NEWS: Gasoline Prices Affecting America's Driving Habits - The Tipping Point

September 3, 2008
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0809 01 Z+tipping Point+illustration
After years of wondering and conjecture, it appears that we've finally found it: the point at which gasoline prices will actually change what Americans drive. Like a person searching in the dark with his hands outstretched, we didn't know whether that point was nearby or far away. The speculation was wide-ranging - three dollars per gallon, four, five, more? No one really knew how high gas prices would have to go to alter Americans' driving habits. The first milestone, three dollars a gallon, arrived after Hurricane Katrina put several refineries out of service. It was a figure never seen before in the United States, although in inflation-adjusted terms, it wasn't as pricey as gasoline was back in the early days of motoring. But it's hard to think in inflation-adjusted terms when the station signs are starting with the number three for the first time.
Still, three-dollar-a-gallon gasoline caused barely a ripple in the marketplace; Americans merely switched from cash to credit.
In a book published only last year, Oil on the Brain - which treks backward up the gasoline supply chain, from gas pump, to distributor, to refinery, to U.S. and finally foreign oil fields - author Lisa Margonelli cites some interesting statistics. A 2004 survey by Maritz Automotive Research found that only four percent of buyers said fuel economy was their most important criterion when buying a car; the figure for cupholders was higher. Margonelli also cites a 2005 study, which postulated that if gas prices stayed at four dollars a gallon for more than a year, drivers would cut back their consumption by only five percent.
But for a lot of Americans, fuel economy has become very important indeed. Four dollars a gallon is proving to be a much bigger deal than anticipated.
According to AAA, the national average for a gallon of self-serve regular reached four dollars for the first time on June 6 of this year; California reached the milestone on May 22. Even adjusted for inflation, it's the most expensive gasoline ever on record in the United States. And never mind the predictions of economists or the wisdom of surveys - it's already having substantial repercussions in the marketplace.
0809 02 Z+2009 Honda Civic Sedan+side View
For one thing, Americans are using less gas. Even in the run-up to four dollars, U.S. gasoline demand had been lower than it was last year throughout the early part of 2008. But what's startling is how dramatically it's changed the cars we're buying. The most drastic shift can be seen at the top of the popularity chart.
For twenty-six years in a row, the Ford F-series pickup has been the best-selling vehicle in America. Through April of 2008, the F-series was still on top. But in May, it fell out of the top spot - not to number two, or number three, or four. The F-series had fallen all the way to fifth place.
And the F-series is not alone. The Chevrolet Silverado stayed in lockstep right behind it, dropping from number two to number six. The Dodge Ram fell off the top-ten list altogether; compared with the year-earlier period, Toyota Tundra sales were off by nearly one-third, and the Nissan Titan saw its sales cut by more than half.
To even the most casual observer of the automotive scene, it has long been obvious that, despite the rationalizations of their owners, a great many full-size pickups aren't bought on need, but on want. Suddenly, it appears that a lot fewer people want to tool around in a four-door, 4x4 pickup with an empty bed in the back. For the first time in recent years, cars are outselling trucks. And what's really eye-opening is which cars are hottest of all.
The traditional top-selling cars, mid-size sedans such as the Toyota Camry, the Honda Accord, and the Nissan Altima, have enjoyed sales increases (particularly the latter two) but haven't moved up the pop chart. No, it's two small cars that have shot up past their mid-size brethren to trade places with big pickups.
For the first time in its long history, the Honda Civic has become the best-selling car in the United States. The Civic's decades of excellence are suddenly paying off in a big way, as it has become the go-to vehicle for U.S. car buyers looking for a good small car. So sterling is its reputation that used Civics are commanding absurd prices, with one-year-old examples selling for more than the sticker price of new ones. Right behind it is Toyota's Corolla/Matrix (the company reports the sales of the two models as a single figure), which leapfrogged the company's perennially best-selling Camry.
The last time we saw a wholesale shift in automotive preferences on this scale was during the Arab oil embargo of 1973. That was driven not so much by gasoline price increases but by scarcity; stations ran out of gas, and buyers sometimes had to wait in long lines to purchase gasoline. That kind of scarcity breeds fear, and fear is a powerful market factor. What we're seeing today is different. Gas is not in short supply; it's just expensive. Economists, environmentalists, and auto executives have long wondered what it would take to pry Americans out of the big, comfortable cars, trucks, and SUVs they appeared to love so much. Now they have their answer. Four dollars a gallon is proving to be the magic number.
In a speech in June, General Motors CEO Rick Wagoner acknowledged the new reality, announcing deep production cuts among the company's trucks and SUVs, funding approval for the Chevrolet Volt plug-in electric car, and a possible sale of the Hummer division. "These higher gasoline prices are changing consumer behavior, and rapidly," said Wagoner. "We at GM don't think this is a spike or temporary shift; we believe that it is, by and large, permanent." The tipping point has been reached.
America's Top 10 Selling Vehicles
January-April 2008May 2008 (percent change vs. May 2007)
  1. {{{Ford}}} F-series
  2. {{{Chevrolet Silverado}}}
  3. {{{Toyota Camry}}}
  4. {{{Honda Accord}}}
  5. {{{Honda Civic}}}
  6. {{{Toyota Corolla}}}/{{{Matrix}}}
  7. {{{Nissan Altima}}}
  8. {{{Chevrolet Impala}}}
  9. {{{Dodge}}} Ram
  10. {{{Ford Focus}}}
  1. {{{Honda}}} {{{Civic}}} (+33.3%)
  2. {{{Toyota}}} {{{Corolla}}}/Matrix (+16.8%)
  3. Toyota {{{Camry}}} (+2.3%)
  4. Honda {{{Accord}}} (+37.0%)
  5. Ford F-series (-30.6%)
  6. Chevrolet {{{Silverado}}} (-42.0%)
  7. {{{Nissan}}} {{{Altima}}} (+43.6%)
  8. Ford {{{Focus}}} (+53.2%)
  9. {{{Chevrolet Cobalt}}} (+19.2%)
  10. Chevrolet {{{Impala}}} (-33.3%)
0809 03 Z+2008 Ford F150+front View

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