Stable Oil Prices Lessen Demand for Alternative-Fuel Vehicles

Crude oil prices recently reached $75 per barrel for the first time in ten months. While the price per barrel has been gradually increasing in recent weeks, the prices consumers have been paying at the pumps have remained relatively stable. As a result, gas prices have not grabbed headlines the way they did last summer when they topped $4 per gallon in some parts of the country.

The global oil market, however, remains volatile and that volatility is the driving force behind the need for alternative fuel sources and the public’s acceptance of hybrids and electric vehicles. According to Lonnie Miller, R.L. Polk’s director of industry analysis, “If a consumer accepts fuel volatility, the consumer will be more open and quicker to buying a hybrid car.” Miller says the correlation between fuel prices and consumer behavior is measurable and undeniable. “Hybrid registrations go up shortly after fuel prices go up,” he says, “The peaks and valleys ride together.” He also said that extraneous factors including unemployment rates have a countervailing effect.

Industry analysts differ on the direction oil prices will take in the short-term. Some assert that slowly improving economic conditions and the end of the summer driving season may keep the demand low. Others forecast significantly higher prices as business activity bounces back in developed regions and point to China’s increasing appetite for oil.

In a recent interview with CNN’s Money, Trilby Lundberg of the Lundberg Survey said, “Even if crude oil prices don’t give up their recent gains, gasoline prices are not likely to rise.” Lundberg remains optimistic that, for the near-term, gas prices will remain at or near their current levels. “If crude oil prices slip, we may see gasoline price slippage too. But refiners have already idled a significant portion of their total capacity,” he said.

Doug Coleman, Toyota’s U.S.-based Prius brand manager, says that oil and gas prices will continue to have a major impact on the development of new technologies including plug-in hybrids and all electric vehicles (AEVs). Coleman says, “The pace will completely depend on a lot of external factors. The number one driver to affect these things from a demand point of view is gas prices.” As with most things, Coleman says that people have short memories when it comes to pain at the pumps. “Gas prices go up? You’ll see more demand. Gas prices go down?” he says, “People will forget about it for a little bit.”

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