How Gas Could Hit $6 a Gallon

Posted on 04. Apr, 2012 by in Auto News

The national average gas price eclipsed $ 3.90 last week in March car sales left in high-mpg choices flooded. With two new variants hit dealers saw the Toyota Prius, the best sales result months in nearly 12 years of U.S. sales. Half of the 10 best seller offer a hybrid version, and two of the non-hybrid versions have with EPA highway ratings of 40 mpg or better.

High fuel prices driving faster than their profits usual summer, and there is a 20% chance that prices could spike to almost $ 6 a gallon, says market research firm IHS.

"Only 3 percent of the budgets of consumers go to gasoline. This is tiny," IHS chief economist Nariman Behravesh told participants at a conference sponsored by IHS and the National Automobile Dealers Association on the eve of the 2012 New York International Auto Show. "But here's the psychological part of it: You see the prices every time it to the pump."

What is the cause of the boost?
In the near future, two factors are pushing gas prices higher. The first is a supply disruption and limited capacity. "There are not many spare capacity worldwide for a variety of reasons," Behravesh said, noting supply disruptions in Yemen Sudan and Syria are to blame in part for the oil price.

Then there is what Behravesh the name "Iran risk premium" or a bump in gas prices by month fear of war with Iran. We are not going into too much weed, but sanctions against the country's nuclear program could move the country to disrupt the Strait of Hormuz, a vital shipping lane for oil. The situation remains weak, and IHS says "random" escalations not a military strike could lead to Iran Hormuz closed. Such fears have been pushed oil to $ 20 to $ 30 per barrel.

Brent crude oil – which largely determines what drivers pay at the pump, according to IHS analysis director Mike Wall – at $ 125 per barrel traded on Tuesday.

"There are two narrow fairways – it's pretty simple to me," Behravesh said. "NATO forces, especially American forces would clear [the strait], but you would have to be over a period of a few weeks, where the oil could not come from the Persian Gulf."

Twenty percent of the world's oil comes from that region. If this happened in January 2013, IHS projects oil prices would spike to $ 240 per barrel then. $ 160 withdrawal by spring and to around $ 120 by summer

What does this mean to the driver? Pump prices expected to spike "the upper $ 5s," Wall said. Consumers would respond with a sudden, short-lived when to shift hybrid and plug-in vehicles. The latter group was largely unavailable during the gas price increases in 2008.

Nissan want to be GM and other plug-in car manufacturers able to fill the demand? GM has. Chevrolet Volt more obvious than she knows what to do with, after all But Wall is not suspected. "I do not think it [production] really enough capacity for" an Iran-fueled spike in demand, he said.

Nissan could fare better. The automaker is moving production of its Leaf electric vehicle in the U.S. – provided a step by which Nissan was able to meet the demand, fellow analyst Tracy Handler.

Either way, says IHS a spike to $ 200 or more per barrel could do serious damage to a car industry just to enjoy until better times.

Long term, Behravesh large quantities of oil from unconventional sources: shale, tar sands and more. "So suddenly the outlook for the energy supply, the energy prices in the medium to long term are looking pretty good," he said.

But No Big Shift
The Middle East may increase gas prices leave, but consumers are the types of cars they have stuck. Even as gas approached $ 4 a gallon, Detroit full-size pickups combined to 13.4% in March to improve sales. Even the age-old Chevrolet Avalanche, which combines the EPA rates at 17 mpg only flew 25.9%. And the Dodge Challenger, whose city is EPA mileage in the youth, saw its best sales month yet.

"There's still a market for the car, even with $ 4-a-gallon gasoline," a prelude Reid Bigland, the Chrysler care in the U.S. sales, told conference participants. In fact, a study last month by CNW Automotive Research, found that 82 percent of consumers. Still their car exchange in the same segment of the vehicle, despite more than four-fifths of them listing fuel consumption among the top three reasons why they traded in their cars

"Downsizing is now a function of practicality or driving needs, as an attempt to increase fuel consumption," CNW said in a statement. "Traded Indeed, by all respondents, only 7% of the major car-owners for a smaller model -. Hardly more than in 2007"

Gas prices would have to reach $ 4.75 per gallon for consumers to make radical changes, CNW predicts. Bring a crisis in Iran, which could over night – but short, decisions today and gas prices may not require a change in the type of car you own.

"People see a 11-year-old car," Ford marketing chief Jim Farley, said, referring to the median age of today's cars to a record 10.8 years. "Remember, most of these vehicles are V-6s," Farley said. "It is totally possible now that they have the same class of vehicle for 10 miles per gallon better. "