As I write this, the TV and newspapers are full of accounts of the devastation caused by Hurricane Katrina’s hit on the Gulf Coast region.
If I lived in a total news vacuum, however, I would still know that something drastic had happened. Gasoline prices have risen to over $3 a gallon as of this writing. It seems that lately any fluctuation, real or mere possibility, in the supply of fuel or crude oil is reason enough to raise prices.
To get a little perspective on this I compared pricing on various undercar components going back over an 18-month span. Prices have gone up on average between 6 and 10 percent on most parts. During this same period the price of steel went up dramatically: 66 percent, according to one source.
Why is it then that the price of brake rotors and ball joints didn’t skyrocket as well? The price of crude oil has climbed steadily over the last 18 months and gasoline has stayed right in step with it. I can’t think of any other industry that gets away with passing along every price increase directly to the consumer.
I realize that I’m taking a simplistic approach to a complex situation, but consider this: Car parts pass from the manufacturer to a distributor, the jobber, and on to the final consumer. While the price goes up at each step in the chain, there is also value added in the form of customer service and warranties.
Because the competition on manufactured goods is pretty stiff, especially in our service-oriented economy, most people in the distribution chain will absorb some of the increases or find ways to offset them before raising prices.
Oil and petroleum products, on the other hand, have no value-added services built into the chain. Crude oil is pumped, transported, refined and offered for sale with the knowledge that there will be a demand for it, and that the average motorist doesn’t even care what brand it is. As long as it’s convenient and within a few cents of everyone else in town, everybody’s happy.
It all boils down to competition, and the lack of it in the case of petroleum. The human race has an insatiable need for energy, and as long as we depend solely on oil for motor fuel, the price will spiral upward with every new member of Earth’s population.
The OEMs are making progress with hybrid gas/electric power, and research continues on hydrogen power, but these will have little effect in the immediate future. The average car in the U.S. is over 10 years old, so even if hybrids or hydrogen were an economical reality today, we would still not see any substantial benefits for a while.
Fuels such as biodiesel and ethanol are an alternative and can be distributed through the existing network, but they are not perfect either. One of their drawbacks is incompatibility with materials used in the fuel systems of these same older vehicles, but this could be overcome.
The aftermarket began by providing products and innovations that the OEMs didn’t, not by merely offering the same parts that could be bought through a dealer. Since then the focus has shifted to competing with them for the replacement parts business and ignoring much of the R&D work that was responsible for many of the automotive advances in the early days. Perhaps if that situation were to change, the next storm, whether it’s political or natural, might not have as much of an impact at the pump.
About the Author
