Today (october 4th, 2005) we learned that SUV sales dropped dramically after the huge gas spikes that hurricane katrina caused. Did you see that coming? I sure did. Gas prices have a direct effect on the economy. This you know. What you might not know is the amount of an effect it has on many things.



I forecast that SUV sales would drop significantly when gas hit $3 per gallon. You may see this as a bad thing, but for those of us who have waited for the auto industry to increase mileage instead of horsepower, it is a blessing!

The auto industry has been made aware that Americans, at least those concerned about our daily driving costs, choose not to drive around in land yachts. Ironically, the auto industry will need to adapt... a sink or swim anology to follow the land yacht comment!

Now for what you all have been waiting for... my new forecast.

The auto industry will adapt or go out of business. They will slow the production of SUVs and Trucks because several people who don't need these vehicles can't afford to drive them. This apparently has already begun in some aspects.

You will see a separation of the auto companies from the oil companies. This is for those of you who believe the oil companies have the auto industry in their back pocket. Anyway, the auto companies will begin investing serious money in alternate fuel vehicles and efficiency in current gasoline driven automobiles.

Sales in these vehicles will spike, along with motorcycles and scooters. This has also been happening in some aspects. Hard to beat 90 miles per gallon on a scooter if all you are doing is running around town!

What will happen to gas prices? They will continue to go up. The oil companies still need their money, and all-in-all, the gas prices are not that high if you look at some of the other countries in the world.

The bigger question is what is going to happen to prices of all other consumibles that Americans buy... imports as well as products made here in the USA.

The drop in sales of SUVs is more of a quick fix than a long term solution to gasoline prices. It is the one obvious thing we can do to lower our gasoline usage. What will be interesting to see is the long term solutions. I will patiently await the next chapter of this story and report accordingly.