Gee, High Prices Drive Down Consumption -- Markets Work

U.S. motorists, paying record prices for gasoline, drove less for a seventh consecutive month in May, pointing toward the first annual drop in road travel since 1980.

``$4 per gallon may have been the trigger point we've been looking for,'' said Kenneth McGill, managing director for travel and tourism at consulting firm Global Insight Inc. in Lexington, Massachusetts. ``It's interesting to see Americans finally reacting to the price of gasoline by rationing consumption.''

Vehicle-miles traveled on all U.S. roads fell 3.7 percent in May from a year earlier, the Federal Highway Administration said in a report today. The seven-month slide is the longest streak since 1979, agency spokesman Doug Hecox said.

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Bloomberg News

Markets Work -- GM To Build 'Good' Small Car For A Profit!

GM currently owns about 13% of the small car market. With demand for small vehicles increasing with the price of black gold, GM is out to increase that market share. Nevertheless, even if it doesn't increase its share, it plans to make more money off of each small car sold. How? By raising the price, naturally.

The plan is simple: make better small cars, charge more for them. The upcoming Cruze could run you a few thousand more than the outgoing Cobalt, for instance. The test is to see whether cars like the Cruze will be worth the premium. GM Global Design Chief Ed Welburn said, "In North America, we never did a good small car." The General plans to bury that piece of its history... but it's going to charge you, the consumer, for the funeral.

The idea that GM can lasso the small car market while charging a premium, at the same time as slashes its marketing budget by $1.5 billion, takes some effort to swallow. One analyst said that demand for small cars will outstrip supply, so GM could get away with it. However, until we see proof of small GM cars that take bats to the established competition, we'll have to give this plan a "Hmmm."

This is great!  When we looked for a car last year it was hard to find an American model that had quality and safety for the price some of the imports could be had.
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Autoblog -- GM's Plan: Small cars making a big profit

Markets Work -- Gas Usage Drops As Prices Rise

As average gas prices hit a record high of $4.108 a gallon this week, the government released new data showing that drivers have cut back their use of the fuel to levels not seen in five years.
The average price of gasoline in the U.S. has been above $4 a regular gallon for more than a month, AAA reports, putting a dent in gasoline demand.
Even through the Fourth of July weekend -- a time when Americans traditionally get on the road -- gasoline consumption dropped 3.3% from last year to 9.347 million barrels a day, according to weekly data .

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WSJ

The Power Of The Markets

Meanwhile, the head of Total, Christophe de Margerie, told the Financial Times the company's planned development of the huge South Pars gas field in southern Iran would not go ahead.

"Today we would be taking too much political risk to invest in Iran because people will say: 'Total will do anything for money'," he said.

Total was the last major Western energy group to have seriously considered investing in the country's huge gas reserves.

Analysts say the move will be a big blow to the Iranian energy industry. It means Iran is now unlikely to significantly increase its gas exports until late into the next decade, they add.

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BBC -- US Warns Iran On Missile Threat

Oil Imports Drop - First Time Since 1977

The US is starting to break its “addiction” to foreign oil as high prices, more efficient cars, and the use of ethanol significantly cut the share of its oil imports for the first time since 1977.

The country’s foreign oil dependency is expected to fall from 60 per cent to 50 per cent in 2015, before rising again slightly to 54 per cent in 2030, according to the head of the Department of Energy’s statistical arm.

(...)

The US decline in foreign oil dependency is already becoming more visible, with imports making up 57.9 per cent in the first three months of this year, down from 58.2 last year.

Guy Caruso, head of the US Energy Information Administration, said that that trend was set to continue as people adjusted to high oil prices and the impact of the Energy Independence and Security Act, which became law in December 2007, was felt.

“The 1970s is the last time we saw any significant decline in net import dependency in the US. It shows that markets do work, policy changes do work, technology does work” Mr Caruso said.

Fixed that quote for Mr. Caruso, by the way, he never mentions that 1977 was the year the Trans-Alaska Pipeline came online, gee, perhaps that had something to do with, "the last time we saw a significant decline in net import dependency in the US?" Maybe?

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Financial Times -- In Depth - US begins to break foreign oil 'addiction'