I'm all for alternative energy. I would love for there to be a
cleaner source of fuel, and would relish the oppourtunity for the
U.S. to give the oppressive, terror-sponsoring governments of
oil-rich countries the proverbial middle finger. But I also
hate
subisdies and mandates. The government shouldn't choose winners
and losers in the devopement of new forms energy, fund pork barrel
projects, or take actions that distort the market.
The only way that we are ever going to reduce our dependency on
foreign oil is for the price to stay high enough, long enough, to
create incentives for Americans to change their consumption habits.
So it is heartening for me to read in the NY
Times that the market is starting to work, with Americans
purchasing smaller cars to save money on gas.
In what industry analysts are calling a first,
about one in five vehicles sold in the United States was a compact
or subcompact car during April, based on monthly sales data
released Thursday. Almost a decade ago, when sport utility vehicles
were at their peak of popularity, only one in every eight vehicles
sold was a small car….
"It's easily the most dramatic segment shift I have witnessed in
the market in my 31 years here," said George Pipas, chief sales
analyst for the Ford Motor Company.
The trend toward smaller and lighter vehicles with better
mileage is a blow to Detroit automakers, which offer fewer such
models than Asian carmakers like Toyota and Honda. Moreover, the
decline of S.U.V.'s and pickups has curtailed the biggest source of
profits for General Motors, Ford and Chrysler.
Once considered an unattractive and cheap alternative to large
cars and S.U.V.'s, compacts have become the new star of the
showroom at a time when overall industry sales are falling.
Sales of Toyota's subcompact Yaris increased 46 percent, and
Honda's tiny Fit had a record month. Ford's compact Focus model
jumped 32 percent in April from a year earlier. All those models
are rated at more than 30 miles per gallon for highway
driving...
Automakers ignore the move to smaller vehicles at their own
peril. G.M., for example, is playing catch-up by introducing a
dozen new cars and crossovers in the next few model years.
This is classic economics--consumer demand shifting in response to
the rising price of a complementary good. If a car company wants to
remain competitive, it has to offer fuel effecient alternatives.
This is all happening without any need for any government-imposed
increase in fuel effeciency standards. If gas prices remain high,
it's only a matter of time before private investments in
alternative fuel research become more and more pervasive. When
politicians pander with short-term strategies for reducing the cost
of a gallon of gas, it just postpones this day of reckoning.
topics:
Economics, Business, Energy, Oil
