Gas Prices Will Continue to Rise ~ Hybrid Car Review
Hybrid Car Review: Gas Prices Will Continue to Rise

Thursday, January 10, 2008

Gas Prices Will Continue to Rise

According to the Energy Information Administration (Official Energy Statistics from the U.S. Government), gas prices are predicted to keep on rising, at least for the short term. According to their latest reports (found via ABG), retail prices are expected to stay over $3 per gallon in 2008 and 2009, with average prices peaking near $3.50 per gallon this spring. Of course, it varies by region.

Table 4c. U.S. Regional Motor Gasoline Prices and Inventories

2005 2006 2007 2008 2009


(cents per gallon)

Refiner Wholesale Price

167 197 219 251 240

Gasoline Regular Grade Retail Prices Excluding Taxes

PADD 1 (East Coast)

179 208 227 262 250

PADD 2 (Midwest)

177 206 232 263 251

PADD 3 (Gulf Coast)

177 206 226 259 247

PADD 4 (Rockt Mountain)

181 210 234 265 254

PADD 5 (West Coast)

193 223 242 278 267

U.S. Average

180 210 231 265 253

Gasoline Regular Grade Retail Prices Including Taxes


227 258 277 314 302


222 252 280 310 298


219 248 268 303 291


226 256 281 311 301


244 276 301 332 321

U.S. Average

227 258 281 314 303

Gasoline All Grades U.S. Average Retail Price Including Taxes

231 262 285 319 307

Crude Oil Predictions
Despite the rising cost in retail prices, the EIA is also predicting a lower cost per barrel: WTI crude oil prices averaged $66.02 per barrel in 2006 and $72.30 per barrel in 2007. WTI prices are projected to average about $87 and $82 per barrel, respectively, in 2008 and 2009.
Gasoline and Crude Oil Prices
The EIA is also predicting a rise in motor gasoline consumption (0.8 percent in 2008 and 1.0 percent in 2009) as the driving-age population grows and the ethanol share of the gasoline pool increases.

Renewable Fuel Predictions for 2008 and 2009
The Energy Independence and Security Act of 2007 mandates that transportation fuels sold in the United States must contain at least 9.0 billion gallons of renewable fuels in 2008 and 11.1 billion gallons in 2009. The 2008 renewable fuels mandate is projected to be exceeded, with domestic ethanol production increasing from a projected total of 6.5 billion gallons in 2007 to about 8.5 billion gallons in 2008. Ethanol imports and biodiesel should add about 0.5 and 1.2 billion gallons, respectively, to the 2008 renewable fuel volumes. Although domestic ethanol production capacity is expected to increase from the current level of 7.4 billion gallons per year to about 13 billion gallons per year in 2009, ethanol transportation and distribution infrastructure constraints and State gasoline product quality regulations, which inhibit ethanol blending, are expected to slow market penetration and thus restrain production growth.

What this Means for Hybrid Cars
The relationship between hybrid car sales and gas prices is as obvious as it is true. So, as gas prices continue to rise, so will hybrid car sales. I expect more studies to start coming out letting people know they can save money (in the long term) by buying a hybrid car.

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McG said...


With oil prices soaring (100 a barrel) and gas prices expected to potentially hit $4 by the spring, it will be interesting to see how it affects the hybrid market. Especially since many believe that the tax incentives, etc don't necessarily make hybrids an economical choice. The Issue did a feature about the economics of buying a hybrid and one of the blogs featured argued that buying a hybrid is actually a ripoff. You may want to check out the feautre at The Issue as it provides some clever insight from all angles.


The Issue | The Issue

Anonymous said...

What concerns me is the stupidity of people who will begin to buy're going to see some real tools out there willing to pay well over MSPR for hybrids...which in essense ruin the chance for a great majority of people buying something fuel efficient and affordable.

I for one will NEVER EVER pay close to MSRP for any car. And when having gone to the Toyota and Honda dealers to look at hybrids, I was met with incredible arrogance and a $5000 markup. If that is the case, and as sad as it may be, I'll never own a hybrid.

McG said...

It's a real shame that the car companies haven't unveiled a cost effective, compact hybrid. I know Honda and Toyota have the technology and the know how, I hope it's just a matter of time before they unleash what could surely be a massive revolution in the way people travel. If the cost is right, people won't shy away, especially if gas prices really do hit $4.


The Issue | The Issue

Mike said...

Believe or not, there are studies saying you can make up the money difference by buying a hybrid. It just takes some time. And with gas prices rising all the time, the time until you break even is getting shorter every day.

BTW, do you work for the issue? (a little bit of sarcasm, there... I think one link would have been sufficient, don't you?)

nozferatu: People are willing to pay MSRP because it is very popular and despite the surge in Prius production, the supply is still tight. Besides which, the cars are still very expensive to build (see my comments below).

The markup tends to come from all the extras people want with their cars.

mcg again: I'm not sure the car companies can produce a low cost compact hybrid (at least not a full hybrid) right now. The technology is still very new and the research costs are still very high. Toyota can get away with charging a lot less for the Prius because they were smart and spread the research budget around.

At the moment, Nissan is still losing money on every hybrid they sell since they are buying the hybrid engine from Toyota. I'm not sure about Honda (I'm assuming they make money, but not much per car).

It's estimated that the new hybrids from GM cost them over $10,000 more than their gas only counterparts. GM, in an effort to compete, won't be passing all of the extra cost on to their buyers, but don't look for any sales there anytime soon. They hope that enough units will sell so they can bring the costs of production down quickly.

And the cost is going to go up, initially, on the next generation of hybrid cars when the lithium ion batteries become available. Until mass production kicks in, the new batteries are going to be very expensive. But prices should lower themselves very quickly after that.

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