Survey: $3 Gas is a Tipping Point

The latest study by Kelley Blue Book once again confirms the fickleness of US car buyers when it comes to gasoline prices. In the second half of May, KBB surveyed 753 prospective car buyers and found that 87 percent expect gas prices to rise sharply. In April, just 66 percent believed gas prices would rise. What changed in the last month? Gas prices rose sharply.

The national average price for gasoline is $2.64—a jump of 20 percent in the last month. In California, the statewide average for regular is $2.96—four cents below what KBB sees as the tipping point. KBB also found that about two-thirds of respondents said that gas prices had an influence on what car to buy.

“While we may not see the $5-per-gallon gas experienced in some areas last year, current economic conditions compounded by the pain at the pump may make $3-per-gallon gas a new threshold for car buyers—the point at which they change their mind about what vehicle to buy and how they spend their money,” said Jack Nerad, Kelley Blue Book’s executive market analyst.

According to KBB, the No. 1 compromise was moving to a smaller engine—a four-cylinder, say, instead of a V6 or V8. That was followed closely by vehicle size—moving down to a mid-sized sedan from a larger model, for instance.

A sustained rise in gas prices will encourage consumers to adopt smaller cars and hybrids—but so far, that’s been a tough sell. Honda was aiming to sell 90,000 units of the new 2010 Honda Insight in the US this year, but is now acknowledging that it may not reach its goal. John Mendel, the company’s US executive vice president, now believes that Insight sales will be closer to 50,000 or 60,000 units. The Honda Insight, offered at an MSRP of $20,000, is being marketed as the first affordable hybrid.

Big in Japan

On the other hand, the Honda Insight was the No. 1 selling car in Japan in April, and was overtaken by another hybrid, the 2010 Toyota Prius, in May. The Japanese government offers generous incentives for hybrid-buyers—and gas prices are almost 80 percent higher in Japan than in the US. Current retail prices for gasoline in Japan are $4.69 a gallon, according to the Tokyo-based Oil Information Center.


  • chukcha

    Just a quick visual report from the west coast of Canada:
    The current price of regular gasoline in British Columbia, Canada is… drum roll… $1.10/litre (~$4.30 per gallon)
    Every ~10th car on the street is a hybrid. :)
    The older cheap SUV’s are slowly disapearing from the streets. The high end SUV’s like the Cayennes or Lexuses are actually growing in numbers. Looks like those of us who are “immortal” :) still favour the “sweet” sound of gas pumps as they fill up the 120L bellies of their fancy beasts and the obligatory growling farts of the 4″ exhaust pipes as they start their SUV’s to leave the gas station. Good for them I say; at least someone can afford to have wastefull fun in the current economic climate.
    On the busy intersections and in frequent traffic jams of tight lipped and “propah” British Columbia you can almost hear the streams of wasted petrol being devoured by the thirsty V8 chimneys of the fancy cars and trucks as they’re idling impatiently; waiting for the the electronic whip of their master to command them to tear the pavement and burn rubber; to leap ahead and show off their might. Alas, as the red light turns to green the gentle touch of high heeled shoe on the accelerator pushes the disappointed beast slightly behind the stealthy Prius that sneaked through out of nowhere. Humming, the HiTech toy disapears behind the turn.
    The clicking sounds of turbo diesel cars are becoming the norm in BC. More and more people are rediscovering how much fun it is to change a gear @1500 rpm and actually feel all that torque pushing you against the seat. There are approximatelly the same amount of diesels here as hybrids. Which means that in BC the diesel engine is very popular. Even the “immortals” are embrasing the diesels. I noticed that there are a lot of Mercedes ML/GL/RL/E 320 CDI’s on the roads. By the way, the diesel fuel in BC is ~15cents cheaper than regular gasoline! It makes a lot of sence now to buy a diesel.
    End of visual report :)

  • Anonymous

    If unrest in Iran shuts down oil production or “scares” oil speculators, we will definitely see national gas prices go above $3.00.

  • wooac

    Inside of imposing CAFE rules or “Cash for a New Clunkers”, the Federal and State government should have just upped the Gasoline Tax so it is a higher percentage of the price, say 18% to the State and 18% to the Federal Government. This would induce the sale of more clunkers than forking over $4500 to buy an only slightly more fuel efficient vehicle, reduce the deficits for the State and the Federal gov’t, and stop shipping money to countries who are destabilizing the world, like Iran, Saudi Arabia, and Venezuela.

    Heck with $3/gal, make it $5-$6/gal and people would change their behavior and buying patterns.

  • Old Man Crowder

    $1.10/L Cdn = $3.68/US gal

    Quit trying to scare the Americans!

  • Lost Prius to wife

    Old Man Crowder, it is not about “trying to scare the Americans”. Six months ago, two contributors stated that the “good news” with the down turn in the economy was that the gas prices would stay under $2 per gallon for two or three years. I answered back that they were dreaming and that gas prices would be back up to $2 in a month or two, make $2.50 by summer and end up at least between $2.50 and $3, if not more, by the year’s end. It took nine weeks to make it up to $2 per gallon (I missed by one week) and is now over the $2.50 mark for summer. There is one unlikely scenario that would put gas prices back down to the approximate $2 mark for about a year, but I consider it highly unlikely. Therefore, one has to look at where the future gas prices are likely going to go. And that is only up.

    In early 2006, Consumer Reports indicated that I would be spending at least $2000 to $3000 more for a Prius hybrid than a comparable car, even with the full Federal Tax Credit and gas savings. My research and calculations showed me that they were way off in their statement. In mid 2006, Consumer Reports redid their figures and indicated that I would save $406 (with a full tax credit) over a five year period (subcompact Corolla XLE versus small sedan Prius). I was still laughing at them and their more detailed conservative figures, especially since I had real time figures (we bought the Prius in February 2006) that showed that they were still very conservatively off. This last year, Consumer Reports indicated that it would take only approximately a year or slightly more, without a tax credit, to recover the extra cost (and they are finally right). The Corolla is a budget minded car, but the Prius is still thriftier. And which space is preferable: The subcompact interior of the Corolla or the more spacious interior of the small sedan Prius?

    This site is all about using common sense. I may work with rockets, but I promise you I am not a genius rocket scientist. I just applied simple math to the research of the vehicles available, looked at what is happening in the world and what were the findings of change to that world, and applied common sense. That is why we bought the Prius.

    Although the Prius will not fill everyone’s needs (it is not a truck for hauling rock), there are and will be other future vehicles that will meet more and more people’s needs. The less oil that we all use now will make the world that much better for our children and their children to grow up in. Of course, that again is only common sense.

  • seren

    Which begs the question WHY are there NO production SMALL SUV, SMALL hybrid pickups in the works ??

    I think both would be phenomenal sellers !! Would be best of both worlds, super fun, great view of road and great mileage to boot!

  • Max Reid

    As China’s auto sales increase, global oil and gasolene prices will continue to increase, so better buy a smaller vehicles.

    A hatch/wagon has lot more space than a similar sized sedan, so consider it.

  • Nelson Lu

    Seren writes:

    “Which begs the question WHY are there NO production SMALL SUV, SMALL hybrid pickups in the works ??”

    The Ford Escape/Mercury Milan/Mazda Tribute Hybrids not only are production small SUVs, but have been around for years. And their owners seem to love them.

  • RKRB

    -Fuel cost may be a major psychological player in the market, but it’s far from the major factor in the cost of a new car.

    -If you save $900/year in gas costs, most (if not all) of that saving will be eaten up by increased insurance and registration fees and interest fees if you borrow (you can easily look up those costs). The fuel savings will probably be dwarfed by depreciation, perhaps the biggest expense a new car owner has, although you can lower this by keeping your car longer (here, GM cars have traditionally depreciated significantly more than Japanese cars, in general).

    -As Lost Prius has indicated, it’s good to keep the Simple in mind. If we want to sell vehicles that lower emissions and save gas, this can most predictably be done in two ways: raise the cost of owning less fuel efficient cars, and lower the relative cost of buying more efficient ones. This can be done by increased gas taxes and registration or inspection fees for older, less efficient cars. To avoid sudden shocks to the economic system, this could be done gradually but predictably (right now, the unpredictability of fuel prices may increase sales of wasteful cars as people wait for gas prices to come down again “like they always do(!).”

  • plugins now

    for ‘hauling rock’s just rent a truck…NOBODY needs to own an suv except a contractor….it is for show only and soccer moms etc in giant suvs…and is a display of pathetic american shallow narcissism…

    newsflash: people driving hybrids aren’t peacocking to everybody or ‘elitist’ despite faux news reports. some people even in US actually do care about others and future, not just me me me. look at me. I want everybody to think I can afford a giant tank and it will make me cool somehow….

    if fedex, ups etc. are now going electric, nobody else has any excuse. period.