With gasoline prices surging across the nation in the wake of Hurricane
Katrina's path of destruction in the Gulf of Mexico, the cost of
running a car appears to be heading for what some auto experts say is a
tipping point for American drivers.
The price of gas is now well above $3 a gallon in some parts of the
country, and the storm-related price surge comes on top of already
record-high pump costs. But despite the persistent rise in gas prices
this summer, U.S. motorists continued to buy up gas-guzzling light
trucks and SUVs as the big U.S. auto companies offered deep discount
programs to whittle down swollen inventories.
All that now appears to be changing. According to an unscientific poll
of automotive industry experts, a sustained gasoline price above $3 is
likely to push American car consumers away from buying large
gas-guzzling SUVs and light trucks and toward smaller, more
fuel-efficient SUVs and cars.
"Three is the magic number," said Mike Chung, automotive market
analyst at auto research Web site Edmunds.com. "It's not about gas
prices moving briefly above $3; the cost of gas will have to move above
$3 and stay there for a few months for people to realize this is
hitting their pocketbook hard - that's where we'll see a shift in
attitudes."
Chung says that, while SUV owners may have been willing to pay $50 to
fill a 20-gallon gas tank when a gallon cost $2.50, at $3 a gallon a
fill-up costs a SUV owner $60, and as the cost edges closer to $100 it
will start to make smaller cars look more attractive.
"With every major shift in gas prices over the last year we have not
seen a major shift in consumer buying practices, but there's
definitely a breaking point where people will consider smaller
vehicles, and $60 for a tank of gas is where we think people will sit
up and take notice," Chung said.
Devon Cohen, vice president of automotive services at LiveDeal.com, a
Web site for classified advertising, says employee discounts have led
to a glut of big, fuel-inefficient cars like SUVs. Nationwide, car
dealerships are reporting a significant increase in customers trading
in their SUV's for smaller, more fuel-efficient SUVs and cars, he
notes.
"I've spoken to a number of auto dealers and they are saying people
are coming into their dealerships with large SUVs, like the Escalade or
Yukon, and want to trade them in, but some of the dealerships are not
bidding on those cars because they already have too many," he said.
"They know they will hold those cars on their lots for a long time,
and as gas prices go up the value of those cars will go down - it's
a risk to their inventories."

to a nationwide average of about $3 in today's dollars after the
Iranian revolution of 1979 and the country's war with Iraq, the average
fuel efficiency of new U.S. vehicles doubled from about 14 miles per
gallon to 28 miles per gallon. New regulations passed following the
energy shocks of the early 1970s recommended that automakers make more
efficient vehicles, but those regulations were not binding and the
shift was due primarily to consumers demanding cars that could run
further on a gallon of gas, according to Lave.
"This short-term blip from Katrina will not last, but it's unlikely
we'll see a serious decline in gas prices from where they were a week
ago at $2.50, certainly over the next three to five years," Lave
said. "The main thing that will bring that price down is whether
there's some alternative to petroleum; there are some alternatives
out there, but unless Americans drive less and reduce demand for gas,
we'll continue to see higher prices."
"There's little question that the situation in the Gulf, if it
keeps gas prices high, will have an impact on consumers' car choices,
but will this period of higher gas prices be sustained long enough to
see people make major shifts in their purchasing decisions?" Langer
said. "Is the dramatic drop in SUV sales temporary, or the start of a
major trend?"
Another question is how the big car companies will react adds Langer.
"The big auto companies have found themselves in a bind - they
already several years behind in creating hybrids, but they also have so
many resources tied up in these vehicles it is hard to for them to make
the shift and give consumers what they want in the face of high gas
prices. They are stuck in a mindset that is hard for them to
respond," she said.
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What do you think... will prices over 3 bucks a gallon cause a major
shift in the auto market?  

Patrick
'93 Cobra