America’s Getting Gas Price Amnesia

Gas prices could stay below $3 a gallon through the end of 2016. But then what?

byLawrence Ulrich|
America’s Getting Gas Price Amnesia

I took the call from a friend in Detroit, my former hometown. A call that, with winter upon us, usually involves a despairing (but secretly satisfied) accounting of brutal snowfall or bone-cracking temperatures. But this year’s call involved the pleasant, nay, party-down mathematics of gasoline prices: “It’s $1.78 a gallon down the street here,” my friend said. He then joked about buying a Hummer.

Only many Americans aren’t joking. And foreign investors are probably dreaming of those mothballed Hummer production lines, considering how many pickup trucks, Cadillac Escalades and other drill-baby-drill conveyances are flying out of showrooms. You remember, the models that dealers couldn’t give away when the economy and car industry tanked, or whenever gas prices soared. The models we all assumed, not long ago, were dinosaurs bound for some new theme park, preferably in oil-soaked Alaska. For those with short memories (read: most Americans) it all peaked in July 2008, when a gallon of unleaded rose to $4.11.

Do something, Americans demanded of their government, the Oil Fairy, anyone. That “something” turned out to be a financial meltdown, and gas prices tumbled to $1.62 by year-end. But nobody was popping champagne. Instead, the government cobbled together a Cash for Clunkers program to rescue a flatlining auto industry and bribe people to trade polluting guzzlers for more fuel-efficient models.

Today, according to AAA, a gallon of regular gas averages precisely $2.00 a gallon nationwide, the most sweet-and-low unleaded since 2009. Retail averages are below two bucks in 26 states. That includes $1.79 in South Carolina, Missouri and Kansas. And this time, the economy is healthier; IIHS Global Insights says cheap gas equates to a $100 billion tax cut for 2015, like a $750 gift card to every household.

On one hand, it warms my Norman Rockwell hearts to see families piling into cars for road trips they can suddenly afford. Americans are doing the Griswold thing, setting new highs for miles driven. National Parks are seeing millions more visitors. And while consumer spending hasn’t risen dramatically overall, people are going crazy on travel, restaurant meals and, you guessed it, new cars. The Drive lives for this stuff: When a record 17.5 million new cars hit driveways this year, we’re reminded that Americans love motoring as much as ever.

Too bad giveaway gas prices have begat a national amnesia and cognitive dissonance.

Some car dealers report that buyers who once hedged on thirsty trucks and SUVs during previous gas-price dips—who recognized that the good times couldn’t possibly last—are now jumping in with both feet. Fine. Gas prices are widely expected to stay below $3 a gallon through the end of 2016. But then what?

We know how oil companies operate. All it takes is a global calamity, some obscure and dubious market mechanism, and gasoline prices will skyrocket. When that happens—and, make no mistake, it will happen—all those Escalades and Ford F-Series that people really, really need for single-driver commuting will again be as toxic as subprime mortgages.

I’ll grant my own hypocrisy: I’ve greatly enjoyed several test cars—a 6.2-liter Cadillac CTS-V, a Corvette Z06, the 707-horse Dodge Hellcats—that return 11 or 12 mpg when driven as God (or Foyt) intended. But I still remember filling such bottomless pits with premium fuel in New York at over $4 a gallon, the feeling of dropping $80 to quench the thirst of full-size pickups and SUVs. It’s tempting to just say “Enjoy it while it lasts.” But that doesn’t feel right, because it’s what we always say when the fumes of cheap gasoline go to our heads. Conserving fuel and doing something about global warming, at least for people who believe in such things, shouldn’t swing on a loopy, self-interested sine wave along with fuel prices.

With the frat boy gas-guzzling party in full swing, smaller and more efficient models are once again the nerds on-the-outs. Even Bob Lutz, former GM vice-chairman and father of the Dodge Viper, called for a national energy policy, possibly including a serious hike in the federal gasoline tax, to bring sanity to the process. More-stable fuel prices would encourage rational, less-impulsive buying behavior. They would allow automakers to think long-term, to innovate and move the needle on fuel efficiency and emissions without getting stuck with white elephants every time fuel prices sag.

Consider the new Chevrolet Volt. During my San Francisco test drive, the plug-in hybrid covered 50 to 60 miles on electricity alone, returning better than 100 mpge. It then switches to gas-electric hybrid operation to deliver roughly 45 mpg. It’s reasonably peppy and fun-to-drive, looks way better than before, and can be had for around $26,000 after a federal tax credit. Drive one yourself, even if you’re not a high-mileage fan, and you can’t help but be impressed by the engineering; the way so much technology is smoothly integrated into what looks and drives like a conventional car.

Any bets on how many Volts GM will sell? Fuckin’ A, I’m buying a Hummer.