May 2008 saw the United States locked in the midst of the worst gas crisis in thirty years. The daily increase in the average price of gas was having profound affects around the nation, causing spikes in food prices and the canceling of summer vacations. The rise in gas prices also had a profound shift on the American auto market. For the first time in seventeen years, the American large pickup truck was knocked from the top of the best selling vehicles in America list.
The Ford F150, a workhorse of a vehicle that held the lead for most of those 17 years, fell not to the second, but all the way to the fifth spot on automobile best sellers list. The new king of the mountain was none other than the Honda Civic. The Civic was flanked by similar, small, more fuel efficient cars ? the Toyota Camry, the Toyota Corolla, and the Honda Accord. And there were big moves in similarly sized American cars. USA Today noted the Chevy Cobalt's numbers were up 19%, the Chevy Aveo was up 44%, the Ford Focus jumped up by 52%, and the Pontiac Vibe rocketed up a massive 72%.
Things only got worse for the SUV market as the summer progressed. As the average price for unleaded gasoline passed $3.50 at the national level, the SUV and truck markets were largely declared dead by many members of the press. After the better part of two decades as an American icon, a rugged representation of American freedom, the inefficiencies of they had finally dethroned the SUV as a practical, everyday vehicle.
By the end of the summer, with gas prices reaching their fevered highs, Nissan became the last automobile manufacturer to official announce across the board reductions in to the sheer volume of makes, models, and total numbers of SUVs and trucks to be produced. Coincidentally, the end of the summer also marked the potential end of the gas prices. The daily reports of record high gas prices were replaced by the national average cost for gas falling on a daily basis. A penny here, a penny there. Soon, prices were lower than they were before Katrina. Not long after that, they were nearly on par with the averages in 2003. Five years of steady increases, an industry finally retooled to the changes, and a consumer-base which aligned itself were undone in a matter of months as various forces drove the global price of crude oil down from the mountain it climbed.
Though gas prices seemed to be falling with the same reckless abandon in which they'd risen, the results in SUV sales did not match. Though many makes and models did see a the rate in which their sales were declining, and some did see an actual move into the positive territory, the obvious connections between the low price of gas and SUV sales can't be instantly made. After all, many car dealers had made hereto unprecedented moves to rid their lots of their remaining SUVs.
Perhaps the fear that is currently keeping the sales of SUVs at rather depressed numbers isn't the price of gas, but rather the fear of the price of gas. American drivers have seen gas move towards both ends of the spectrum seemingly without real world correlation for years now. It's quite possible that for the time being, even though the prices are still generally below $2 per gallon, drivers are still holding our breaths. Or perhaps, we've found that small and frugal is as good an icon as rugged and roomy. Perhaps we're heading for an America where SUVs and sub-compacts can peacefully co-exist.
Did you think the non-inflation adjusted record high in oil and gas prices form hurricane Katrina last September was just a blip on the radar? If you did, you may be in for a very rude awakening. Directly below are some very compelling reasons why this may be the case.
In the late seventies and early eighties automobile ownership in China was virtually non-existent. China's roadways, once synonymous with packs of bicycles, are experiencing an explosion of car traffic driven by the nation's ever growing consumer class. Last year, automobile sales in China exceeded 5 million units. China is now the world's fastest growing auto market. However, even with this recent surge of automobile ownership in China the market remains virtually untapped. At present, its estimated that significantly less than two percent of China's population, 1.3 billion people, owns an automobile but with cheaper models and a growing used car market, auto ownership in China is steadily increasing.
The oil production decline rate, sometimes referred to as Hubbert's production curve or peak oil, at several major global oil fields has been considerably steeper than expected. For example, the U.K. has now become a net importer of crude oil and its production is dropping fast. Presently, crude oil production in the U.K. is below 2 million barrels per day and has appeared to reach its absolute peak of 2.9 million barrels in 2000.
Shortages of unleaded gas could potentially occur this summer because the U.S. ethanol industry can't keep up with the demand for fuel-grade alcohol to mix with gasoline. Imports of ethanol could possibly meet demand but are currently subject to a 54-cents-per-gallon tariff.
The current standoff between the United States and Iran, OPEC's no.2 oil producer, over Tehran's nuclear energy ambitions also applies upward pressure on the crude oil market. Although Iran has claimed in the past they will not use oil as an economic weapon that could change at any moment. Iran recently has officially gone nuclear with the first successful enrichment of Uranium. So the whole Iran situation is tense at best.
AccuaWeather has forecasted the 2006 hurricane season, which starts June 1 and runs through December 1, to be more active than normal. Considering the current fragile status of refining capabilities within the U.S. any potential damage to those facilities from hurricanes this summer could have a dramatic effect on prices.
Due to political instability and rising violence in Nigeria, oil companies have suspended the production of over 600,000 barrels per day of crude oil. Don't expect any quick resolutions to these long-term problems in Nigeria. At present, over 20 percent of Nigerian production remains at a stand still following attacks by militants.
Crude oil demand is rising at a very fast pace. At present, it's increasing around 1.75 million barrels per day. Even with Saudi Arabia's vast crude oil resources the market will be unable to cope without some drastic measures. Furthermore, the water content is rising in the old supergiant oil fields of Saudi Arabia. Referred to as the water cut, there are rumors now circulating that water content is over 50 percent. When it reaches 80 it's for the most part game over. Of course the water cut is considered a State secret in Saudi Arabia for obvious reasons.
Many of the world's major oil fields are very old and potentially are nearing or have already surpassed their peak in production. There are about 120 oilfields in the world that produce half of the world's crude oil supplies. The top 14 fields, which make up 20 percent of global supply, are over 50 years old. In Saudi Arabia, which contains a quarter of the entire global oil supply, there are only five major fields producing 90 percent of their supply.
It was estimated after the Iraq invasion that this area would produce close to 5 million barrels of oil in future. However, plans to develop Iraq's infrastructure have been scrapped because of relentless insurgent attacks as well as the threat of potential civil war. Although, even with a peaceful Iraq, the two oil fields that comprised about 80% of their crude oil production in the past are in very poor condition.
Crude oil prices recently broke out of a long-term bullish symmetrical triangle trend continuation pattern. For those without a working knowledge of technical analysis this is a very common type of trend continuation pattern.
All of these points really lead to the potential "perfect storm" in regards to oil pricing. Petroleum is utilized in many of the products we purchase on a daily basis. There are some people that agree with our predictions and believe that we should just turn to alternate sources of fuel. This is a good idea but it is truly logistically impossible to just stop using oil. So how does this affect the ordinary person? The only way one could potentially deal with such potential calamities, as any of these many scenarios will pose, is proper preparation. I am afraid just driving a hybrid will not cut it.
Both Scott Conklin & George H Hindson are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Scott Conklin has sinced written about articles on various topics from Used Car, Cars and Gas Prices. Scott Conklin is the president of Conklin Cars, a leading provider of Kansas Ford,. Scott Conklin's top article generates over 9900 views. to your Favourites.
George H Hindson has sinced written about articles on various topics from Gas Prices. About The AuthorsGeorge Hindson and Paul Skarp are principals of Aaron Trading. A licensed and registered commodity futures broker. Visit our commodity futures trading weblog for additional energy and commodity market analysis at. George H Hindson's top article generates over 9900 views. to your Favourites.