Comments from some domestic auto execs earlier this year that noted demand for SUV's was inelastic in the face of rising fuel prices were, at the time, just plain stupid. Now they seem downright offensive.
To admitted car buffs and normal driving folk alike, the fuel prices seen during the earlier part of the summer were quite shocking. At roughly 40 percent higher than the same period last year, these new prices quickly became an inconvenience, though not something that might get people to stop driving their boats, lawnmowers, and Jet skis on the weekend or (heaven-forbid), derail plans to upgrade from a normal Durango to the Hemi.
As the summer moved on, however, so did the gas prices -- to even higher levels. What was once thought to be a quick summer spike looked more like it might hang around for a while before getting back to the more acceptable sub $2 level. Then, of course, along came Katrina, which has had an enormous impact not only on our physical infrastructure in terms of refineries, distribution and drilling, but even more significantly in symbolic terms.
Our society has been conditioned for anticipation, and the current fuel prices are a very good indicator of this. Sensationalism in the media and its constant cry for tomorrow's impending doom have trained the average Joe into thinking that the other shoe could (and likely will) drop at any time.
When prices first started climbing at the beginning of the summer, the US was sitting on as many crude oil reserves as ever, gas prices hadn't jumped by more than a few percentage points since September 11th, relations with OPEC countries were "consistent," and domestic automakers were still pushing an aggressive SUV business model. What is fundamentally different now, however, is that we are technically still in a time of "war." Under such conditions, any whisper of a death in the Saudi family, a new energy bill, or an active hurricane season can send prices soaring.
Yes, there is always likely to be additional energy demand from emerging countries like China at some point, not to mention our own taste for waste and the traditional summer surge in prices. There hasn't been, however, a rational or physical reason for the upswing to take off as fiercely as it has.
What got the ball rolling long before Katrina was the media kicking around a few doomsday scenarios about "dangerously low levels" and "unprecedented demand" for lack of other interesting stories. There is a small, very vocal percentage of the population that absolutely thrives on crying wolf and lives for catastrophe, and a very large percentage that is interested in hearing about it. Just watch CNN, FOX, or even the Weather Channel for two minutes when we aren't in a period of national crisis, and everything you hear will be directed to "Extreme" this or "you are in danger" for that.
Look at the news headlines this week. The energy department just came out with a study saying that in the wake of the hurricane natural gas prices for the Midwest may rise as high as 71 percent. Other than possibly helping to achieve this, what exactly is the point of this study?
To a large extent, the current prices we see are simply a manufactured phenomenon built on futures that are more volatile than the stock market itself.
Our society seems to move with all the tenacity and discretion of an angry mob. Whether its following a trend toward the oh so cool and efficient SUV's, or back to the environmental hybrids, we are a group of followers. The marketers and PR specialists rule the roost, and we are following them right to the end. In the wake of massive loss of property and life, no one could ever argue that Katrina was a good thing. If, however, paying nearly $4 a gallon for regular gasoline has finally debunked the myth that energy consciousness is someone else's problem, then there may just be a silver lining to this dark cloud.
It all comes down to communication. The timing and interpretation of a message can be more significant than the message itself. Consider the recent "rumor" of a suicide bomber on a bridge in Baghdad, which lead to a stampede and the death of 800 people. Or in the context of Katrina, it has been reported that roughly 200 auto dealerships have been affected by the storm with somewhere between 250,000 and 500,000 new cars damaged.
There is plenty of finger pointing and blaming to go around, and the idea of informing an entire city while a storm may or may not be impending is impossible. But even 10,000 of those cars could sure have moved lot of residents out of New Orleans, costal Mississippi, and Alabama.
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