“If Gas Reaches $5 I’m Gonna Buy a Hybrid”

A Glimpse at the Future of Hybrid Technology
This month, the price of oil, and therefore gasoline, rose to prices that eclipsed the previous high-price record, set in the summer of 2005, after Hurricane Katrina wreaked havoc along the Gulf of Mexico. As a result, there’s a conversation happening in coffee shops, around water coolers, and on golf courses everywhere, and it boils down to this promise: If gas stays high much longer, I’m going to get a compact car / hybrid car/ one of those plug-in things.

We’ve all heard someone make such a statement, and we all know that the price of gas has been creeping higher than higher, falling a little, and then climbing a bit more. What then, is the crucial price point before the auto market actually turns, and what alternatives are likely to be most popular?

$4.00 / Gallon is Critical Price Point.

According to a study done earlier this year by industry authority Edmunds, the critical price point is the $4.00 / gallon point. It’s like the redline for fuel prices, and when gas prices reach that level, and stay there for a sustained amount of time, the market will see some changes.

Specifically, we’re likely to see:

• A 35% decrease in mid-size SUV purchases
• A 34% decrease in large SUV purchases
• A 26% decrease in large truck purchases
• The luxury car and luxury SUV segments would show decreased interest as well, but less so, perhaps 15%.This is because the target customer in for these segments can generally easily absorb an extra dollar or so per gallon of gas.
• Brands that are perceived to be fuel efficient would show increased sales, even if their cars are not necessarily fuel efficient in reality.
• A 502% increase in interest, if not actual purchases of, hybrid vehicles.

The key, of course, isn’t just reaching that price point. The market has to stay there for several weeks, even months, before there’s a significant change in buyer behavior. This is because we humans are a fairly adaptable lot, and we’ve already become accustomed to gas prices that hovered around $2.00, $2.50, and $3.00 / gallon.

What Technology will be Embraced?

Once gas reaches that critical $4 of $5/gallon crisis point, what technology will we be turning toward? There are several options:

• Fuel Cell Cars: Ford, Honda and Hyundai have both been showing hydrogen fuel cell cars, recently, with the Ford Edge ready for a 2009 model year. Hydrogen fuel cells offer fuel economy of roughly 600 miles per “charge,” and their main byproduct is water, but without a national system of refueling stations, they’ll be limited to select markets in New York and California for several years.
• Compressed Natural Gas (CNG) Cars: It’s no surprise that the most well-known CNG vehicle to date comes from Honda. After all, they were also the first maker to release hybrids into the U.S. market. The Honda Civic GX has been available in select markets since 2005, and not only does it offer fuel efficiency of roughly 250-300 miles on a single “fill,” there is the potential for having a filling station in your own garage. The GX has been hailed as the cleanest-burning car available.
• Gas / Electric Hybrids: New enough to still make a statement cars such as the Toyota Prius and Honda Civic Hybrid are the most readily available alternative fuel cars in production. Using a combination of a traditional gas engine and an electric motor, these cars have fuel economy that is significantly better than traditional gas-powered cars while still retaining the ability to be refueled almost anywhere in the country.

There are, of course, other alternatives. Plug-in electrics are becoming more and more popular, and some are street-legal, and useful for normal commutes, if not long journeys. Some cities in the Pacific Northwest are even putting in public “recharge” outlets at government offices to encourage the greening of their commuters. Diesel, which smells worse but is actually more efficient and less toxic than regular gas, has also seen a new resurgence in the last couple of years.

Whether we see $4 or $5 / gallon prices at the gas pumps this year, is widely rumored, but still uncertain. However, as global politics change, it is likely to occur sooner rather than later, and the conversation at the water cooler won’t be, “If gas gets to $4 / gallon I’m getting a hybrid,” it will be, “Know where to get the best trade-in value on an SUV?”