Ford Motor Company’s announcement last week that it will axe nearly all of its North American car lineup sent shock waves throughout the industry, and admittedly, it looks like the automaker’s timing could have been better; crude oil prices are at their highest level in three years, according to The Detroit News, and they’re expected to keep climbing. That could result in one of the most expensive driving seasons in recent memory, and if history is any indicator, higher gas prices tend to drive a shift toward cars and away from SUVs and trucks among new vehicle shoppers.
“This will be the most expensive driving season since 2014,” says the Global Head of Energy Analysis for the Oil Price Information Service, Tom Kloza.
Granted, the fuel economy gap between cars and light trucks has declined considerably in recent years as automakers have adopted new technologies in order to meet ever-tightening fuel economy standards. Still, with gas prices across the country likely to keep climbing, small, fuel-efficient cars may see an influx of budget-minded buyers looking to squeeze every penny, and Ford will have precious few products in its stable capable of luring them.
The rise in crude oil prices is being driven in part by the surging demand created by a recent wave of global economic growth, The Detroit News reports, along with production cutbacks put in place by the Organization of the Petroleum Exporting Countries. US oil supplies were 1.1-million barrels lower as the 2018 summer driving season started than in 2017, per the US Energy Information Administration. (The summer driving season is defined as running from April through September.)
The car sales that Ford might miss out on as gas prices climb aren’t of the sort that the automaker will necessarily miss, mind you; UBS analyst Colin Langan estimates that selling small cars in North America loses Ford roughly $800 million per year. Still, one can’t help but wonder whether higher prices at the pump could have presented Ford with an opportunity.