perilous with the economy flatlining, we’ll see the price start climbing up again soon.
I don’t know where some of you guys live, but I haven’t seen much of a difference on the ratio of small cars and large trucks/suvs. I see just as many Expeditions, Tahoes, and F150s on the road than before gas prices spiked.…
You shouldn’t expect to see much of a change in the short term. The fleet turnover takes years, and as many here have pointed out, it makes economic sense to keep your SUV if you already own it. Should gas stay expensive, they will leave the fleet sooner than they would normally – why dump 2k into transmission repairs if it is worth less than that – and the junkyards will be full of vehicles that look too good to be there.
If you expect the focus to stay on more efficient vehicles, the price of fuel will have to stay high. Some do buy efficient on environmental grounds, but that number of buyers is small and existed even when gas was cheap. While this will be an unpopular statement to make on this site, I feel that it is in the country’s best interest not to allow fuel to become too cheap. When the price drops too much, the first thing to go is economical cars. Also, the older American oil wells – which is basically most of them – are more costly to operate per barrel of oil, so the oil companies will shut them down and import more, cheaper oil. There goes domestic production. Even with the ability to drill more in our coastal waters, the production price will still be too high if the collapse of oil prices continue. Theoretically I would like to see a minimum floor on prices and the money collected be used specifically for energy related programs – alternatives, helping people improve the efficiency of their home, etc. In reality I worry that the funds collected would be diverted elsewhere. There would have to be a”lockbox” mechanism in place to prevent that.
Just look to the 80’s/90’s for the pattern of what we can expect, energy wise, if oil drops to $40/bbl. All the talk of “independence from imported oil” will again be just that, talk.
Cheap gas is a ‘relative’ term.
Nov 18, an emergency meeting with OPEC has been set. Expect oil production cuts and higher prices. Most of the OPEC member want an $90 floor, and they will defend it. Saudi Arabia’s economy is $50bbl of oil. Same for Canadian Tar Sands, viability is $50 for existing projects, about $80 for new projects that are now on hold.
The SUV fad is done. People don’t need them; and anyways family vehicles tend to lose favor because they are associated with being uncool.
Basically people don’t drive their moms car.
Think the SUV will be back to the minivan or station wagon status status; profitable, decent seller, not something to form a foundation around.
This has nothing to do with choice anymore – when residuals are nearly zero on a lease, every jackass who could previously afford an Escalade on payments will be forced to cough up obscene down payments. They couldn’t do that when the economy was peaking a few years, so they definitely won’t now that everyone’s savings are in the shitter.
The end of the SUV for now. Only for now though. I think it’ll be back.
the fact that oil is finite and waning is providing a reality check.
Every resource is finite. We don’t have an unlimited supply of Twinkies, either, but the lack of an unlimited supply doesn’t result in one having to pay $5,000 to get one.
The idea that finite = expensive is simply incorrect. The issue is one of whether supplies can keep apace with demand.
The reality is that oil demand growth rates are generally pretty low, in the range of 1-2% per year. Those growth rates are low enough that they are typically met by increasing reserves, which also grow over time as demand for oil prompts the oil companies to go find more of it.
With oil above $50-60/bbl, there has been plenty of motivation to go look for it. When oil was $15/bbl, not so much. Higher prices have prompted more exploration and reserve levels relative to demand remain consistent.
For the moment, we aren’t anywhere close to running out of oil. Perhaps one day we will be, but we aren’t now.
@Robstar
Gas is 2.8X/gal here in Indianapolis
My SIL says it’s 2.6X in Missouri
dropping faster than the Dow.
2.1X by Christmas, IMHO.
*Gas is $2.89 in here in Columbia, Missouri.*
I think it’s absolutely naive and ignorant to assume people will change. My carbon credit says they’ll jump right back into the large SUVs (Stupid Utility Vehicles) the minutes they can.
That is, when/if they can get a 60/72 month loan on one.
DT