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High prices won't hit US gasoline consumption: experts
By Mary Chapman
AFP
DETROIT, Michigan
Petroleumworld.com 06 14 06Though high pump prices have begun to affect what kinds of vehicles US consumers buy, it could take years before there is a real reduction in overall fuel consumption, experts say.
For one thing, consumers must be convinced that high prices are here to stay.
"When we get above 3.50 (dollars) a gallon, I think people in earnest will consider alternatives," said Anthony Pratt of J.D. Power and Associates.
"But, there must be a consumer perception that this is the new baseline for gas, not just a spike. If the perception is that the situation is volatile, or short term, there won't be a big change."
Hovering around three dollars a gallon for several months now, the average price of regular unleaded gasoline in the United States was 2.90 dollars a gallon on Monday, up from 2.13 dollars a year ago, according to the American Automobile Association.
Some of the pump-price blame can be pinned on hurricanes Rita and Katrina. Up to 15 percent of the nation's refining capacity was affected for much of last year, and many refineries are still being repaired.
In addition, rising global demand, spurred by economic growth in China and India, continues to put pressure on world oil prices. And that is only going to get worse.
According to the Energy Information Administration, the United States is expected to consume 1.4 percent more barrels of oil per day by 2025. India, meanwhile, is forecast to consume 3.5 percent more while China's usage is predicted to increase 4.5 percent.
Consumers in the United States have begun to respond.
A JD Power study last year found that only 36 percent of Americans considered a vehicle's fuel economy before making a buying decision.
A Consumer Reports study released last month concluded that 37 percent of consumers now say gas prices are so high they are looking at replacing their current vehicles with more fuel-efficient rides.
Sales figures are also beginning to trend toward fuel efficiency. Compact cars made up 18.9 percent of new cars sold in May, up from 15.7 percent a year earlier while large sports utility vehicles dropped to 3.6 percent of the market from 5.7 percent in May 2004, according to Edmunds.com.
"The most typical pattern has seen middle-income families move from two larger vehicles -- SUVs or minivans -- to one large vehicle and something more gas efficient. Gas prices have had an impact, but smaller cars are also hip. It's a fashion change," said Jesse Toprak of Edmunds.com. "There's been an influx of new and exciting products."
There are also a growing number of options for consumers seeking fuel-efficiency but all have their drawbacks. Gas-electric hybrids cost between 4,000 and 10,000 dollars more than their fuel-guzzling counterparts. Diesels engines are cleaner than they were in the past, but are still banned in some states. Clean-burning technologies such as hydrogen and fuel cells are still years from being ready for the market.
All of which is why manufacturers such as General Motors Corp. are taking a broad view.
"I think the best approach possible is a multi-pronged approach, because ultimately, we don't know what the interest from consumers will be," said GM spokesman Brian Corbett.
"We have three different types of hybrid systems, and we're upgrading our conventional internal combustion engine to make it more efficient. Overall, we're looking at various levels of affordability and fuel economy."
It will all come down to cost, said Pratt.
"Before consumers are willing to pay for any kind of alternative technology, manufacturers have to get prices down to where it's like a like a powertrain upgrade, the difference between a four-cylinder and a six-cylinder," he said.
"Between 800 and 1,000 dollars is around the amount they're comfortable with. And at that level they'll be able to realize an economic payback."
Even then, the combined market share for hybrids and alt-fuel vehicles will be less than 10 percent by 2010, said JD Power's Toprak.
"Things are not looking that great in terms of gas consumption over the next few years," he said. "Look, we're adding nearly 17 million new cars every year to the roads, and even though we may be able to cut some gas mileage here and there, those things are not going to make much of a difference, especially if air fares continue to increase and more people drive instead. I still expect gas consumption to increase."
AFP 130302 GMT 06 06
Copyright ©2006 AFP. All Rights Reserved.
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