US: Ever wondered about $200 oil?
Oil at $US200 a barrel would trigger a global recession with severe, though differing consequences for automotive sales forecasts in the US, Europe and Asia, a white paper from analysts Global Insight said.
In the US, according to the white paper, the impact of soaring oil prices is aggravated by the relatively weak dollar, the tradition of cheap petrol and the preponderance in the market of large pickup trucks and SUVs.
Europe, however, is somewhat insulated by the strong euro, the much earlier adaptation to higher petrol prices, stricter emission standards, and a better mix of small cars and diesel engines.
Asia region is more complex due to the wide diversity of economic development in its markets, penetration of motor vehicles, vehicle demand dynamics, and fuel subsidies and taxes.
"The Outlook for Light Vehicle Sales under a High Oil Price Scenario" white paper was authored by Global Insight's lead automotive analysts for the US, Europe and Asia, using forecasts from the firm's energy group.
Despite current drops in the price of crude oil and sound arguments against "peak oil" in the $150-200 per barrel range, the paper was created because of the ongoing controversy surrounding not only how high the price of oil might go, but also the long-term direction of oil prices - up or down.
$150-200 per barrel oil
In the US, as oil prices rise higher, the market falls to 13.8m units in 2009 and stays low through 2011 when pent-up demand causes sales to begin rising slowly to 15.7m units in 2012, still 800,000 below the base case which forecast $120 oil.
The mix of vehicles will change dramatically; diesels, hybrids, new technologies, and lighter materials will abound. But the impact of very high petrol on the light truck market is "particularly brutal," according to the white paper with sales dropping to 4.7m in 2012, down from 8.6m last year.
In Europe, the car market would virtually stagnate at less than 14m units until 2013 because of the strength of the euro and high excise taxes. For example, typical petrol prices in Germany would increase to nearly $14 a US gallon. Car sales would dip by 800,000 units. Lastly, oil sustained in the $150-200 range would act as a pan-European CO2 tax, effectively doubling many CO2-based car taxes being tolled out across EU member states, with the result that consumers will be pushed further and faster into downsizing their automotive purchases.
The global slowdown will hit Asia's export-dependent economies and trigger a significant slowing of their domestic economies. Inflation, the white paper notes, is a large concern and monetary tightening to control it is exacerbating the impact on consumer spending and vehicle demand. Countries are beginning to reduce high fuel subsidies, and fuel prices at the pump are rising. Though governments will have the option of sheltering consumers from the full impact of the high oil price scenario, growth rates will moderate significantly and the total light-vehicle market will fall by about 3.4m units to approximately 25m units in 2013. The impacts will vary by country.