KBB Sees $3/Gallon Gas Threshold Sticking

Last summer, gas prices surged to all time record highs, pushing above $4/gallon for regular fuel, even topping $5/gallon in some areas. That increase proved disastrous as consumers soon canceled vacation plans or put off a new car purchase. Even when consumers were buying, the demand for small cars was too much, making cars like the Ford Focus a scarcity on dealer lots.

Consumers Expect Gas Prices To Rise

Kelley Blue Book, the consumer organization that has been tracking new and used car prices since 1926, recently issued the results of a consumer opinion survey taken in May 2009, asking people what they thought that the price of gasoline would be over the summer and how higher gas prices might affect their purchases. 87% believed that gas prices would continue to rise, a sharp increase over the 66% who said the same thing in a similar April survey.

“As summer approaches with household budgets still pinched by the weak economy, car buyers are once again becoming very conscious of rising gas prices,” said Jack R. Nerad, executive editorial director and executive market analyst for Kelley Blue Book and kbb.com. “While we may not see the $5-per-gallon gas experienced in some areas last year, current economic conditions compounded by the pain at the pump may make $3-per-gallon gas a new threshold for car buyers – the point at which they change their mind about what vehicle to buy and how they spend their money.”

What Types Of Vehicles Should The Industry Build?

As might be expected, the fluctuating gas prices have taken its toll on the auto industry who is finding it difficult to provide the right mix of vehicles to meet sudden changes in consumer demand.  Indeed, KBB said that 73 percent of those who saw gas prices increasing in May said they plan to change their spending habits if gas prices were to go much higher.

For automakers such as Ford, who are planning to shift to smaller, lighter and more fuel efficient cars over the coming years, the KBB survey comes as no surprise to them. However, with gas prices fluctuating so wildly, will consumer sentiment shift once again if gas prices suddenly drop next fall as they did last year? If so, future KBB consumer surveys could offer far different results, further confusing the direction that the world’s automakers are planning to go.

See Also — Ford Likely To Overtake GM This Year