Lower Gas Prices to Help Sales of Midsize SUVs
Analysts today expect the first signs that eight weeks of unabated decline in gas prices is spelling some relief for U.S. automakers.
With crude oil this morning slipping toward $60 per barrel, and government figures showing last week's average pump price had dropped to $2.31 per gallon–the lowest since February–car companies were set to release September sales figures today showing a rebound for some models of sport utility vehicles.
However, the overall trend for the Big Three is expected to be down, with Toyota continuing its march toward industry dominance.
Oil prices weakened further on forecasts of ample supply. The U.S. Energy Department contributed to the bearish trend when it announced it would delay buying some 11 million barrels of crude for the Strategic Petroleum Reserve to keep more supply on the market through winter. It was a timely change of heart for the Bush administration, which is seen as benefiting politically from falling oil prices. For the most part, during the past five years of rising oil prices, officials have declined pleas to pause in the drive to fill the strategic reserve.
Gas prices fell 7 cents from last week's average and were down 24 percent from the peak of $3.03, hit the week of August 7. U.S. automakers, which rely on heavier vehicles that guzzle more gas, clearly are hoping the declining fuel costs will work in their favor. Paul Taylor, chief economist for the National Automobile Dealers Association, says consumers will choose more large models if they expect gas prices in the $2 to $3 range.
Jesse Toprak, analyst for Edmunds.com, expects that the gas price decline, along with generous incentives, will push midsize-SUV purchases up 15 percent over last year and large-truck sales up 6 percent. However, Toprak anticipates that large-SUV sales will be down 9 percent, and few analysts expect a return to the heights of several years ago.
Jeff Schuster, forecaster for J.D. Power & Associates, thinks that the oil price scare will not be easily erased from consumers' minds. "The smaller vehicles are here to stay," he says.
Although most analysts believe car sales will be flat for September, they anticipate that is only because foreign automakers, particularly surging Toyota, will make up for declines anticipated for Ford, GM, and DaimlerChrysler vehicles.
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