Europeans’ preference for smaller cars and their embrace of fuel-sipping diesel engines mean high oil prices are not as much of a problem to car shoppers, compared with the US, especially when high taxes mask the impact of price changes at the pump, a Reuters report said.


“Because gas is so expensive here anyway, Europeans tend to drive around in smaller cars. I really don’t think it’s a major issue,” Stephen Cheetham, an auto analyst at Sanford C. Bernstein Ltd, said of surging crude oil prices, according to the news agency.


Analysis of 20 years of fuel prices, vehicle demand and stock return data yields little evidence that higher petrol prices are either good or bad for European auto stocks or car sales in the US and major European markets, he reportedly said.


Renault executive vice president Georges Douin told Reuters last week that European manufacturers would escape damage given the popularity of diesel plus new speed limits in some places that were limiting fuel consumption.


The report noted that European car makers have been able for years to boost the average fuel consumption figures that their fleets achieve while US peers’ performance has been flat or weaker as demand for heavy, powerful cars, trucks and sport utility vehicles goes up.


Worried by prospects for a tax on carbon dioxide emissions, European manufacturers are churning out fuel-efficient cars in a bid to boost their fleets’ average consumption to around 40 miles per gallon (5.9 litres per 100 km) by 2008 from some 28 now – still a third better than the average for US models, Reuters said.


“The rise in pump prices in some ways even helps them because it does refocus the consumer back on small engines. There has definitely been a trend to higher power outputs recently” in all big markets, John Lawson at Smith Barney told the news agency.


Reuters said high oil prices may one day make Americans think twice about buying gas-guzzlers, but US sales of new cars – even of most SUVs and trucks – continue to rise, helped in part by robust incentives: May sales were the strongest in nine months.


Should this trend falter, much as the 1970s oil shocks cracked open the US market for thrifty Japanese cars, European carmakers have strong products at the ready, Reuters said.


The news agency said the European car makers  are already trying to dispel the American stereotype of diesel engines as noisy, smoky and hard to start in frigid weather with a new generation of smooth-running turbo-diesels – Volkswagen , for instance, says diesels now power around 10% of the cars it sells in the US.


Even makers of hybrid cars do not anticipate a huge boost from expensive petrol, the report said.


“I would not say the current rise in oil prices is affecting consumer behaviour in Europe in any way – not for hybrid or for anything — yet,” James Rosenstein, European spokesman for Toyota Motor Corp, the hybrid market leader, told Reuters.


Rosenstein reportedly said Toyota has sold more than 2,500 Prius hybrids in Europe so far this year and could probably double its annual sales target of 5,000 if it had enough supply – he stressed they performed as well as diesels and were cleaner.


But Reuters noted that others were less convinced that hybrids would put much of a dent in demand for diesels, which make up more than 40% of the European car market and whose market share is rising.


“In the US hybrids tend to be outstanding relative to their peer group in terms of fuel economy, but in Europe that is not the case,” Smith Barney’s Lawson told the news agency.


The Sanford C. Bernstein analysts Cheetham reportedly said hybrids may be big in Califiornia, but – barring a major breakthrough in battery technology – would never become a dominant force in Europe despite tax breaks that governments dangle to encourage their use.


“It’s heavy. It’s expensive. Nobody makes money. They are loss leaders. They are environmental halo products,” he reportedly said.


Ford is rolling out a hybrid Escape SUV in the US market, but not in Europe for now.


European driving habits are much different than those in America so that “hybrid technology does not represent such a clear-cut advantage over other technologies”, Ford reportedly noted.


Reuters said the coming fuel cell cars that run on hydrogen and emit only water are great in theory but still don’t enjoy the economy of scale that would make them affordable and require vast investment to set up hydrogen tanking stations.


“Delivering large amounts of highly compressed hydrogen through a new infrastructure is technically demanding and may not be all that safe – it obviously has got to be safe enough for Aunt Agatha to do it – and it implies massive investment by the oil companies who have absolutely no economic incentives to put themselves out of business,” Cheetham told Reuters.