$4 Per Gallon Gas: From Apocalypse to Necessary Evil Tax in 4 Years?

Remember pre-Great Recession, circa 2008, when gas prices shot up from under $2 per gallon to over $4?

People were scared and PISSED! Used Prius’s were selling for over the MSRP of new ones (because you couldn’t find a new one anywhere other than Craigslist). SUV and truck sales plummeted. And anyone who wanted to sell their once-coveted giant SUV in favor of a more fuel efficient ride couldn’t give the damn thing away – like it was some kind of infectious disease. Oh, and we were all on the short path to Peak Oil and the Apocalypse.

New car buyers, at that time, were demanding higher mpg’s. And automakers were caught mostly flat-footed  in being able to deliver them, with the exception of Toyota. 23 city and 32 mpg highway, at the time, were considered exceptional.

Yet, buyers intentions were clear. In May of 2008, year-over-year vehicle sales looked like this:

Top selling vehicles that had increased in sales year-over-year

  • Nissan Altima +9.6% (24 mpg city, 32 mpg highway)
  • Ford Focus +29.1% (24 mpg city, 35 mpg highway)
  • Chevy Cobalt +17.3% (24 mpg city, 33 mpg highway)
  • Toyota Prius +22.6% (48 mpg city, 45 mpg highway)
  • Chevy Malibu +22.5% (22 mpg city, 32 mpg highway)
  • Pontiac G6 +22.2% (22 mpg city, 30 mpg highway)

Top selling vehicles that had decreased in sales year-over-year

  • Ford F Series (trucks) -15.5% (13 mpg city, 17 mpg highway)
  • Chevy Silverado (truck) -20.8% (14 mpg city, 19 mpg highway)
  • Dodge Ram (truck) -24.2% (13 mpg city, 17 mpg highway)
  • GMC Sierra (large SUV) -11.2% (14 mpg city, 19 mpg highway)
  • Ford Econoline (van) -21% (14 mpg city, 19 mpg highway)

Then the recession hit. And gas prices dropped 60% to below $2 overnight (quite literally).

Over the next two years (2009-2010) gas prices went right back up to around $2.75-$3 and leveled out. 2011 and 2012 have brought prices up to the mid to high $3’s. And 2012 has seen the return of $4 per gallon. Here’s how the historical price of gas looks over the last 7 years:

historical gas prices

The country’s response a few years ago to the high demand for fuel efficient vehicles brought a wave of more fuel efficient smaller vehicles that are just now hitting the market. The most fuel efficient cars are all electrics. There were only a few back in 2008. On top of that, for non-hybrids, the new gold standard is 29 city, and 40 mpg highway – a full 8 mpg higher than just a few years ago.

Sadly, there’s been limited demand for these vehicles, as seen in a list of the best selling vehicles of 2012:

 RANK  VEHICLE                       2012     2011   % CHNG
 1     Ford F-Series P/U          143,827  126,627    +13.6
 2     Toyota Camry               105,405   76,821    +37.2
 3     Nissan Altima               96,360   69,551    +38.5
 4     Chevy Silverado-C/K P/U     95,638   92,455     +3.4
 5     Honda Civic                 77,169   64,968    +18.8
 6     Honda CR-V                  74,587   57,433    +29.9
 7     Toyota Corolla              68,428   76,675    -10.8
 8     Dodge Ram P/U               67,464   52,739    +27.9
 9     Ford Focus                  66,043   37,071    +78.2
 10    Ford Fusion                 63,949   65,023     -1.7

Only the Honda Civic and the completely re-designed Ford Focus come close to 40 mpg hwy.

At the same time, there is hefty sales gains in the biggest gas guzzlers as well. The Ford F series (+13.6%, 17 mpg city), Chevy Silverado (+3.4%, 14 mpg), and Dodge Ram (+27.9%, 14 mpg), are all having banner years. What a difference 4 years makes, eh?

Instead of having the same reaction we had (pre-recession) when prices skyrocketed and we all were looking for signs of the coming Apocalypse, it appears that we have been eased in to a new $4 per gallon norm. $5 per gallon is looming as the economy continues to recover. Gas prices have simply become a “necessary evil” tax for driving around town at 15 mpg’s in 4,500 lbs. of steel.

Consumers have clearly dropped the ball and went ahead and bought the gas guzzlers.

Meanwhile, the near extinct automakers have laughed all the way to the bank as they have been enjoying record profits on the backs of lower worker wages (another story entirely) and more highly profitable truck units being bought.

But YOU are better than that! If you want to ever achieve financial independence, that is.

More to come…

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