Tuesday, May 06, 2008

 

Frustrated owners try to unload their guzzlers

I know the feeling. We got rid of our 8 cylinder not too long ago and we are getting better mileage. Unfortunately, moving to the 'burbs means more driving. Still I am lucky that I work from home otherwise I could easily imagine spending another $300+ per month on gas. Ouch. Already we are being hit by very expensive airline fares. My wife's ticket to Russia was $1850 nearly triple what I paid in 2002.

The markets are doing what they are supposed to do when there is an exogenous price increase. Substitutions are made and less fuel is consumed. We can count on new sources of oil being discovered and, perhaps, new alternatives will come onto the market. Just like the 1970's, oil will rise to a spike high then settle down to a new higher plateau- I assume pretty far under $100/barrel. For the time being high oil prices will hit consumers in their pocketbooks which are already being squeezed by the housing bust. The commodity bubble probably isn't over but it will be if the U.S. economy doesn't grow for the next year.

Diego: I don't own a gas guzzler but I'm considering a newer car because it is about time. I'm seriously considering a Honda Fit based on price and mpg. It is smaller than the CR-V I'm currently driving but I don't think I want to pay up for a new CR-V if I can get by with a smaller Fit and save at the pump as well. I don't think a Smart ForTwo is in the cards for me but I will give it some thought.

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