Gas Prices to Hit $7 a Gallon by 2010, CIBC Forecasts
Not surprisingly, CIBC sees wrenching problems for automakers in a $7-a-gallon world. Owning and driving a car will become too expensive for millions of lower-income Americans, forcing them to look for cheaper means of transport.
As a result, car sales will plummet. That trend has already started to play out as gas prices have risen. Sales of automobiles, which averaged close to 17 million units per year over the first half of the decade, have dropped to 14 million units a year.
CIBC expects sales to drop to as low as 11 million units a year by 2012, the lowest level since the early 1980s.
“The market share of light trucks, SUVs and vans will be literally halved, reversing the trend of the last 15 years,” said Jeff Rubin, chief economist and chief strategist at CIBC World Markets.
Auto manufacturers have already begun offering cash-back incentives and zero-percent financing as light trucks and SUVs pile up in auto showrooms. Last week, Ford cut truck production and delayed the launch of its redesigned best-selling F-150 pickup truck in anticipation of lower sales this year.
Rubin said higher gas prices will cause Americans to cut back on driving and turn to more fuel-efficient vehicles. The report predicts that about 10 million vehicles will be forced off the road because of the high cost of driving.
“About half of the number of cars coming off the road in the next four years will be from low-income households who have access to public transit,” he said.
Americans are indeed driving less this year.
Rubin said average miles driven will likely fall by 15 percent this year. He added that gasoline consumption in the U.S. has declined sharply since the start of this year and should show the first annual decrease in 17 years.