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Gas Prices To Hit $5, Dealers Looking To Dump SUVs

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On: Fri, Dec 31, 2010 at 3:33PM | By: Chris Weiss


Gas Prices To Hit $5, Dealers Looking To Dump SUVs

We all know that SUVs are entirely impractical for much of the country. They're huge, inefficient, expensive to buy, more expensive to own, and not really that necessary for average driving. Yet people continue to buy them. According to Kelley Blue Book analyst Alec Gutierrez, SUV sales have dropped by only 1 percent since the spring of 2008—the last time that we experienced a major gas price hike.

One would think that with the high gas prices over the past few years, combined with a growing sense of collective, environmental responsibility, SUV sales would be tanking by the double digits by now. While that's not happening yet, new predictions that gas prices could soar as high as $5 per gallon within two years have consumers and dealers rethinking their SUV strategies.

Former president of Shell Oil John Hofmeister said in an interview: "I’m predicting actually the worst outcome over the next two years, which takes us to 2012 with higher gasoline prices," adding that he believes that prices will hit $5/gallon by 2012.

Other industry analysts disagree that the price hike will come that quickly, but agree that it will come before the decade is over.

In fact, it may be already underway. Average nationwide prices jumped to over $3 per gallon this past week, the highest they've been since October 2008.

During the price leap of spring 2008, a time in which prices pushed toward and above the $4 per gallon mark, vehicle sales were hit hard, with SUVs and trucks proving to be a particularly heavy anchors. At the time, the New York Times declared October 2008 auto sales as the worst in 25 years, and companies like Ford and Toyota were being weighed down by SUVs and trucks.

Gutierrez doesn't believe we'll see a similar sales dive until gas prices hit $3.50 or $4 per gallon, and doesn't believe that the drop-off will be quite as sharp as it was in 2008. But there is bound to be a market reaction, even if it's slow and gradual.

If gas keeps rising, consumers will undoubtedly eschew the largest vehicles and search for smaller, more efficient cars and trucks. And dealers are beginning to alter their strategies to reflect that future. Dealerships around the nation have begun to scale back the number of large SUVs that they stock. Instead, they're focusing on smaller, more fuel-efficient SUVs and cars.

Luckily for dealers, manufacturers have also responded with a renewed focus on more efficient crossovers, and updated SUVs with more efficient engines.




Comments

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Gay | 1:14PM (Tue, Jan 11, 2011)

Surely the gas prices won't rise too fast, I can't afford to fill up weekly as it is.



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