Peak Oil is You

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Page added on February 26, 2009

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The Boomers Stop Buying

…For boomers who had experienced financial crises in their lifetimes before, seemingly decades remained in which to recover and make retirement comfortable. Now, as $40 trillion in net worth was wiped out worldwide, suddenly 65 looks like it’s coming the day after tomorrow.

This time around, America can’t count on the younger generations to help out. CNW Marketing Research pointed out this month that fully 53% of buyers under age 30 have disappeared from the new car market in just the last two years. The negative impact is such that, based on last year’s 13.2 million car sales, it would take 19.2 years to replace the entire American fleet. For comparison, the year the first boomers became adults America enjoyed a 9.8-year fleet replacement rate, based on new car sales.

And for perspective, at the depth of the Great Depression in 1933, car sales ran at a 14.8-year replacement rate.

The Perfect Storm: Four Crises About to Collide

So the boomers have quit spending, fearing the short distance to retirement, while more than half of the youngest generation has disappeared from the car market because of a lack of economic opportunity. That’s why the economy has fallen so far, so fast.

If this economic downturn lasts into 2010, by the time there is a real recovery boomers will be even closer to retirement and their retirement accounts only a little fatter. That is not a recipe for the consumer rebound America badly needs.

One bright spot is that this downturn has most likely postponed peak oil production, but it will still happen within the next 10 years. Predictions on what that means for world economies range all over the map. But it would be reasonable to assume that oil will be over $200 a barrel, while gasoline could cost $7 or more per gallon. And next time those figures won’t fall back down again. Ever.

Business Week

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