Wednesday, December 29, 2010

$5 a Gallon by 2012? Worrisome, but Survivable...for Some

For drivers of gasoline-powered vehicles who were hoping to hear good news about the future state of fuel prices, here's something to rain on your parade. Former Shell President John Hofmeister recently indicated that he foresees gas prices hitting a very European $5 a gallon by 2012.

The question everyone wants answered is this: will vehicle manufacturers be ready? Hopefully they learned their lesson last time, but there's really no telling; after all, cars like the absurd Chrysler Aspen came out at a time when all signs said "Don't do this".

Hofmeister cited a few factors that would potentially lead to this dilemma. He says:

"The issues that gave rise to high priced gasoline in 2007 and 2008 are repeating themselves, except the world demands even more oil in the next several years than before. Asian growth is continuing, e.g. 17 million new cars per year just in China, and will demand more oil. U.S. economic recovery has brought demand back to where it was before. Economic growth means even more demand. But the U.S. Government is prohibiting expansion of U.S. domestic crude oil production which puts upward pressure on global crude oil prices…If we stay on our present course there is no question but that prices will rise to the $5.00 gallon level by 2012 in my opinion."

Some major manufacturers (ahem, Chrysler) should be worried if this happens, primarily because they lack any cheap and efficient vehicles and still depend on truck sales for their bread and butter. Others, such as Ford, Hyundai, and those building smaller, fuel efficient, attractive vehicles - be they compact hatches or CUVs - will likely weather the storm with relative ease, as this is a problem that they've encountered and tamed (to an extent).

Let us know what manufacturers you feel are in trouble, why, and how they could be improved. Maybe we could give them a helping hand.

By Phil Alex

Source: CNN , Via: TTAC , Photo: BP


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