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Cheap Gas: A Minute, an Hour, a Month, a Year?

Cheap Gas: A Minute, an Hour, a Month, a Year?

By Colin Mathews's avatar Colin MathewsColin Mathews November 30th, 2008

http://www.flickr.com/photos/23475878@N07/2933167054/Enlarge Photo

Gas prices have recently fallen as rapidly as GM, Ford, and Chrysler’s dwindling cash reserves: well below $2 per gallon in many areas of the country. From highs more than double that number just months ago, these petrol price vacillations are enough to make a person dizzy. Or at least bipolar.

How is it possible that one resource is subject to such massive price differences? Over at Jalopnik, they say it's a quite the melee of forces, "including OPEC’s daily level of greed, the number and location of which countries we’re currently invading and the current reason for low prices: demand or the lack of it."

So now that gas is dirt-cheap again, are Americans going to buy up SUVs in droves once more? The prediction from this corner: no. A focus on fuel efficiency is here to stay. Finally, Detroit has been forced into a corner regarding fuel consumption. From SUV plant shutdowns to wholesale abandonment of plans for future behemoths, Detroit automakers are taking the automotive equivalent of summer school where fuel efficiency is concerned--11th-hour stuff. It seems the die is cast, and Detroit is making enormous changes from which it can't return.

Detroit is focusing on--and investing in--smaller, efficient vehicles. It is developing hybrid powertrains, electric propulsion systems, and a host of new technologies focused on eking out more mpg. I'd be shocked if the Big Three suddenly abandoned this seismic shift in their approach to automaking just because gas is suddenly cheap again. I'd be even more shocked if the buying public suddenly started lining up to buy 9 mpg Hummer H2s (that's an anecdotal number, by the way; the EPA never actually rated the H2, and with Hummer on the chopping block, it looks like they probably never will). I doubt consumers really trust this sudden drop in fuel prices; rather, they're probably enjoying it while it lasts, but are fully prepared to pay $4 and more per gallon before long.

2008 HUMMER H2 SUV

2008 HUMMER H2 SUV

Enlarge Photo



If the Big Three had made the thirsty SUV a corner of their product portfolio, then they likely wouldn't be in quite the fix they're in now. Alas, it appears they made it the cornerstone for their financial stability, and most consumers simply don't want them anymore.

Foreign automakers certainly have played to the American penchant for the guzzling SUV: Audi Q7 V-8 (12 mpg city), BMW X6 V-8 (13 mpg city), Infiniti QX56 (12 mpg city), Lexus LX 570 (12 mpg city), Mercedes G 55 AMG (11 mpg city), Porsche Cayenne GTS manual (11 mpg city), and Volkswagen Touareg V-8 (12 mpg city) to rattle off a few. Clearly, Detroit manufacturers are not alone in playing to American market tastes. But as sales of the foreign guzzlers taper off, it won't kill them as their overall product range is extremely diverse. Sure, they're doing some readjusting of their own, but the black hole of SUV sales is not the death knell that it is for Detroit. And five of the seven manufacturers above were quick to market with efficient diesels to push their heavy rigs around, pulling mpg up into a far more palatable range.

2005 Mercedes-Benz G55 AMG

2005 Mercedes-Benz G55 AMG

Enlarge Photo



I think, this time, Detroit has learned. And even if this latest round of cheap gas makes it another 6, 12, or even 16 months as horrific market realities keep demand for gas in the United States low, I think cash-strapped Americans will gain newfound appreciation for efficient vehicles. Perhaps the silver lining here is that many Americans are learning, perhaps for the first time, that efficiency does not have to equal boredom, banality, sluggishness, or a depressing driving experience. Thank God the dark days of the '80s are past us and high-powered electronic engine management, fuel injection, gasoline direct injection, piezoelectric diesel injection, variable-vane turbocharging, lockup torque converters, synthetic lubricants, dual-clutch automated manuals, lithium-ion batteries, low coefficients of drag, and silica-infused tires are keeping us rolling at levels of efficiency we never dreamed possible back when the feds bailed Chrysler out in 1979. It's possible to get 35 mpg, or 40, even 45 without suffering through the emasculating, depressing insult of a Dodge Omni, a Chevrolet Chevette, a VW Rabbit Diesel, or a Ford Tempo. When American drivers get their first taste of the new generation of frisky, enjoyable fuel misers, many will likely never look back.

Enlarge PhotoGas prices have recently fallen as rapidly as GM, Ford, and Chrysler’s dwindling cash reserves: well below $2 per gallon in many areas of the country. From highs more than double that number just months ago, these petrol price vacillations are enough to make a person dizzy. Or at least bipolar. How is it possible that one resource is subject to such massive price differences? Over at Jalopnik, they say it's a quite the melee of forces, "including OPEC’s daily level of greed, the number and location of which countries we’re currently invading and the current reason for low prices: demand or the lack of it." So now that gas is dirt-cheap again, are Americans going to buy up SUVs in droves once more? The prediction from this corner: no. A focus on fuel efficiency is here to stay. Finally, Detroit has been forced into a corner regarding fuel consumption. From SUV plant shutdowns to wholesale abandonment of plans for future behemoths, Detroit automakers are taking the automotive equivalent of summer school where fuel efficiency is concerned--11th-hour stuff. It seems the die is cast, and Detroit is making enormous changes from which it can't return. Detroit is focusing on--and investing in--smaller, efficient vehicles. It is developing hybrid powertrains, electric propulsion systems, and a host of new technologies focused on eking out more mpg. I'd be shocked if the Big Three suddenly abandoned this seismic shift in their approach to automaking just because gas is suddenly cheap again. I'd be even more shocked if the buying public suddenly started lining up to buy 9 mpg Hummer H2s (that's an anecdotal number, by the way; the EPA never actually rated the H2, and with Hummer on the chopping block, it looks like they probably never will). I doubt consumers really trust this sudden drop in fuel prices; rather, they're probably enjoying it while it lasts, but are fully prepared to pay $4 and more per gallon before long. 2008 HUMMER H2 SUVEnlarge Photo If the Big Three had made the thirsty SUV a corner of their product portfolio, then they likely wouldn't be in quite the fix they're in now. Alas, it appears they made it the cornerstone for their financial stability, and most consumers simply don't want them anymore. Foreign automakers certainly have played to the American penchant for the guzzling SUV: Audi Q7 V-8 (12 mpg city), BMW X6 V-8 (13 mpg city), Infiniti QX56 (12 mpg city), Lexus LX 570 (12 mpg city), Mercedes G 55 AMG (11 mpg city), Porsche Cayenne GTS manual (11 mpg city), and Volkswagen Touareg V-8 (12 mpg city) to rattle off a few. Clearly, Detroit manufacturers are not alone in playing to American market tastes. But as sales of the foreign guzzlers taper off, it won't kill them as their overall product range is extremely diverse. Sure, they're doing some readjusting of their own, but the black hole of SUV sales is not the death knell that it is for Detroit. And five of the seven manufacturers above were quick to market with efficient diesels to push their heavy rigs around, pulling mpg up into a far more palatable range. 2005 Mercedes-Benz G55 AMGEnlarge Photo I think, this time, Detroit has learned. And even if this latest round of cheap gas makes it another 6, 12, or even 16 months as horrific market realities keep demand for gas in the United States low, I think cash-strapped Americans will gain newfound appreciation for efficient vehicles. Perhaps the silver lining here is that many Americans are learning, perhaps for the first time, that efficiency does not have to equal boredom, banality, sluggishness, or a depressing driving experience. Thank God the dark days of the '80s are past us and high-powered electronic engine management, fuel injection, gasoline direct injection, piezoelectric diesel injection, variable-vane turbocharging, lockup torque converters, synthetic lubricants, dual-clutch automated manuals, lithium-ion batteries, low coefficients of drag, and silica-infused tires are keeping us rolling at levels of efficiency we never dreamed possible back when the feds bailed Chrysler out in 1979. It's possible to get 35 mpg, or 40, even 45 without suffering through the emasculating, depressing insult of a Dodge Omni, a Chevrolet Chevette, a VW Rabbit Diesel, or a Ford Tempo. When American drivers get their first taste of the new generation of frisky, enjoyable fuel misers, many will likely never look back. 2009 Honda FitEnlarge Photo --- P.S. - If you want insanely cheap fuel, don't mind the leisurely acceleration of an '80s diesel, have about $500 to invest, and are pretty good mechanically, you can get your fuel for free--like I did last week, some 90 gallons in all. Restaurants that fry food (they're about as prolific as American SUVs) have to throw away their old fryer oil--WVO (waste vegetable oil), they call it. Many have to pay a waste management service to come and haul it away. So if you could guarantee, say, your local Hunan Gourmet that their WVO bin will be empty every Saturday morning, it's quite possible they'd gladly let you have at it and take all you want. Then again, some fanatic like myself might have already brokered such a deal. Or a waste management company, wise to the nascent market for used waste vegetable oil, might be paying said restaurant a couple cents per gallon for the stuff. But even if one had to pay 10, 20, or even 50 cents per gallon, using waste vegetable oil in an old diesel is an incredibly cheap way to drive. I'm setting out to prove just how cheap, driving from Atlanta to Los Angeles without paying a cent for fuel in an old Mercedes diesel wagon that I recently converted to run on 100 percent waste vegetable oil. Stay tuned: departure is set for next Friday, December 5.--Colin Mathews --- Make sure you check out our partner sites dedicated to focused news, reviews and more for Ford, Chevrolet, Toyota, Honda, and the Toyota Prius.

Tags: North America, Driving, Industry, Electric Cars, Shoppers

Posted in: 2008, Sports Cars, Hybrid, Green, Diesel



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Responses (6 total)

  1. By Owen #1, Posted: 11/30/2008

    Beautiful post, Colin! Well written--some fine web journalism. I hope you're right and things are really finally swinging towards some substantive changes in the industry.

  2. By JKD #2, Posted: 12/1/2008

    The gas may be cheaper but the (new) American SUVs are still as expensive as ever and with limited HELoCs and lower credit scores we just can't afford to buy them as much as we used to. A $11-12K off MSRP discount on a Suburban has been pretty standard for quite a few years now. The wealthier ones who are able to drop more than 35-50K on the SUV, tend to go with the foreign makes anyway.
    Once China picks itself up from its knees (they're becoming less and less dependent on us) then all hell will break loose gas price-wise :-(

  3. By Reece #3, Posted: 12/1/2008

    I wouldn't pronounce the SUV dead anytime yet. Yes they will shrink in market share and not every brand will feel the need to have one, but they serve a purpose to a lot of buyers (not me I hate them) but there are people who a) need them and b) want them. It may take some technical changes but I suspect in 5, 10 and 15 years time they will still be around.
    Some changes are easy 1) get rid of petrol engines from SUV's and replace them with Diessels. 2) Hybrid and SUV's don't make a lot of sense, the cost increase vs minimal fuel economy prices plus added complexity that goes against the grain of buying these things - see 1) Diesels make sense. and 3) the weight issue, lighter but more durable replacements for metal parts will become more common and eventually make themselves to this area of the market. Wil they be light, no but significantly lighter, yes. Left heft, better fuel economy. The third may take some time but I am sure Mercedes and BMW are looking at this issue as they sell a lot of big cars as well as SUV's and weight is soemthing they will have to address.
    The problem with US SUV's was not that they were built but that management relied solely ont hem and didn't diversify.

  4. By JKD #4, Posted: 12/1/2008

    Reece - I will kindly disagree with your first two points.
    Diesels are very expensive and even more so to comply with our latest emissions requirements. They will never be mainstream in this country plus the fuel is so much more expensive and the masses will not be convinced.
    Hybrids do make a lot of sense in SUVs. Take Tahoe's 21/20 and that's close to a 40% city mileage improvement. This option is expensive but the cost can be managed and GM will reach economies of scale the same way Toyota did eventually (if they're still around of course).

  5. By R2dad #5, Posted: 12/1/2008

    Agree with most points. However, in 5 years time all of these hybrid batteries are going to start failing. Who will pay for that? Will it be as simple as dropping them off at the local neighborhood hazardous materials pickup sponsored by the local garbage pickup company, at no charge? If so, them maybe hybrids will be a longer-term solution to the mileage problem rather than diesel. I forecast that there will be no free lunch for hybrids, and battery disposal fees will be in the hundreds of dollars if not more. As diesel fuel becomes more popular the price will come down as refining capacity grows so I think we're going to see more diesel (and diesel hybrids) in the future.

  6. By JKD #6, Posted: 12/2/2008

    I'd give the batteries more than five years (at least seven) and they can and will be recycled. Prius replacement batteries were supposed to be thousands and thousands of dollars and the price keeps going down; it's currently less than $2K IF anyone needs a new set.

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