Kicking Our Addiction
In the past 15 years, the automobile industry has witnessed monumental shifts, such as the boom in the popularity of the SUV, a Japanese company becoming the world’s largest automaker, and the rise of the hybrid. However, one thing in common between June of 1993 and June of 2008 in the world of automobiles is that roughly the same amount of cars were sold. Today it was announced that US auto sales reached a 15-year low, and I think that it is a fitting reflection of the larger economic situation.
For over a hundred years, automobiles have been mass produced in America. Their presence has encouraged, perhaps more than any other invention, the amazing growth that has occurred in both our cities and populations. When Americans navigated the Oregon Trail in the 19th century, their journeys would last five or six months. Now, because of the automobile, that famous trek could be completed within two days (if you drive like my father does) or three days (if you drive like someone who values their own life).
There are plenty of reasons for why so few cars are being sold. Many of those reasons are similar to the problems facing many of the world’s top economic authorities: oil prices, credit woes, price instability (inflation), etc. Despite automakers best attempts to entice buyers, the fish just aren’t biting on those lines, no matter how appealing the bait. The bottom line is that gas in the US is over $4 per gallon, with no end in sight. Unless a new car can get you fantastic mileage, the odds that a person even wants to consider buying one is slim to none.
Perhaps, in some twisted way, this is a sign of more responsibility being taken by individuals. Perhaps this is an indicator that more people are looking for alternative ways to get around town. Perhaps this is a sign that the US is finally going to start demanding less oil… perhaps probably not. There is a long way to go before the US will kick what my colleague John labeled “our heroin-like addiction to oil.”
When I studied ‘Black Wednesday’ and the subsequent recession that the UK experienced, I read an interesting commentary on the episode. The economist wrote that the whole process was necessary in the long-run in order to “wring out” inflation from the UK’s economy. So perhaps, if certain pieces fall into the right places over the next few years, this current recession might be able to help “wring out” high oil prices and our addiction to automobiles from the US economy. If that ever happens to be the case, maybe today’s announcement will be seen as a landmark for when consumers finally began the long-overdue process of ending "our heroin-like addiction to oil.”
AUD Retail Sales (May)
EUR Euro-Zone Producer Price Index (May)
AUD Trade Balance (May)