#GasPrices

With fuller wallets and lower prices at the pump, millennials are leading the charge toward the highest consumption among Americans since 2007.

After a slight decline during Easter, gas prices are once again climbing back up as crude oil does the same.

With fuel prices still falling as of this writing, the U.S. Energy Information Administration issued a report forecasting an average of $550 in savings at the pump for a typical family in 2015.

Once upon a time, a gallon of regular could be had for under $3. Then, prices climbed as reduced production and geopolitical uncertainty played their respective roles. However, 2014 could feel like 2010 again as prices tumble back down to $3/gallon.

From Zero Hedge, a look at global gas prices, with New York City as the benchmark. A look at the price of a liter of gas (multiply by 3.8 for the gallon equivalent) gives a better picture of the choices that people make around the world when it comes to buying cars.

On occassion, I’ll use the Question of the Day feature as a tool to draw on the collective knowledge of the B&B to learn something; today I’m asking your your input on Tropical Storm (Hurricane?) Isaac.

More than half of new car shoppers have recently changed their minds about the car they want to buy, says a new study by Kelley Blue Book. Researches find customers thinking about cars they normally would not have considered. What is changing their minds en masse: Rising gas prices.

JD writes:

Dear TTAC,

I realize opinions are like…elbows. But right now I am looking for a hit to the ribs.

I am moving to Northern California, and intend to live up in the hills around Skyline Blvd. / Highway 280.

I am debt free on a 2006 Mitsubishi Montero Limited. It is such a fantastic sleeper of an SUV; as rugged as I need for weekend camping, rock climbing and/or surfing excursions, and also cleans up well for mid-week business meetings (I work from home, so only need to drive to the office or customer site a couple days per week).

The Monty is in great condition, with 75K miles on the odometer, and still worth approx. $15-20K. It is safe for my wife, infant, and possibly future brood. The Monty is a gorgeous ”carbon grey metallic” color, without the cheesy spoiler option. It’s a stellar SUV in the classic sense.

That stated, I have the itch to sell the Monty and use that cash to buy a slightly ”lesser” vehicle (in terms of value), as well as an enduro-type motorcycle; perhaps a used BMW F 800 GS.

The Economist has put together the above chart showing global gas prices as of February 2012, as well as how fast they’ve risen in the past 12 months. Even with gas approaching $4 overall, we’re not doing too badly compared to the rest of the world.

Last week in a speech at Daimler owned Freightliner truck plant, President Obama said that the new 55mpg CAFE standards will save a typical American family $8,000 a year on gasoline. That would be great news to most American drivers if it were true but the president took political science and law courses in college, not math. Or maybe his math isn’t off.

Pop quiz; what do increased production, lots of cash on the hood and high gas prices mean for Honda dealers? Lots of Civics moving out the door.

Josh writes:

I’m currently in the market for a 2005 or 2006 Chevy Tahoe Z71 and was wondering about when would be the best time to buy. Before you question the Tahoe, I’m probably one of the only people who can justify one. I live in Colorado and spend almost every weekend in the mountains hauling people and their gear up 4wd trails and snowy roads to trail heads and sleeping in the back.

I figure that given gas prices going up, this summer would probably see the values drop off. I like to do the opposite of everyone else who will be buying fuel efficient vehicles. But then I read an article by Steve that said the used car market is going to be getting worse. I’ve see prices go down some over the last 6 months (been watching the market), but not by much. So does this summer sound good, should I buy now, or wait for the future?

The big news around here yesterday came from Bertel’s interview with Toyota’s Chief Engineer, in which it became clear that Toyota takes the developing world’s growing demand for oil very seriously. With global demand already outstripping supply, the giant automaker’s embrace of a petroleum-constrained business model seems to make it clear that gas prices will play a significant role in the future. But markets are, by their natures, both difficult to predict, and shaped by predictions. And Edmunds CEO Jeremy Anwyl reckons that, although gas prices are high and could well go up in the short term, fears of a runaway gap between supply and demand may not materialize over the longer term. He writes:

Here’s the twist: As I said, the consensus belief (or story) on future oil prices is that they will be higher. And short term, this may be the case if and/or when the global economy recovers and/or demand grows in emerging markets.

But there is a longer-term story as well. This story suggests that peak oil may be nigh and the future holds shortages and sharply higher prices. Buying into this story, companies, acting individually, will see profit in expanding exploration, developing sophisticated new extraction technologies, etc.

The aggregate result of all these individual activities is that the future supply of oil will improve and prices will actually drop.

In fact, we have seen this paradox play out before. Through the Seventies, we were first shocked by rapid price increases and then conditioned to believe they would continue. And, of course, oil prices collapsed in the Eighties.

Who’s ready for some politics? With the presidential election still over 14 months away, recent Iowa straw poll winner Michelle Bachmann is upping the campaign promise ante by telling a Greenville, SC crowd

The day that the president became president gasoline was $1.79 a gallon. Look at what it is today. Under President Bachmann, you will see gasoline come down below $2 a gallon again. That will happen.

Without even taking a side in the muck of presidential politics, it’s plain to see how ridiculous this statement is. As Politico helpfully notes:

Bachmann didn’t detail how she would cut the price of gasoline, which is tied to the global price of oil. [Emphasis added]

Personally, I think gas should probably be taxed to a point where Americans pay about what the rest of the world does, in order to pay for the externalities of oil consumption. Most auto execs agree, arguing that America’s artificially low gas prices play hell with product planning. But even (or is that especially) if you’re a hard-core anti-tax free-market fundamentalist, Bachmann’s statement should be treated with scorn. After all, markets, not presidents, should be setting oil prices. But what’s principle (or even good practice) when compared to the need for political pandering?