Motorists are paying the highest gasoline prices in nearly three years, and the busy summer driving season won’t offer much relief. But that’s unlikely to put a crimp in the fast-growing SUV market.
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During the days of gas-guzzling vehicles, surging prices at the gas pump were seen as a warning sign to potential SUV and truck buyers. Today’s models offer far better gas mileage, allowing shoppers to focus less on fuel-economy and more on other attractive SUV features such as cargo space and roomier seating.
“Interest in trucks and SUVs are so strong right now that small increases in gas prices won’t affect it that much,” Kelley Blue Book analyst Tim Fleming said. “It could put a small dent in the trend, but SUVs would still be gaining and cars losing.”
U.S. buyers have flocked to the crossover market. SUVs and trucks have combined for 67% of all new-vehicle sales this year, according to Autodata. Sales of light trucks are up 9.8% through March, while passenger cars have lost 10.8% in sales compared to the first quarter of 2017. And automakers continue to roll out new SUV models to attract customers. Ford, which expects sport-utility vehicles to grab half of the U.S. market by 2020, is reallocating $7 billion in cash from car development to SUVs.
The outlook for gas prices hasn’t discouraged automakers. Bryan Bezold, Ford’s senior economist, told analysts on a recent conference call that pump prices “are not yet at a level that should represent a meaningful headwind to either the level or mix of auto sales.”
The national average for regular gasoline sits around $2.73 a gallon, according to AAA. Rising crude oil prices have contributed to the price hikes at the pump, and gasoline demand hit a record high in mid-April. U.S. crude futures closed at their highest level in nearly three and a half years Wednesday at $68.47 a barrel.
The Energy Information Administration expects gas prices to average $2.74 a gallon during the April to September summer driving season, an increase of 33 cents compared to last summer. For the entire year, drivers will pay $2.64 on average for regular gasoline and $2.76 for all fuel grades, equating to an increase of $190, or 9%, in average household spending.
Still, motorists will be paying much less than in 2014, when the national average approached $3.70 a gallon.
Fleming said gas prices would likely need to surpass $3.50 a gallon for dealers to see a noticeable drop in demand.
“Even then, any reversal would probably be temporary. The trend has been going on even longer than the last 5 years. It’s been going on for decades,” he said.