Experts say it won't get much worse; it won't get much better, either.
When NASCAR is being lobbied to use alternative fuels, it's a sure sign that gas prices have reached a breaking point.
Perhaps following the lead of Indy Racing League's two-year transition to ethanol, NASCAR is being urged by at least one major automaker to also go "yellow," according to recent media reports.
It's indicative of an era when hybrid vehicles and fuel-efficient cars appeal to even the most adamant drivers of gas-guzzlers.
Though fuel prices are still considerably higher than they were a year ago, gas prices after the Memorial Day weekend were at a six-week low, and there appears to be some relief at the pump. But pundits and fuel analysts are clear about one thing: The price of gas will remain high.The opinions range widely, but many say drivers are finally serious about fuel-efficient modes of transportation. The real question is, is this all too little too late?
At press time, a gallon of gas in Needles, Calif. was $3.99, while fuel in North Little Rock, Ark. was $2.49 a gallon. The average price was $2.89 a gallon (www.gaspricewatch.com
No one is beyond the grasp of this fuel price crunch. Jeff Neely, from C.J. Parts Distributors Inc., in Trenton, N.J., says he has experienced a definite impact.
"It was calculated that an additional 1 percent of gross profit was sucked out by gas prices," he says. "We polled our Tier 1 customers and they said it would be better to offset the increase by raising prices, rather than an added delivery charge."
He adds that shipments directly from the manufacturer have also slowed as the companies wait for their trucks to have as much product as possible before hitting the road.
Reaching a full tank of tolerance
As the industry braces for a pricey summer concerning fuel prices, those who work in parts and repair are also trying to determine the motorist's tipping point: When is enough enough for the nation's drivers?
According to AutoWeek, a CNW survey cites the breaking point at $3.75 a gallon, as almost half of the consumers surveyed say they would immediately purchase a more fuel-efficient vehicle if gas prices reach that point. The Energy Information Administration predicts that gas prices will remain at about $2.70 through the summer.
"By September 2006, fuel prices are expected to be lower than last year because of the return of crude oil and natural gas production and refineries affected by Hurricanes Katrina and Rita in 2005," says the agency in a news release. "With another active hurricane season possible this year, news of developing hurricanes and tropical storms with a potential to cause significant new outages could add to volatility in near-term prices in the latter part of the summer."
And despite fluctuations, drivers remain wary, as websites post up-to-the-minute updates from a network of vigilant amateur reporters.
Jonathan Steinmetz, lead auto analyst for Morgan Stanley who spoke at the recent Global Automotive Aftermarket Symposium, says those drivers in the lower income brackets are most affected by high fuel prices as the cost of gas essentially amounts to a tax at that level.
Additionally, drivers of domestic makes are more likely to feel the gas price crunch than those who drive European or Asian makes (as these demographics are traditionally in a higher salary strata), he says. This could affect domestic replacement parts sales, posits Steinmetz.
It's not only the domestic vehicle buyers taking a hit from gas prices. Domestic automakers report recent significant drops in truck and SUV sales, as consumers are abandoning gas-guzzlers in favor of gas-sippers and smaller vehicles. As part of this trend, and along with proposed more strict Corporate Average Fuel Economy Standards, automakers say the ultimate result will be the loss of even more jobs in Detroit and elsewhere.
Conversely, those who have put more of their eggs into the fuel-efficiency basket, like Toyota and Honda, are reporting double-digit increases in U.S. sales.
To counter this shift, some OEMs are even handing out debit cards with money for drivers to use on fuel or other items. A recent GM promotion offers California buyers of select makes and models monthly prepaid debit cards that pay the difference of $1.99 per gallon and the average price of premium gasoline. Ford recently launched an incentive program that includes zero-percent financing and a debit card that can be used to buy $1,000 in gas ($1,100 for some trucks and SUVs).
An odd target amid the gas price scuffle is boutique fuels, or specialized blends that meet localized air quality requirements.
In April, Pres. Bush directed Environmental Protection Agency (EPA) Administrator Stephen L. Johnson to form a task force that will look at ways to reduce the number of boutique fuels and increase cooperation between states when it comes to supply decisions. The EPA was putting together its report at press time.
Ethanol blends do not drive up the cost of gasoline, asserts the American Coalition for Ethanol, which adds that the price of ethanol is much lower than gasoline prices, and removing ethanol from the nation's fuel supply would actually cause price spikes.