Article on the Volt, Cruze, and gas prices

""If gasoline stays cheap, then the American public says, 'I'm not interested in that; I will keep my Tahoe longer.' It puts us in the industry in a position where we are at war with the customer," Lutz said at the time."


Translated:

The future looks confusing, I'm not sure we can handle it.

 

Well gas prices wont stay low for very much longer, so it is a moot point.

 

Translation:

"With gas prices so low, will anyone buy an electric GM?"

-Brad

 

I figure they'll stay low 'till BP gets that hole capped off and the gulf cleaned up a little.

 

You mean, like in five years or so?

 

Historically it is the same problem. Hybrid sales are soft when gas prices are low. In this case I believe GM will benefit because their low production will be able to keep up with the demand.

 

Gas prices are starting to go back up. Oil is $79 a barrel now and rising. With the poor economy the price won't rise too fast but it can only go up from here.

 

I guess after the first bankruptcy, GM is getting back in the groove for a second one.

 

The stupidity of the American public never ceases to amaze me...

 

Gasoline prices WILL rise .... congress will make sure of that.

 

On the contrary: Congress is subsidizing the oil industry to keep gas prices in the U.S. the lowest in the world. (With the possible exception of some oil emirates that subsidize even more heavily to placate their populations.)

However, prices will rise in the long term as the peak makes itself felt and worldwide demand increases with third-world industrialization.

 

Yes - instead of dealing with the peak oil and encouraging alternate transport - they spent $1 Trillion "securing" oil. The result is that oil prices went up from $20 a barrel to $80.

 

That's down to the lack of regulation - indeed the refusal to regulate - the financial services industry. Commodity over-the-counter prices are derived from the commodity futures prices; futures are sold as an investment, the movement tends to be long-only, so there is ever more demand for futures paper.

The $147 peak in July 2008 came in the middle of a recession when demand was relatively low across the world, and in the US - the largest consumer of oil by far - traffic levels on highways (urban and rural) had dropped back to the levels of 2002. The crash in prices then came as credit ran out, as owners of paper oil (and other commodities) sold off rapidly to cover other shortfalls. As they have been bailed out and the balance sheets nominally improved, demand for paper oil has gone up again. It's just about holding steady at the moment, but I still think it's way higher than it should be.

I strongly recommend reading Mike Masters' reports, available from the 'Click Here to Download Reports' button in the upper-right of http://accidentalhuntbrothers.com/

 

I'm going to have to agree w/Lutz and add to it other vehicles in the Tahoe's class (e.g. Escalades, Yukons, Expeditions, Navigators, etc.) It's true.

It's ridiculous that the American public (esp. in the part of the SF Bay area where I was living) buy so many monstrosity class land barges. It's only when gas prices are high do people and the media get into a tizzy and complain. They almost in a panic buy smaller, more efficient cars and try to dump their SUVs. Even when they're high, some will still buy monstrosities because they're "cheap" due to the glut on the used market and because of huge incentives being put on new ones.

When gas prices are low, small car sales plummet.

I was just in Canada (BC to be more specific) and w/gas prices at equiv of ~$4.30/gal, I saw very few monstrosity class SUVs there. I also saw very few or no full-sized cars (e.g. Ford Crown Vics) as taxis. I saw a # of Corolla, Sentra and Prius taxis.

I'm not so sure I agree w/the translation.

 

A few points:
This is published by the "Detroit Free Press", so there's that demographic to keep in mind.
Detroit was in tough shape a couple years ago when the rising oil prices caught them with their pants down, so being prepared for another rise this time is a bad thing?
$2.76/gallon is "cheap"? Until 2005, we thought $2.50 was outrageous and there were calls to investigate possible collusion, etc. Then Hurricane Katrina hit and that was the beginning of the modern gyrations in pricing.

 

Haven't read the report yet, but your main point that I highlighted is wrong - the recession didn't start until after July 2008. The housing market was already in decline then, but the rest of the economy was still buzzing along. Probably on borrowed time, and the run-up in fuel prices was the straw that broke the camel's back. July 2008 the DJIA was still above 11,000, in a bear market yes, but still about the 10% pull-back where people aren't too concerned. After September all heck broke loose as it plunged to 7,000.

The thing that happened in 2008 was that spare capacity in oil production was almost zero, so nobody could pump more oil in response to the record high prices, regardless of whether price fixing was occurring. Demand might look to be down, just because people couldn't buy more. Some claim that oil production (at least conventional oil) actually peaked in 2005, and it's only the recession that's masking that fact so far (because of the recession, demand has dropped), but it's kind of a chicken-and-egg thing.

High oil prices always lead to recessions and low oil prices lead to economic growth. Since oil is energy, that makes sense, although people tend to look at the immediate cause of economic cycles (housing, finances, etc), not the root cause, which is harder to trace, but the correlation is there. At the peaking of oil production, expect more swings in oil prices unless we manage to stay in a mild recession.

 

No - that was the first and well anticipated result of Peak Oil. Yes, there was speculation that possibly caused the big spike and rapid plunge. But in a commodity like Oil which is very inelastic - you expect a large price hike to reduce the demand even by small amounts.

Infact, there are theories which say we will get a recession everytime oil prices go up very fast. And that recession causes demand contraction which reduces price. When the economy recovers, so does the demand for oil. The cycle starts all over again once the recession ends. Peak oil theorists predict this cycle to be the norm in future.

The Oil Drum | Jeff Rubin: Oil Prices Caused the Current Recession

Checkout Jeff Rubin's book "Why Your World Is About to Get a Whole Lot Smaller"

Why Your World Is About to Get a Whole Lot Smaller by Jeff Rubin

 

It is impossible to look at the data and not conclude the the trading of oil futures and derivatives did not drive the price higher (artificially high), and the colapse of those derivatives did not send the price down (artificially low). The laws were changed that allowed many more futures and derivatives sold than their existed oil. Part of the problem is that the SEC seems to be stacked with lawyers that regulated investment banks as they asked to be regulated, and refused to hire MBAs that understand what the banks are doing. These same distortions also led to the mortgage derivatives and collapse of the financial sector. We as taxpayers ended up paying to keep these places a float even as they continue to influence SEC regulation.

It is amazing that some predicted peak oil in the past, and refuse to actually look at oil production figures, so can draw the conclusion that they were right all along. Oil production was at an all time high last year.

We have had lower oil prices in recessions and higher oil prices in growth periods. Some correlation does not evidence causation, especially when counter examples exist. Since the oil embargo, the us economy has moved to a place that it is less influenced by oil price swings, and we can only assume that this trend will continue.

All of this said, we can look at solid economic theory to see where oil prices are going in the mid term. Oil is a scarce resource controlled by a monopoly. As there is less supply and more demand, things that are predicted in the mid term, prices will increase. If behavior changes based on this information the economy will be less dependent on the price of oil. That means that even though short term low prices may slow the adaption of plug-in hybrids, in the mid and long term economics will kick in and lead to a more efficient vehicle mix. GM missed this little bit of economics when they killed the ev1. Let us hope that some their have learned the lesson and will precede with better policies.