Thanks Giving drivers were greeted last week with a surprise at the pump: gas prices have been dropping consistently and are now at record lows, which started a driving craze. Now that we’re back at work, the trend seems to keep going. But for how long? Will this drive an SUV and big engine boom, as some suggest? Let’s follow the money and get to the bottom of this.
As you may already know, crude oil production (and a million other factors) dictates refined gasoline prices. So what happens when when there’s an overproduction of oil and a surplus of refined gasoline? Prices go down. So low in fact, that we’re are seeing recession level prices, when demand was low and production was up. So what does this mean for consumers and car manufacturers?
There’s this theory floating around that we might see an increase in SUV and big car sales, which we think is silly to associate it to the gas price phenomenon. For one, Ford’s SUV division has been growing constantly, with or without low gas prices. Second, car buyers moved away from big, inefficient engines not just because of crude oil prices, but because they actually care about the environment. The new generation of drivers has fueled (no pun intended) an increase on powerful yet efficient cars, like the EcoBoost series from Ford.
So in the mean time, let’s not freak out. A quick look at this 10 year average gas price in the U.S. tells us gas prices are historically higher than today. Although it is great for consumers to have access to cheap gas, we need to think about the other side of the coin. Just this morning, some news outlets were discussing oil companies planning on laying-off workers because of this same reason. Also, some lawmakers are in talks to increase gasoline taxes, since prices have dropped. So is there a happy medium?
While every driver would like to pay $2.00 or less for a gallon, others will argue there needs to be a sustainable gasoline market, both for consumers and producers. Remember, you don’t need to sacrifice power and speed to get great fuel efficiency. In 2009 Ford introduced its first EcoBoost, which is a line of small, turbo-charged engines that deliver great power and little fuel consumption. Today, almost every Ford vehicle comes in an EcoBoost configuration, form the sporty 2015 Mustang, to the powerful F-150.
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