Oil Hits $75, Reminds Car Buyers of Volatility

August 25, 2009

The price of oil reached $75 a barrel on Tuesday, its highest level in 10 months. While the steady increase in oil has had a minor impact on prices at the pumps, it serves as a reminder of the volatility in fuel prices—which is perhaps the biggest influence on the prospects for alternative fuel-efficient auto technologies, such as hybrids and electric cars.
“If a consumer accepts fuel volatility, then the consumer will be more open and quicker to buying a hybrid car,” Lonnie Miller, R.L. Polk’s director of industry analysis, told HybridCars.com. “Hybrid registrations go up shortly after fuel prices go up. The peaks and valleys ride together,” Miller said. He cautioned that other factors, such as unemployment, have a countervailing impact.

Miller tracked the lock step direction of gas prices and hybrid registrations since 2004.

A rise or fall in gas prices is also correlated to the number of online hybrid shoppers.

Where Do We Go From Here?

Oil market analysts are split on the short-term direction of oil prices. Some believe that a slow economic recovery and the end of driving season will keep demand low, while others see
much higher prices due to renewed business activity in developed regions, especially China.

“Even if crude oil prices don’t give up their recent gains, gasoline prices are not likely to rise,” Trilby Lundberg of the Lundberg Survey told CNN Money. “If crude oil prices slip, we may see gasoline price slippage too. But refiners have already idled a significant portion of their total capacity.” Lundberg believes gas prices are likely to hold steady in the short term.

The future direction of oil and gas prices will have a major impact on the introduction of new auto technologies, such as plug-in hybrids and electric cars, according to Doug Coleman, Toyota’s US-based manager of the Prius brand. “The pace will completely depend on a lot of external factors. The number one driver to affect these things from a demand point of view is gas prices,” Coleman said. “Gas prices go up? You’ll see more demand. Gas prices go down? People will forget about it for a little bit.”


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  • Samie

    Not sure “The peaks and valleys ride together” can always show a perfect example of consumer habits & unemployment is a lagging indicator along w/ economic cycles needing to be at least 3 quarters of expansion to move out of a recession. Also some part of the indicators need to show investments into oil futures as this is often a speculative factor. Another important indicator of hybrids should include actual competition w/i the market.

    EV’s will not show the same comparisons in the long-run I believe due to convenience factors of not wasting time to fuel them up at a gas station or going for routine oil changes. In all of this I’m not saying price of petro or uncertainty about future prices is not one of the main reasons people buy hybrids followed by environmental concerns but as long as vehicles have ICE’s we will see these general but not perfect comparisons.

  • Robcares

    It could also show that the general public is short sighted and brainless. Tax usage in order to cut our dependency on oil and cut emissions, it’s the only way to get people to change.

  • Robcares

    It could also show the the general public is short sighted and brainless. Tax usage in order to cut our dependency on oil and cut emissions, it’s the only way to get people to change.

  • RKRB

    This fine article seems to show the rather intuitive point that when a commodity costs more, consumers will try to find ways to use it more efficiently. Perhaps one way to use this data is to make the rise in fuel prices predictable and stable. The article made an excellent point that the price of gas correlates with higher interest in fuel-saving technology like hybrid vehicles, but it is likely that this interest correlates even more highly with the anticipated future price of fuel (which may explain the lag you see in the charts). At present, no one can really predict the future price of fuel with much certainty (people have been trying to do this for years without much refinement or success, despite all the certainty you hear on the issue), and those who believe the price of fuel will eventually become more affordable (“as it always does”) are probably more likely to buy less fuel-efficient vehicles.
    Several past postings have made the excellent point that perhaps the best way to decrease fuel use is to increase its relative price. One way to make fuel price rises more predictable, stable, and socially useful is to add on a specific fuel tax increase of, say, 25 cents per gallon a year from now. The next year the tax will increase another 25 cents, the following year another 50 cents, and so forth. This would occur no matter what the market price of fuel would be. Yes, this is a tax, but it would make future fuel prices more predictable, and when they are predictably higher, more people will try to factor conservation into their long-term purchases (like automobiles and power consumption). It would also not take away incentive to explore for new sources of fuel, since fuel use will still be high enough to be profitable for companies engaged in supplying fuel by exploration and production. It would also be a way to divert fuel price increases from unstable and unfriendly foreign governments into something more useful (like decreasing our national debt or borrowing from other countries). An incremental, long term price increase would also make it far easier to factor efficiency into planning.

  • DC

    Its even easier than that. Remove the mass of overt and hidden subsidiestax breaks etc. that the dirty energy industry has written in for itself over the last century(mainly in the US, but not limited to) and watch the price at the pump double or triple overnight. No new taxes required. It is a “free-market” failure that such a primitive harmful energy system was allowed to dominate the world in the first place.

  • anonymous

    i think hybrid cars are a good solution to the environment :D

  • maggot face

    fuzzy mc fuzz pants.

  • tapra2

    then the consumer will be more open and quicker to buying a hybrid car,” Lonnie Miller, R.L. Polk’s director of industry analysis, told HybridCars.com. “Hybrid registrations go up shortly after fuel prices go up.Consulting Blog