Are We About To See $5 A Gallon Gas?
by Jeff Gilbert
WWJ AutoBeat Reporter
DETROIT (WWJ) - The unrest in Libya is sending global oil prices higher. That could mean higher prices at the pump, and have an impact on Detroit's auto companies, just as their sales are starting to recover.
"It's really the threat of disruption that's sending oil prices higher," says Fox 2/WWJ Business Editor Murray Feldman. While there's been no disruption, Libya supplies 11 per cent of U.S. crude oil.
That's sent oil prices well above $93 a barrel. The average price of a gallon of gasoline in the Detroit area is $3.18. With the important summer driving season coming soon, many believe that price is headed up.
"Analysts say prices could go to five dollars a gallon," said Feldman.
Predictions like that are making motorists nervous.
"I'll definitely cut back on how much I drive," a young woman named Jessica told WWJ Reporter Beth Fisher. "If I can't afford to buy the gas, I'm not going anywhere."
Higher gas prices could change both driving and car buying habits.
"I'll be thinking of electric vehicles or some alternative means of transportation, for sure," said Steve Halinski of Warren.
When gasoline prices topped four dollars a gallon in the summer of 2008, it killed SUV sales, and helped send the auto industry into a deep recession. But, analysts say the domestic auto companies are in a far different place today, with many new small car choices.
"We see General Motors with several different small cars coming," said Aaron Bragman of IHS Automotive, an industry consulting firm. "Some are even smaller than they have today. We see the Fiat 500, which would be very popular, if we start to see gas prices fluctuate."
Ford's new subcompact Fiesta has done well, and the company is just starting to roll out a new Focus compact.
The major automakers are putting out these small cars in response to both upcoming fuel economy rules, and anticipated increases in gasoline prices.
Bragman says it's not high fuel prices alone that push people into smaller vehicles, but volatility and unpredictability about where the gas prices may be going.
But a spike in gasoline prices, might not necessarily hurt car sales.
"People's cars currently are approaching some of the oldest they've ever been," said Bragman. "The U.S. fleet is aging. They haven't replaced a lot of vehicles in previous years. People do need a new vehicle. What it may do is push people into looking at vehicles they may not otherwise have looked at."
Follow Jeff Gilbert on Twitter @jefferygilbert
