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"What If Oil Hits $200 Per Barrel?"
Outlook for Automotive Sales under a High Oil Price Scenario: Global Insight White Paper
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Waltham, MA, 4 September 2008 - Global Insight, Inc., one of the world's leading suppliers of information regarding the automotive industry, in its just released "white paper" that analyzes the impact of $200 per barrel crude oil, finds that such a "High Oil Price" scenario would trigger a global recession with severe, though differing consequences for automotive sales forecasts in the U.S., Europe and Asia.
In the U.S., according to the white paper, the impact of soaring oil prices is aggravated by the relatively weak dollar, the tradition of cheap gasoline, 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 gasoline prices, stricter emission standards, and a better mix of small cars and diesel engines. The Asian 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 U.S., Europe and Asia, utilizing forecasts from Global Insight'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.
The Impact of $150-200 per Barrel Oil
- In the U.S., as oil prices rise higher, the market falls to 13.8 million units in 2009 and stays low through 2011 when pent-up demand causes sales to begin rising slowly to 15.7 million 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 gasoline on the light truck market is "particularly brutal," according to the white paper with sales dropping to 4.7 million units in 2012, down from 8.6 million last year.
- In Europe, the car market would virtually stagnate at less than 14 million units until 2013 because of the strength of the euro and high excise taxes. For example, typical gasoline prices in Germany would increase to nearly $14 a U.S. 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 3.4 million units to approximately 25 million units in 2013. The impacts will vary by country.
To receive a copy of the white paper, "The Outlook for Light Vehicle sales under a High Oil Price Scenario," please visit www.globalinsight.com/oilwhitepaper
Contact:
George Magliano (U.S.), Dir. NA Auto Research, +1.212.884.9509, (george.magliano@globalinsight.com)
Nigel Griffiths (Europe and Asia), Mgng Dir, European Auto, +44.208.544.7919 (nigel.griffiths@globalinsight.com)
Simon Wardell, Dir., Global Oil Mkts., +44.207.452.5014, (simon.wardell@globalinsight.com)
Jim Dorsey, Sr. Mgr. Global Insight Media Relations, +1 781.301.9069, (jim.dorsey@globalinsight.com)
About Global Insight's Automotive Group
Global Insight's Automotive Group is comprised of 115 analysts located in 12 offices in eight countries across three continents. Collectively, the Automotive Group has over 650 years of experience working in the automotive industry, many with previous experience in analytical, planning, engineering, and management positions at over 40 different vehicle manufacturers, suppliers, and automotive consulting and information companies.
Global Insight's automotive analysts and consultants are dedicated to providing superior-quality information, analysis, forecasts, and advisory services to organizations involved with the automotive industry. They provide understanding of the market forces and trends through the provision of reliable, timely, and accurate intelligence and assessments, in supporting clients in the development of more effective business strategies and the achievement of better financial results.
About Global Insight
Global Insight, Inc. (http://www.globalinsight.com/) is a privately held company that brought together the two most respected economic information companies in the world, DRI and WEFA. Global Insight provides the most comprehensive economic and financial information available on countries, regions and industries, using a unique combination of expertise, models, data and software within a common analytical framework to support planning and decision-making. Through the world's first same-day analysis and risk assessment service, Global Insight provides immediate insightful analysis of market conditions and key events around the world, covering economic, political, and operational factors. The company has over 3,800 clients in industry, finance, and government with revenues in excess of $105 million, over 675 employees and 25 offices in 14 countries covering North and South America, Europe, Africa, the Middle East, and Asia.
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