Oil Hits $75, Reminds Car Buyers of Volatility
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.”