Low Gas Prices Cause Consumers To Flock To Gas Guzzlers - Isn't This What OPEC Wants?

Researchers from the University of Michigan Transportation Research Institute revealed that after years of improvement, the fuel economy of new vehicles bought by American consumers has stagnated in November.

The reasons are rather easy to understand – US sales of “gas guzzlers” – namely pickup trucks, large SUVs and crossovers have soared lately. That’s because the gas prices have seen incredible drops this year, putting the national average at a four-year low. And, even as automakers continue to make improvements across their lineups, a long drop in fuel prices is likely to trigger a mileage rating numbers decrease in the near future

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TheSteve - 12/8/2014 5:21:26 PM

+2 Boost

New U.S. technology has been developed that would breathe new life into existing, low-yield oil fields that are believed to be no longer viable, but billions of dollars are required to create the facilities to extract the oil and refine it to a saleable state. That only happens when crude is selling above a certain price.

OPEC wants to secure their own ability to sell oil. They don't want someone else to have an upper hand. The easiest way to do that is to sell crude at lower prices. Because crude is a commodity (people "trade" crude like shares at a stock market), when one major seller lowers their price, they become the default sale for all buyers in line, thereby guaranteeing their sale. Other sellers must follow suit, or wait until the lowest priced seller is sold out before their product is considered at a higher price. The result is that world oil prices decline, and so does gas at the pump.

With the price of crude being where it is today, it's no longer economically feasible to invest billions to get at that more expensive, "non-viable" domestic supply, so this new technology doesn't get built or go online, and therefore doesn't compete with OPEC, and keeps the U.S., a huge oil consumers, buying from OPEC (and others).

BTW, the U.S. doesn't buy oil exclusively from OPEC. It also buys from Canada, Russia, and others. It depends on Arab countries a lot less than you might think. Never the less, any one major oil producing country can affect world oil prices, as we see with OPEC.

Also, experts believe we'll see low gas prices for at least 2 years.

chewy - 12/8/2014 5:57:56 PM

+2 Boost

I believe Canada and Mexico are actually the main oil imports for the US. Consumers don't necessarily look very far into the future when making decisions. Que the articles with upset consumers in a year or two who are having such a hard time filling up when gas prices go up.

MDarringer - 12/8/2014 9:01:52 PM

0 Boost

Two-year leases on gas guzzling SUV were a big deal at one of our dealers' Black Friday event.

MrEE - 12/8/2014 8:17:04 PM

+3 Boost

The lower gas price goes the better it is the shop for fuel efficient cars, lots of supply and dealers are dealing. Higher gas prices are always just around the corner.

MDarringer - 12/8/2014 9:00:33 PM

-2 Boost

Keystone pipeline = low gas prices...screw OPEC.