By on October 31, 2014

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What happens when $2.99 for a gallon of regular fuels demand for new vehicles? The U.S. economy feels its VTEC kick in, of course.

According to The Detroit News, the U.S. Commerce Department reported the economy grew 3.5 percent in Q3 2014, with 0.59 percentage points contributed by auto sales. Said sales also delivered an 0.55 percent boost in Q2 2014, helping the GDP climb to 4.6 percent.

Spending is up, as well: 9.5 percent increase in automotive spending through September 30, resulting in a SAAR of $457.1 billion.

Meanwhile, October’s sales are expected to rise 6.4 percent in comparison to the same time last year, with more to come according to Edmunds analyst Jessica Caldwell:

Car and truck sales have settled into a groove. Dealers are welcoming a consistent flow of shoppers into their showrooms, and the pace will likely remain steady through the end of the year. With declining gas prices and strong truck and SUV sales, the industry is poised for a very busy holiday season.

Forecasters are predicting 2014 sales will hit 16.4 million units, the best performance since 2006, with LMC Automotive projecting 17 million sold by 2018, 17.5 million by 2020. The figure would just best the previous high of 17.4 million SAAR, achieved in 2000.

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54 Comments on “Low Fuel Prices, Strong New-Car Sales Boost US Economy...”


  • avatar
    Lie2me

    Who are those guys and is that an old Eldorado convertible they’re looking at? Perhaps Elvis’s posse?

  • avatar
    Hummer

    The lowest I’ve paid yet fair is $2.87, I don’t expect for it to go down much more if any, but this “crazy cheap” gas meme is old. We’re paying almost $3 a gallon for fuel, it’s not a deal, and it’s not significantly less than its averaged for the past several years.

    No doubt it creates confidence in almost every part of our economy and I’m glad to see it help this much, but don’t forget quite a few people would be happy to see the price triple.
    The biggest loss here is that we won’t get an entire vehicle life cycle through on this increased confidence, in other words, I don’t expect to see American classics created from this which is a shame.

    • 0 avatar
      jhefner

      Someone posted a picture on Facebook last night of gas selling for $2.56 a gallon at a DFW gas station.

      As long as Saudia Arabia keeps the spigot open to shut down shale oil production and hurt Iran and Russia, prices could continue to fall.

      • 0 avatar
        Hummer

        That’s not too bad, I’ll be all on the bandwagon of happy folks ~$2.00-2.25, but I’m not going to hold my breath that even those DFW area prices make it to NC.

        I hope the Saudis do keep the spigot wide open, as long as we can keep ours idling long enough that they(Saudis) are no longer willing to lose as much as they are, then it’s a win win for us.

      • 0 avatar
        28-Cars-Later

        Its Russian Roulette though with pricing, even the Sauds can only sustain a sub 70 price for so long. I also agree with Hummer, $3 is not cheap for the plebs with the current level of wages (which have not kept pace) but is cheap in dollars given there are multiple trillions of them added in the past five years. I don’t see too much of a real economic recovery at $3.xx/gal, but it may be enough to give some credence (or at least perception of credence) to the fake recovery we’ve been hearing about since 2010ish.

      • 0 avatar
        cdotson

        I’ve already seen $2.53 in Richmond VA, although it has floated up lately $2.59 is still around. The station outside my window at work is an Exxon and typically at the higher end of the local market and it’s at $2.69.

      • 0 avatar
        TW5

        I paid $2.59 last night in Denton County.

      • 0 avatar
        George B

        I paid $2.519/gallon in Plano, TX on Thursday evening. The two previous gas purchases were at $2.599/gallon.

    • 0 avatar
      Dan

      Consider the massive across the board inflation caused by 6 years of QE and $3 in 2014 dollars is screamingly cheap.

      The brief global catastrophe of 2009 aside, when was the last time a fast food lunch cost you three gallons of gas?

      • 0 avatar
        28-Cars-Later

        Fast food costs $9+?

      • 0 avatar
        TW5

        QE is not causing inflation, in fact, the Fed has complained throughout most of the recovery that inflation is running below equilibrium. The inflationary pressure on consumer goods is cost-push from the price of oil and our obscene health insurance premiums, which are now the federally mandated responsibility of American businesses.

      • 0 avatar
        Lorenzo

        Actually, for those of us who remember 36 cents/gallon in the early ’70s, anything above $2.50/gal is running ahead of inflation, as calculated by the government. The formula was changed in the early ’80s to reduce the inflation rate and government COLA adjustments.

        If the old formula was in place, it wouldn’t be cheaper, since gas taxes have gone up. In California in ’71, the state gas tax was 7 cents and the federal tax was 4 cents. Now the total state and federal tax burden in Cali is 73 cents/gallon!

        Prices under $3/gal are due to a storage glut (despite exports of refined fuels) and won’t last. Increased American production and the shift to natural gas will keep prices well under $4/gal for quite awhile, except in places like SF and NY.

    • 0 avatar
      bd2

      Could still be cheaper but for all the $$ that is in oil futures and the US refineries exporting fuel.

  • avatar
    maxxcool7421

    What a bunch of derpwagon dinglehumps… Opec is already trying to get the outsider oil farms to reduce output, and they themselves will reduce output and drive that price right back up to 3.75 by christmas.

    stupid consumer cattle…

  • avatar
    DeadWeight

    Cheap(er) gas just in time for elections!

    Yay!

    • 0 avatar
      SaulTigh

      Sometimes I don’t mind being manipulated…going to fill up for $2.79 this afternoon. I was smart enough to move to an area with a diverse economy a couple years before the downturn really took hold and so was able to remain well employed. The last three years have been the best of my career. Picked up a wife along the way and her career has taken off too. Gas is more affordable for me today at $2.79 than it ever was for me when it was $1.49. Bonus!

    • 0 avatar
      TW5

      To be fair, $80/bbl is much closer to the natural market equilibrium than $100/bbl. The longs have ruled the market since the turn of the millennium, especially in the middle of last decade, when China was buying up every oil field in sight, and then under-developing the resources with Sinopec. Same problems exist to a greater extent in Iran and Venezuela, where incompetent state-run enterprises inadvertently suppress output and raise extraction costs.

      The last four years have just been markets clinging to the cash cow of oil speculation, but its becoming clear that it isn’t going to be profitable. Iran is tired of under-developing its resources, and Venezuela is supposedly backchanneling deals to get their oil industry moving again. Libya is online. Iraq is in control of its oil assets again, not the UN. US production is surging. Nigeria can’t find a buyer for Bonny Light. If Keystone XL is built, Western Select will flow into the global market. If fracking gains widespread acceptance, global reserves will swell.

      Don’t get me wrong, the price of oil will still spike, as dictators rattle sabers and oil traders rush into the market for an old-fashioned thrill, but $100 oil is not an equilibrium price unless we experience a geopolitical disaster. Everyone wants to supply at $100, but India, China, and the US have no interest in consuming at $100.

      • 0 avatar
        bd2

        Yep – the immense flow of $$ into oil futures, along with US refineries keeping the price of gas up thru various measures, including exporting fuel, has kept the price of gas much higher than it should have been.

        The price of gas in relation to that of oil is higher than it should be.

  • avatar
    jrmason

    And yet diesel fuel is still 3.60 A gallon local. Sigh.

    When (and I’m not holding my breath) diesel fuel drops below $3 bucks a gallon I’ll start to get a little more excited. Diesel fuel drives the economy and as long as it’s still up there retail and produce and anything else that gets moved by diesel power will still remain at it’s current prices.

    • 0 avatar
      bunkie

      Avgas is still $6.19 at my local FBO. Putting a few gallons in the Cessna 150 earlier in the week cost me almost $90. I’d love to be able to get no-ethanol mogas, it would save over $2 per gallon or about $12 per flying hour, even more in bigger airplanes.

  • avatar
    jrmason

    Gotta love that ethonal! Thankfully there is still one gas station near me (where I also buy my diesel fuel) that refuses to buy ethanol gas. The owner of the station also owns a large scale construction company so he is very picky about the quality of the gasoline and diesel fuel he buys.

    I just got done putting my neighbors ccarburetor back together on his snow blower. It has been sitting since April and in that time frame the fuel literally smelled like tarnish when I opened it up. Fuel bowl was actually rusted as was the pilot jet.

    • 0 avatar
      Carlson Fan

      Minnesota was the first state to mandate ethanol blended fuels. In almost 30 years of storing whatever with ethanol fuel in the tank and carburetor I have never once had issues with it. And I’m not that lucky.

      I suspect the carburetor problems with your neighbors snowblower had absolutely nothing to do with ethanol fuel. I pumped 3 year old ethanol fuel out of my wife’s snowmobile a few years back because I couldn’t get it started. Drained the carb bowls & put fresh gas in. It started right up. The 5 gallons of 3 year old ethanol fuel which looked and smelled just fine got dumped in my GMC PU and burned. I will add that I had treated the fuel with stabilizer.

      • 0 avatar
        jrmason

        The corrosion I’m sure was moisture which we all know ethanol attracts much more than regular gasoline. Could have been bad gas but it isn’t the first time I’ve seen ethanol cause problems In something that had been stored for only a few months. His gas was untreated which made it all that much more of an offense in my book to leave it sit. Anything carburated I own I will shut the petcock off and let it run itself out of gas if I plan on leaving it sit for any length of time.

        • 0 avatar
          Carlson Fan

          I had my big boat sit for almost 11 months one year with 20 gallons of ethanol fuel in a 70 gallon tank. No problems. I ran our pontoon boat with a 4S EFI Suzuki outboard for 2 seasons on the same tank of ethanol fuel. That fuel was in there for around 15 months before I put fresh stuff in. Ran just fine. Again I treat the fuel with stabilizer, but you have to do that with non-ethanol fuel as well.

          I guess I have been trying to figure out why I, or anyone I know for that matter, never have the storage issues with ethanol blended fuels that everyone tells me exist.

  • avatar
    APaGttH

    I paid $2.49 yesterday – $53.25 to fill up the U-body beater.

  • avatar

    Low Fuel prices are due to an election year. Odd correlation…..

  • avatar
    dr_outback

    I was just offered a 2.24% interest rate for 72 months with a buy rate of 1.99% on a 2013 Wrangler Unlimited. Do you know what tells me? The bank is happy with making 1.24% over the next six years, that is if they keep their savings account interest at .75%. And the bank will not be making much more than investing in a CD.

  • avatar
    jrmason

    Unless you happen to know a couple million people the percentage of fuel you and your acquaintances use is a fraction of a percent of real world usage. Ethanol and it’s associated downfalls are a very real problem that are recognized by all OEM’s . All 2007 and later vehicles are required to contain ethanol compatable rubber fuel lines and metal. Carburetors are especially susceptible because they are primarily made up of soft alloys like aluminum. Ethanol in itself is corrosive to such metals and the alcohol will dry and harden rubber fuel lines not designed for ethanol use. Some off the shelf additives further compound the problem rather than help because the alcohols in them will cause further phase seperation. The only type of additive that should be used when storing ethanol blended gas is something with corrosion inhibitors. The hygroscopic properties of ethanol literally absorb the moisture from the air, especially if left in a partially empty fuel tank. Humid climates compound the issue more so than dry climates. I’ve rebuilt dozens of carburetors over the years and have never seen corroded jets and fuel bowls and hardened diaphrams like I have seen since ethanol fuel was introduced. Everybody is entitled to their own opinion but I’ve seen enough to stay away from the stuff if at all possible. I definitely will not store anything with it in there. All my carburated engines get ran dry before storage and the fuel drained from the tank and my Mustang will get a tank full of ethanol free fuel and a bottle of corrosion inhibitor/fuel lubricant, like sea foam or Schaeffers, which are blended petroleum products and alcohol free.

  • avatar
    SCE to AUX

    Sure – everybody’s printing money… except Volkswagen.

    Such news has to be killing them, but they’re too proud to understand what to do about it.

    • 0 avatar
      highdesertcat

      I believe VW is cranking out the best products they know how to make but Americans still remember the VW products of the past, and that’s why VW sales are nowhere’s near that of Toyota products in America.

      • 0 avatar
        DenverMike

        No comparison. Toyotas are as “domestic” as Chevys, except reliable. And as cheap to repair when they do break.

        VWs don’t make sense. They’ll always be “foreign” and not nearly as reliable as Toyota and Honda. And you might as well be fixing a Porsche when they break.

        Good for Yuppies in training though.

  • avatar
    jrmason

    If VW built the same cars over here as they do in Europe, not many would buy them due to the price. Very few gasoline powered VW’s overseas. And the diesel engines fair much better because Europe has higher fuel standards and less emissions junk hanging off the engines. What people don’t realize is Volkswagen Group sells passenger cars under the Audi, Bentley, Bugatti, Lamborghini, and Porsche names so they have access to some of the best technology in the world. What you see here in America is the fault of the consumers. We demand cheap over quality and that’s what we get.

    2014 VW Jetta entry MSRP – $15,690
    2014 Toyota Camry entry MSRP – $22,970
    Hmm, sounds like another apples to oranges comparison to me.

    • 0 avatar
      CJinSD

      The Japanese brands continue to deliver quality here that the Europeans can’t even conceive of at any price. We demand quality over gadgets in the mass market, so that’s what we get.

  • avatar
    jimbob457

    $80 oil is the current move by the Saudis. While it has all sorts of implications for others, the Saudi’s main motivation is to measure its effect on fracking projects in the Williston and Permian Basins. God forbid, from their point of view, that fracking should spread to California, Alberta, Colorado, or Coober Pedy, much less Poland or China. Of course, given time, it will. The only real question is how soon.

    My educated guess is that $80 will prove to be not nearly low enough, even in the short-term. Boom time costs prevail in North Dakota and Midland – $15-20 per hour to work at fast food joints, for example. When all this comes back to earth, $80 will not be at all low enough to severely slow, much less stop future fracking projects.

    In olden days we referred to this rather dramatic cost deflation as the difference between ‘day rates’ and ‘footage rates’. Typically, it amounted to about 25% and always happened rather suddenly.

    The oil boom is over Rover. Get used to it.

    • 0 avatar
      highdesertcat

      jimbob457, today we’re at $78.78/barrel and I would guess that most oil companies cannot reach a break-even at anything less than $80/barrel, even with massive subsidies, accounting allowances and generous tax incentives.

      My impression is that we may go down as low as $75/barrel before we see the price of oil go up again. A cut back in production will see to that.

      We’ve had several examples of this over the past 50 years and the end result was that oil would always rise to the level of profitability.

      The difference now is that we have so much oil that we can’t process all of it plus we have an anticipated global economic slowdown forecast for 2015.

      • 0 avatar
        Lorenzo

        That was true with oil wells that could be capped when prices dropped and reopened when prices rose. It’s a little different with fracking. Oil fracking companies seem to be taking the construction company model, who would respond to slowdowns by bidding projects at a loss to keep their crews intact and earn enough to pay their overhead. The fracking will continue at a minimum level to pay overhead and keep experienced crews together, so low prices may linger longer and rise more gradually.

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