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Griping About Gas Prices ... in a New SUV

With all the histrionics about rising gas prices coming out of Washington these days, SUVs must be an endangered species in our nation's capital, right? Well, not exactly. At Capitol Cadillac, just inside the Beltway, SUVs are flying off the lot. Last week, former White House chief of staff Andy Card dropped by to pick up a new SRX, Caddy's midsize SUV, says dealer Daniel Jobe. But Jobe's hottest seller, by far, is the newly redesigned chrome-encrusted Cadillac Escalade, an incredible hulk that gets 13mpg in the city. "My biggest problem is not gas prices," says Jobe, "it's getting enough of these trucks."

Grousing about gas prices has become our new national pastime. As it turns out, we're griping while we guzzle. Since Katrina gave us our first $3 pump prices last fall, gasoline consumption in this country has actually risen, confounding the energy experts who recall how much we throttled back on our gas usage following the '70s oil shocks. Where are we burning all this gas? In big, powerful cruisers. One in four new models today comes equipped with a gas-thirsty V-8 engine--which is unchanged from last summer, before gas prices spiked, according to new data from J.D. Power. And some of the best-selling rides on the road today are GM's trio of beefy new SUVs--the Chevy Tahoe, the GMC Yukon and that blingy 'Slade, which saw its sales surge 127 percent last month. Meanwhile, last year's "it" car, the hybrid, is becoming a harder sell. Sure, dealers are still selling out of the Prius, but sales of the Honda Accord hybrid plunged 69 percent last month and Ford had to resort to a zero percent financing deal to jump-start its Escape hybrid. For all their megawatt buzz, hybrids still account for just 1 percent of U.S. auto sales and are outsold by SUVs 23-1. "Not a lot of people are jumping up to pay $3,000 extra for a hybrid," says Memphis Toyo-ta dealer Kent Ritchey. "For $3,000, you can buy a lot of gas."

Detroit once thought $3 gas would be our ultimate pain threshold, forcing us to finally give up the keys to our big rigs. But it turns out our oil addiction is harder to kick than anyone expected. Although pump prices have nearly doubled in the last three years, we're driving more than ever. Today's cars average 12,190 miles on the road annually, up 24 percent from 1980, according to federal statistics. And the models we buy now have more horsepower and heft than those of a generation ago, which explains why gas mileage is headed in reverse. Today's new cars and SUVs average just 21mpg, down from 22.1mpg in 1987. When it comes to paying up at the pump, Americans have proved they can rationalize just about anything. "When prices are lower in June," says energy analyst Tom Kloza, "people will brag, 'I got my gas for only $2.75'." Now Detroit is recalibrating its threshold. The new CW: "Prices have to get to $4 and maybe even higher--and stay there for at least a year--before we'll see a substantial shift in what we drive," says J.D. Power's Tom Libby.

Those spikes and swoons at the pump have conditioned drivers to expect that a better deal is always coming soon, energy experts say. "Folks still think if they hold their breath long enough, we'll get back to $1.50 a gallon," says Ken Goldstein, economist for the Conference Board, which just reported that consumer confidence reached a four-year high in April, even as gas prices soared. "People are not about to trade in that Hummer." Brian Dalby just traded in an SUV--for an even bigger one. "I like to look down on traffic," says the Grosse Pointe, Mich., real-estate developer, who swapped a 16mpg BMW X5 for a 15mpg Chevy Tahoe. "Besides, gas won't stay above $3 a gallon all summer."

It was different back in the summer of '79, when gas prices spiked and stayed around $2.80 (adjusted for inflation) for more than two years. That, and fuel shortages (remember those lines?), finally got Americans to switch to smaller cars and reduce gas consumption by 12 percent between 1978 and 1982. But even though today's average price of $2.91 a gallon comes close to the 1981 inflation-adjusted peak of $3.18, it is still not as much of a strain on the family budget. Back then, 9 percent of the household budget went for fuel costs, while today it's half that. Jobe's Cadillac customers shrug off gas prices. "People say, 'Hey, you know what, it's like two Starbucks a week more'."

Still, for car buyers who can't afford a Caddy, gas mileage has moved up the priority list (though it's still outgunned by horsepower). Back in 2001, fuel economy ranked No. 22, while today it's No. 9, according to market analyst Global Insight. But that has hardly triggered an SUV exodus. Most tire kickers just switched from old-school, truck-based models like the Ford Explorer (14mpg city/20mpg highway) to slightly more fuel-efficient car-based SUVs like the Honda Pilot (17mpg city/22mpg highway). Detroit is also getting creative in how it designs its guzzlers. GM burnished the corners of its new SUVs to make them look smaller. Chrysler is outfitting its new Aspen SUV with a big Hemi V-8 that shuts off half the cylinders at highway speeds to boost mileage by 12 percent. The GMC Yukon has similar technology, which persuaded Jeff Schaal to stretch his budget to get into that big boy. "I was worried about the gas, but when I saw that, I was sold," says the 29-year-old Delaware firefighter. "But a couple of my penny-pinching buddies still give me a hard time about the gas mileage."

A generation ago, gas misers ruled the road. And that put Toyota and Honda on the map in America, as boomers embraced their little fuel sippers. But today's gas crisis is playing out very differently: Honda is cutting production of its slow-selling Accord hybrid, while scoring record sales of its SUVs and pickup trucks. "We've become a nation of truck buyers," says Honda senior vice president John Mendel. "Just because fuel is moving from $2 to $3 a gallon, everyone is not going to go back into cars. People will continue to buy big vehicles." And gripe about gas prices.

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