The AP gets straight to the heart of this story: "As the price of oil drops dramatically, some analysts wonder if the bubble is bursting." When the markets closed on Friday, August oil futures had dropped from their recent high of $147/barrel to "only" $128.88. That still leaves oil about $100/barrel over it's long term inflation adjusted average of $27-$28. Detroit, especially Ford, appears to be moving full steam ahead to convert capacity from trucks to small cars as fast as possible, which means in about two years. So… what if fuel prices will drop back down, keep going up or stay about where they are now during that two-year timeframe? Whatever happens, it seems that $4/gallon has been a behavioral tipping point for the US' car and truck buyers. It took about a decade of stable fuel prices for people to forget the shocks of the 1970s. Once again it seems that even a slight moderation of prices would not mean a wholesale return to 1990s style gas-guzzlers. The only sensible strategy for a mainstream automaker: offer a compelling line-up across the board and flexible factories ready to zig when the market zags. But hey, what do I know?
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So… what if fuel prices will drop back down, keep going up or stay about where they are now during that two-year timeframe?
It’s kind of like having your home broken into, but nothing valuable was stolen. Do you suddenly not value the idea of better deadbolts and a security system?
I think the shock has happened and people won’t be quite as stupid next time around. The move towards more small-car diversification is long overdue and I bet it will still be welcomed by most buyers.
Blip.
There may be short term price pull backs in months or even years, but the long term is oil prices are up up up.
Simply we are not able to find new oil to replace what has been depleted in the same productive capacity.
Did someone over at RenCen sacrifice a virgin last week?
It seems to me that if someone passes gas in the Midddle East,we are paying more at the pumps within minutes.
It’s kind of like having your home broken into, but nothing valuable was stolen. Do you suddenly not value the idea of better deadbolts and a security system?
Yes, but I find people do forget. They certainly forgot the 1970s.
John
Please, let it be a trend!
“The only sensible strategy for a mainstream automaker: offer a compelling line-up across the board and flexible factories ready to zig when the market zags.”
Golly, what a concept.
I paid $3.95/gal for premium yesterday, lowest I’ve seen in a long time. But it won’t take much to skyrocket again. Iran flexing its muscles, Venezuela and their commie dictator killing their golden-goose, an Islamic revolution in Egypt shutting down the Suez, Russians getting uber-greedy.
1970s was a supply disruption which was obviously willful and temporary. There’s little evidence that either adjective applies today.
The statistical data point to a strong cooling of the economy, worldwide, with the possibility of a drop in demand — already, people using their cars less is having an impact.
That should bring the price of oil down for a while, as well as the price of most other things, number of jobs, etc.
Damned if you do, damned if you don’t, I guess.
Running full speed ahead economies is probably not that smart, in the long run.
“Simply we are not able to find new oil to replace what has been depleted in the same productive capacity.”
I’d argue that it’s more a case of not being permitted by law to retrieve known reserves. We know where there’s a TON of oil. It’s mostly political hurdles that stand in the way.
I see this as a blip, but a major one.
Detroit needs to learn from this and produce a full lineup of fuel efficient vehicles (cars and trucks) that people WANT to buy and not because of price of penalty.
Believe it or not, high gas prices are here to stay and no amount of drilling for our own oil is going to change that.
It’s a blip for the moment. The bubble will burst, but we’ll need more bad economic news and rising interest rates before we really see it pop. An Obama win should help as well.
I have not seen a price drop at the pump yet. Even if it drops a dollar a gallon, it will just rise again. All the talk of getting out from under foreign oil is a step in the right direction. That should remain the focus. That should continue to be a national priority.
“Believe it or not, high gas prices are here to stay and no amount of drilling for our own oil is going to change that.”
Actually drilling for oil has worked very well. Just were do you think that fuel you run your car on and heat your house came from? It mostly all comes from drilling for oil which is the best way to produce more oil. It puzzles me that people so readily fall for such foolishness, that drilling for oil will not provide greater supplies.
# mikey Says:
July 21st, 2008 at 9:36 am
It seems to me that if someone passes gas in the Midddle East,we are paying more at the pumps within minutes.
Headline: King Abdullah suffers from stomach ulcer; oil rises $6 in intra-day trading
The better the automakers average fuel economy, the greater the reduction in demand for oil, the lower the price for it- simple.