High Oil Prices Boost Green-Car Sales. Terrific -- Now Let's Keep Gas Expensive

Last Updated Feb 25, 2011 6:37 PM EST

Fuel economy is once again an increasingly important selling point for automakers, especially as turmoil in the Middle East and other factors send oil prices skyrocketing. But when prices go down, mileage goes out the window for many car buyers. It's no wonder that, with the market for hybrids and electric cars so uncertain, some automakers openly call for either gas taxes or a price floor to ensure that their green models have a stable market.
Higher taxes on gas or on carbon emissions in general have long struck me as a good and necessary idea, but then I'm not running for anything. Environmentalists love carbon taxes, but there's no chance of them getting through Congress. Automakers, however, are sort of surprise converts to the cause.

The current oil trend is up. The price for a benchmark barrel of Brent crude has crossed the psychologically important $100 mark and seems to be settling in there (it was $110 Thursday). West Texas crude also hit $100, and it only eased off slightly. Last weekend, according to AAA, the national average price for a gallon of unleaded climbed to $3.17 a gallon (up four cents from the week before). Residents of Fort Wayne, Ind., saw average pump prices rise nearly 16 cents in the last week.

Hybrids riding high
Anxiety over rising prices is steering showroom sales toward more fuel-efficient cars. Hybrid cars in January were up 12 percent from the same month in 2010. Toyota's hybrid sales (which included 10,653 Priuses) were up 10 percent. Sales of the Honda Insight hybrid were up nearly 19 percent in January. Hybrid sales slumped in 2009 (and much of 2010) when gas prices reversed from the records they set in 2008. "Is the Hybrid Car Fad Over?" USA Today asked. No, just dormant.

And the new concern about fuel prices is being reflected in auto advertising -- a full-page ad for the Ford Fusion hybrid cites its 41 miles per gallon in the city no less than three times (and trumpets its superiority to the Toyota Camry hybrid).

When gas prices drop below $3 a gallon, however, consumer interest in fuel economy wanes. Consumer Reports 2010 Car Brand Perception survey, released early in the year after a period of relatively low prices, showed that green considerations and fuel economy had fallen by eight percentage points (32 percent were then citing it as important). "In a troubled economy, with gas prices relatively low, green in the wallet trumps environmental concerns for many," the magazine said.

Automakers for socialism
At a dinner during the Detroit Auto Show in January, Bill Ford, executive chairman of Ford (F), called for a national energy policy that could give the company "some clarity about where the U.S. is going as a country." The outlook for green cars, he said, is a bit like "throwing darts," because the market is buffeted by all kinds of external factors -- and especially the price of gas. ;There's a lot of prognostication about car sales being 25 percent electric by X year, but really, who knows?" he said.
Bill Ford started talking about the need for a gas tax 10 years ago, but he says that passage of a comprehensive energy and climate bill would be pretty useful, too. The floor idea has been around for some time, and it proposes new oil taxes that would kick in when gasoline prices dropped below a pre-set level, say $60 to $80 a barrel. That would help not only automakers but also biofuels and hydrogen, because they couldn't be undercut by volatile swings in market prices.

In the present political climate, proposals with new taxes attached are unlikely to get too far politically. But even without that the magic of the market is likely to have the same effect, since almost all oil analysts see the long-term trend as headed straight up. We all have $5 a gallon gas in our future, and that's definitely going to move the green stuff.
Related: Photo: Toyota
  • jim motavalli

Comments