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Why low fuel prices may not be a good thing
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This morning, Jacob Gordon, a blogger for TreeHugger.com and producer of TreeHugger Radio, discussed the false security inherent in the recent plunge of gas prices. He cites the inevitably temporary nature of these low prices and fears that many Americans, gas budgets now flush with cash, may head out in droves to buy huge, fuel-sucking SUVs again.Gordon cites Kelly Sims Gallagher of the Belfer Center for Science & International Affairs at Harvard's Kennedy School, who advises consumers to expect “continued volatility.” According to Gallagher, “Gas prices will increase again. Reduced demand based on the economic downturn is only temporarily pushing them down." In short, low gas prices aren’t here to stay and consumers would be wise to expect sharp increases again in the coming months.
Gordon’s concern is well taken. Market conditions and necessity often drive innovation and reinvention, especially in the automobile industry. We’ve created a vehicle-dependent society that, in the best of times (read: lower fuel costs) leads consumers to view cars not just as transportation, but as status symbols and extensions of ourselves. When gas is cheap, consumers can afford to consider factors other than fuel-economy in purchasing a car, and often will make those factors priority over fuel savings.
If fuel-efficient vehicle demand wanes, will the cash strapped auto industry devote the same resources to their research and development? Gordon cites a recent 60 minutes interview with President-elect Obama, who expressed hope that they do. According to Obama, "with oil under $60 a barrel, doing something about the energy predicament is more important than ever. It may be a little harder politically,but it's more important."
Last month, I made the controversial case for the full-size SUV . As an owner of a Ford Expedition, I get my share of questions, stares and even a few snickers surrounding my decision to purchase such a vehicle. For us, a full-size SUV works but our situation is somewhat unique. Yes, I could save several hundred dollars a year on fuel but as a driver with two children, a short commute, nearby shopping and schools and 6’3” 260 pound frame, smaller more fuel-efficient transportation is accompanied by other, non-monetary costs. Low fuel prices are a God-send, saving my family upwards of $200 or more per month so while prices are low, I’m hoarding gasoline in my basement like Armageddon is coming.
I tend to agree with Gordon that the consumer mindset may be forever changed. Yes, as fuel prices drop precipitously, some buyers may be more open to less thrifty vehicles. But the post-traumatic stress of recent $4-a-gallon gas wont soon go away for the consumer and it shouldn’t for the auto manufacturers, either.
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