Friday Roundup: Gas Guzzlers are Back
Posted December 2, 2011 at 1:52 pm 
Filed in: What’s good news for Detroit automakers but bad news for our energy security? The Wall Street Journal reports today that the SUV is making a comeback, on gas prices which have remained below the $4 per gallon price level which drove motorists away from these vehicles to begin with. This year, SUVs and trucks made up 50.8% of auto sales, up from 47.3% at the end of 2009.
Is this a sign of growing consumer confidence and economic recovery? Perhaps… but it also reflects shortsightedness among consumers. There were reports during the recession that motorists were holding on to cars longer than they typically would have before replacing. One might have hoped that the savvy consumer would hedge against potentially high gas prices and opt for a fuel efficient model, but it appears that the American appetite for a $30,317 vehicle (average cost according to the WSJ) which offers fewer miles per gallon was temporarily subdued but far from vanquished. A new Nissan Leaf is comparably priced, and less with the $7,500 federal tax credit. Still, consumers seem eager for the space and size of SUVs, not the fuel savings of an electric vehicle.
In related news this week, the unstable global economy is casting a shadow over the next Organization of the Petroleum Exporting Countries (OPEC) meeting, which will take place in Vienna on December 14th. In addition to worries over the global economy, the cartel must consider rapid production increases from Libya, negotiate the escalating political tensions between Iran and the West, and determine if the current level of global oil prices suit its collective interests. Setting production levels is tricky with so many variables to balance: if the global economy suffers a double dip recession next year, oil demand could plummet, but if economic growth continues even at slow levels, production levels will need to remain high to avoid a potentially disastrous price spike.
Many OPEC member states from the Middle East and North Africa require oil prices to remain above $95 a barrel to balance their budgets, yet as we reported in October, some members fear that higher gas prices will prompt the West to seek alternatives more aggressively. This is a valid concern on OPEC’s part, but since the U.S.’s interests lie at the intersection of a reliable and inexpensive fuel supply, the clearest solution is a combination of reduced consumption and increased domestic production. The responsibility lies not only on Washington to increase lease sales for drilling, but on consumers to make responsible (and economically prudent) choices to purchase hybrid, electric, and fuel efficient vehicles.
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