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Page added on December 18, 2011

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Still no sign our oil addiction is ebbing

Still no sign our oil addiction is ebbing thumbnail

In a move reminiscent of drug dealers peddling their addictive wares to school kids in order to guarantee, um, future market growth, Saudi Arabia’s Prince Alwaleed bin Talal recently opined that the world’s largest producer of crude would like to maintain a target price of around US$70 to US$80 a barrel for its crude lest its most ardent clientele — that’s us — kicks its high-octane habit.

As cynical as that may be (and also impossible if you believe the “peak oil” theorists), the truly sad part is that it would almost assuredly keep us mainlining petrochemicals. We are, all evidence suggests, short-sighted when it comes to gas prices, our attention span that of an ADD’ed 12-year-old who just sold all his Ritalin to fund his purchase of a Honda mini-bike (OK, it wasn’t Ritalin; they didn’t have it in my youth). In short, our car-buying habits are notoriously fickle.

Like lemmings rushing headlong for the cliffs, we North Americans continue to buy relatively large and profligate vehicles despite the continuing evidence to the folly of gas guzzling.

In the wake of 2008’s spike in fuel prices that sent consumers rushing to Toyota dealerships for Priuses, the North American auto market has largely returned to its profligate ways. North and south of the border, luxury marques are booming, and even here in supposedly frugal Canada, trucks now account for more than 50% of automotive sales.

Optimists will take heart in the recent uptick in subcompact sales, but even this points to a mercurial market. According to Dennis DesRosiers of DesRosiers Automotive Consultants, “Sales of the most fuel-efficient vehicles actually underperformed the overall market” until April’s mini spike in gas prices.

Rising fuel prices are hardly a mystery. Headlines in the media have been screaming the inevitability of higher pump prices ever since the last spike deflated. Whatever evidence you choose to muster — the peak oil theory that claims producers such as Saudi Arabia can’t increase oil production, the high cost of alternative production such as the Tar Sands or the incredible increase in demand from emerging markets such as China — there’s been no lack of trumpeting that gasoline pricing will inevitably edge higher. Yet hybrid sales have faltered and there’s been no massive migration out of SUVs. To be sure, said behemoths have become more fuel efficient, but we are not getting to President Obama’s hallowed 62-miles-per-gallon figure driving sport-brutes no matter how many electric motors we affix to them.

Most troubling is the capricious nature of any migration to smaller and more fuel-efficient cars. Unlike the panic of 2008, this recent increase in pump prices has been as gradual as it has been relentless. Seemingly, a significant portion of consumers has blithely ignored gasoline’s march past the $1.10, $1.20 and $1.30 pricing that lights up every time they stop for a fix at their local station.

One dollar and forty cents a litre (or four bucks a gallon in the USA), however, seems to be some magical demarcation point: $1.37 sees me shopping a Cadillac Escalade, while $1.42 and I’m at a Hyundai dealership putting down a deposit on an Elantra. It makes no sense.

It certainly flies in the face of the argument of environmentalists and a sycophantic media that reports their every word as gospel that any “green” automotive revolution — electric vehicles, hybrids, the move to smaller cars, etc. — is fuelled by increased awareness of our environment and the desire to “do the right thing” for future generations.

Except for the 1% or 2% of North Americans who would drive to work every day in an electrically powered bread box if only their solar-powered bicycle would fit, the rest of our society cares more about money. Moolah. Dinero. That’s what really motivates the purchase of smaller and more fuel-efficient vehicles.

And even that is no guarantee.

A recent USA Today/Gallup poll in the United States suggested that 57% of Americans would not consider buying an electric vehicle no matter what the price.

Indeed, only 12% would consider an EV if gas prices rose above US$5 a gallon. And, remember, that’s consider, not buy. For Nissan CEO Carlos Ghosn’s oft-quoted prediction that electric vehicles would account for 10% of all sales by 2010, more than 80% of consumers who would even consider an EV would have to buy one. That’s a conquest ratio not even the addictive powers of heroin can boast.

Driving.ca


3 Comments on "Still no sign our oil addiction is ebbing"

  1. BillT on Mon, 19th Dec 2011 2:02 am 

    I think the day is coming where everyone would buy anything that could keep them on the move, but those vehicles will not be available to the average American due to the high cost to build and maintain them, not to mention that fuel will be rationed or just not available. What a huge waste of our contracting resources.

    Future generations will look back at us and wonder if we were even sane.

  2. Anvil on Mon, 19th Dec 2011 6:55 am 

    Small cars are more expensive. The usa is broke so buying SUVs and shit at low prices will insure sale growth. Plenty of fat usa regs to make this so as well.

  3. Kenz300 on Tue, 20th Dec 2011 3:47 pm 

    When oil prices spike up consumers will move to more fuel efficient vehicles. Our short term thinking keeps us from looking into the future and see the higher prices and long gas lines coming. Bring on the electric, flex-fuel, hybrid, CNG, LNG and hydrogen fueled vehicles. We will need them all. Electric bicycles and mopeds will also look more attractive. We will walk more, bicycle a little more and take more mass transit in the future. Right now the world GDP is barely growing and Europe is on the verge of recession. This no growth, slow growth or contraction helps to keep oil prices somewhat stable by reducing demand. If the world economy comes out of its recession then oil demand and prices will go up. It is a vicious cycle because higher oil prices will slow economic growth. The world economy was built on cheap oil and that is coming to an end.