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BlackChampagne -- no longer new; improvement also in question.: Cars and Gas Prices



Tuesday, May 27, 2008  

Cars and Gas Prices


NY Times finance article points out another of the spiraling kaleidescope of economic woes being wrought by the popping steady leaking of the housing bubble and the wild loan speculation that fueled it. New car sales are plummeting, since way back in 2007, when home prices still "always went up," about 1/9 of new car purchases were made with cash from home loan refinancing. People using their houses as ATMs, taking out new mortgages for $100k or more above the equity, and blowing the cash on fun stuff. Like new cars.

It was a easy game, since after all, housing prices always went up. All the bankers and realtors agreed on that, so it had to be true. And since prices always went up, owing $700k on a house you bought 5 years ago for $350k, (with a down payment of about $25k) was just fine, recommended even, since your house was now worth $800k, and if you wanted to you could sell it and pay off the loans with a profit for your trouble. Now that those houses are more realistically valued at $450k, with a rental-approximate actual value of $350k, owing $600k is kind of a problem. That would be what the financial gurus call "negative equity," and when it's compounded by a person having taken one of those exotic non-fixed rate loans that ballooned to credit card level interest rates after a couple of years, it's driving people to "jingle mail."

What it's not driving them to do is buy new cars.
Those forces, on top of the softening economy, are putting enormous pressure on the American auto industry as it faces what may be its worst year in more than a decade. About 15 million vehicles are expected to be sold in 2008, down from 16.2 million last year, as sales reach the lowest levels since 1995, according to the marketing firm J. D. Power & Associates.

The impact on the broader American economy could be profound. Not only is the car a consumer’s biggest purchase after the home, but the auto industry remains one of nation’s most important economic engines. With less money available to bolster the industry’s growth, the businesses that support it are also facing the prospect of a sharp slowdown.

"It is a bleak picture, and it all hinges on the availability of financing," said William Ryan, a financial analyst at Portales Partners who has followed the auto business for years. "The whole universe related to the auto industry is touched in some way — parts suppliers, manufacturers, salespeople, trucking people, the paint and metals industries. Even semiconductors."

On a semi-related issue, is anyone else changing their driving habits yet, thanks to increasing gas prices? There are plenty of stories about that in the news; the increased ridership of public transportation, people carpooling, the cratering resale value of SUVs and other gas guzzlers, but is everyone reacting in that fashion? Personally, it's making me drive faster.

When I pay $4.17 for mid-grade, as I did a few days ago (and that's the cheapest gas in the area; Chevron station nearer my apt was at $4.54 for hi-grade yesterday), I goddamn well want to get my money's worth. So I've been enjoying the driving experience more than ever. I'm laughing at 85 in the passing lane, and stomping it to savor my sports car's 0-70 acceleration in on-ramps. This must be how Spitzer felt paying $1000 a ride to high class hookers. If you're going to get fucked for top dollar, you might as well enjoy it, eh? So I floor it and feel the engine press me back into the seat, and as I slide into freeway traffic several seconds later, I smile, puff an imaginary cigarette, and think, "Yeah, that was worth $.50."

Sure, it's kind of like admiring the upholstery on the bar stools on the Titanic while you order a double shot on the rocks, but if you're on the boat (the US economy, in this case) and it's going down no matter what you do, you might as well enjoy the ride as long as you can. Remember last year, when we all thought $3 gas was outrageously expensive? Imagine the line you'd wait in today to pay that much for a fill up? Bet you wish you'd burned a little more rubber back then, when you could still afford it...

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Comments:

When I read about american gas prices and how everyone whines about them I get strong urge to strangle nearest Yank.

hint: take a look at european gas prices.


 

Yeah, if only Bush and Haliburton weren't stifling the alternative energy industry...


 

International gas prices have been discussed in the past, (Note the SF price then, from January of this year, is now around $.80 in the past.) and yes it costs more most places in the world. But most places in the world have viable public transportation systems that enormously outclass the US's.

Also, why would you be angry with Americans? It's not as if our good buddies in the Middle East sell us gas cheaper than they sell everyone else gas; Hugo Chavez to Cuba style. Gas at the pump is so more expensive in Europe since the various European governments have slapped huge taxes on it, taxes that theoretically to pay for some of those nifty trains and buses and trolleys that make it possible for most Europeans to live a normal life without driving 80 miles a day, as so many Americans have to with our infrastructure entirely (and foolishly) designed around automobiles.


 

"Also, why would you be angry with Americans?"

Perhaps because your foolish reliance on automobiles and constant caving to corporations only out to make a profit (your MPG standards are absolutely appalling and really just a sad joke) has resulted in your countrythat contains 5% of the world's population using 25% of the world's oil. Sure, you're paying for it, but that's not much consolation when there's none left because of your profligate "non-negotiable" way of life has squandered it all for shits and giggles.


 

Wikipedia page with interesting statistics on oil consumption. By GNP/oil, the US is nowhere near the top. Yes, the US consumes and imports the most oil, but the US produces so much that per barrel, we're way down that list, getting more bang for the barrel than most of Europe, Canada, and others. Neither does the US rank amongst the nations that import more than 90% of their oil, but that's a largely meaningless figure, since it's just technology/resources and a country can't really help not having petroleum resources in the ground.

None of this addresses the real issue though, in terms of how much less oil could the US import with higher car economy requirements, more investment in solar and wind and other renewable sources, etc, instead of hysterical arguments about drilling in ANWAR like a junkie scrabbling through the couch cushions for loose change, instead of facing up to the real problems.

This post summed up things pretty well, I thought.

"It just feels sad to think about how long it’s been since it became obvious to anyone who cared to look that we won’t be able to scare off problems like fuel scarcity and climate change by closing our eyes and wishing.

That lead time was an opportunity to make changes. Some would have been painful and some merely sensible, but it would prevent huge numbers of honest Americans get caught with their pants down. Instead we blew it out the tailpipe of cars that average 15 MPG. Now, instead of a planned transition, we get to see what happens when stubborn denial meets inescapable change. It’s simply unsustainable to live in suburban car country with a negative equity on the house, $6-7 gas (wait until you see what that does to property values in outlying suburbs) and expensive SUVs that nobody wants. The saddest thing for me was that most who will get fucked the worst had no idea this was coming. There was that one guy who warned us, but he had a snooty laugh."


 

The car-centric lifestyle is not an unsustainable one. All we need is a battery with a high enough output to power the penis-inflating acceleration that we fat, disgusting and self centered Americans can't live without. Which, BTW, we already have. It just needs to catch on and get implemented into the development cycles of major car manufacturers. Plus a more efficient storage medium would help.

That and a few hundred thousand acres of wind farms (Kennedy's coastline is only a year or two away!) and we'll have a perfectly green car-centric economy.

PS: We saved yer asses in WWII, Europe, so I'd show a little more RESPECT if I were you!


 

Good luck finding all the lithium for the battery packs that you need to power all those cars.


 

Like I said, a more efficient storage medium would help. I know it's a long shot what with the utter stagnation of technology (I have to wait like 6 frickin' months to get a significant upgrade to my computer, for Chrissake!), but we'll come up with something EVENTUALLY. Heck, methinks there are already promising energy storage technologies out there. Can't recall any of them at the moment, though.


 

I think the boat in this case is in fact the environment in general and not the US (or global) economy. The economy will recover, the environment may not before it is too late.


 

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