Thursday, June 05, 2008

Car Makers Unprepared

Though we've known for over thirty years that demand would one day exceed the supply of oil, few people were prepared for the latest 'energy crisis' that has driven gasoline prices to new record highs. While the first shortage back in the mid 1970's was temporary, this time it is harder to dismiss as simply market manipulation. There really is an imbalance between supply and global demand. We've had it so good for so long, nobody wants the 'good old days' to end but they must. Even if w don't run out of oil, Global Warming may force us to change our ways soon. There is no longer any valid excuse for wasting energy.

Europeans and others have been paying $5 ($9 today) a gallon or more for over twenty years because their governments tax fuel to ensure conservation and to minimize the Billions in revenue going to the Middle East. As a result, America accounts for over 60% of Middle East oil revenue and 80% of Saudi Arabia's revenue. Cheney's plan to secure a source of oil for America after a revolution in Saudi Arabia is becoming much clearer now. It had nothing to do with Saddam. We invaded Iraq and began building five permanent bases to protect the oil that will allow America to remain a global power for decades after the fall of the Saud family. It is the easiest, fastest way to regain what we would lose in the coming Islamic Revolution that toppled the Soviet Union and continues to spread.

Auto makers have known for decades that Americans should be driving smaller, more efficient cars like the rest of the world, but gave us what we wanted instead because it was so much more profitable. Big trucks were the most profitable segment of the market and everyone went after that market, even Toyota and Nissan. The result was more than half of all US vehicle sales until last month were for trucks, not cars. In Europe, trucks are only 10% of sales.

Sure, automakers tried to give us new small cars but we ignored them until gas prices began to skyrocket. I just priced the same base model Toyota Corolla I bought three model years ago. The least expensive Corolla in the SE US (NC to FL) is now $15,999 plus dealer prep, taxes, etc. with no options at all.

According to on-line discussions dealers are getting $750 to $1000 over MSRP on some models. Even suggested retail prices are up nearly $2000 since 2006, though much of that is for new standard features like six air bags (my 2006 has 2, with two more a $650 option), ABS brakes ans traction control (formerly options) plus the new vehicle stability control that prevents drivers from making bad inputs in a skid are all standard for 2009.

But proof that automakers didn't see this latest crisis coming is the fact that they are still adding size and horsepower to their cars. The new Corolla is an inch wider and 200 lbs. heavier. It gets more horsepower from a tweaked 1.8L engine and even lower gearing than my Corolla. The result is lower fuel economy than my 2006. It seems all makers of cars for the US market are purposely not making their cars more fuel efficient until Congress mandates it. The new Honda Accord has 260 HP. Why would any Accord owner want or need that much power?

We have big changes to make and little will be done until the Federal govt. gets it's act together (not likely). While 55% of European autos are diesel powered because it is more efficient and cheaper to make, tough new US low sulfur diesel standards insure a $0.75/gallon premium for clean diesel here. It will help reduce smog and global warming, but eliminates an easy way to improve the mileage of existing truck and car models for most buyers.

Don't expect high mileage new cars until they are required by the government, after 2012. Even tiny new cars barely get 30 MPG on today's 87 octane gasoline. That's sad compared to my Nissan Stanza 2.0L hatchback that got 43 MPG back in 1983 on I-95 at 75 mph with a full load and the A/C on max. from 93 octane regular. As I have said many times, the gearing is way too low on all US cars, now including the new Corolla. Unless you can change your gearing (almost impossible) the only thing you can do for now is drive much slower or waste fuel.

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