Truck, SUV Owners Rejoice as Forecasters Predict a Lengthy Oil Glut
Automakers can expect a favorable environment for lucrative truck and SUV sales well into next year, as the right conditions come together for a continued oil glut. That heralds lower prices at the pump, less painful driving, and less scrutiny of EPA mileage figures on Monroney stickers.
Oil supply and inventories are rising, even as demand falls off sharply, while overseas interests are conspiring to keep prices down — and in their favor.
According to Reuters, the International Energy Agency issued a prediction today of an oversupplied crude oil market, with “glut” conditions lasting until at least the middle of next year.
The increase in oil consumption predicted by the IEA earlier this year hasn’t panned out. The agency has erased 300,000 barrels per day from its third quarter 2016 consumption growth estimates, and cut the annual outlook by 100,000 bpd. The growth forecast for next year calls for a further decrease in demand — 1.2 million bpd, compared to 2016’s 1.3 million.
This comes a day after a report by the Organization of the Petroleum Exporting Countries (OPEC) showing a record high oil inventory of 3.111 billion barrels. Global production is still expanding, the report claims.
Lower gas prices are one factor affecting the sale of thirsty trucks and SUVs, which automakers can’t build enough of. It poses a problem for environmental regulators, as higher gas prices help nudge average fuel economy upwards.
Dreams of a continuing cheap gas fantasyland could come crashing down when OPEC meets later this month, but analysts don’t expect a production cut. Middle Eastern oil producers can’t allow oil prices to rise too much, lest they spur U.S. production.
A Wall Street Journal report last week claims the oil cartel will try and keep prices in the $50-$60 a barrel range in the long term, lower than they initially hoped for.
This is concerning news for the looming crop of cheaper electric vehicles, though all of the automakers behind the EVs — with the exception of Tesla — are heavily invested in the SUV and crossover game. Don’t expect too many tears, as that’s where the money lies.
More by Steph Willems
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Oh well, we all want to commute 250 miles a week so we can have a "yard", and since children are quite frequently being shuttled to daycare, then we have tall SUV's, and since the "poors" have to drive compacts/non SUV's, to protect their children (and make sure that the airbags are effective against getting t-boned by much taller SUV's) the side windows have shrunk to slits. Et-cetera. It's for the children, so we shouldn't squawk. It's a war out there.
I doubt we will ever see the large cars of the past and I doubt we will ever see vehicles with lower window sills and larger windows. Safety and environmental regulations have made vehicles safer but much more mundane and expensive. Many buyers have migrated toward large crew cab pickups but even they are getting more regulated and their prices have gone up to where eventually they too will become less popular. As for the Chevy Traverse it is a large enough sized vehicle but it is based on a uni-body car platform and is much less expensive to produce than a BOF truck or SUV. Vehicles for the most part have become more globalized except for the full size BOF pickups and suvs which are the last holdouts, but even they will eventually become more global. Less expensive to develop a global platform that can be used in more than one country and spread out among different models and development costs can be recouped much sooner.