Oil Prices and Car Dealers:”Peak Oil Demand”

If oil prices stay low, expect a clash between government’s emission and environment aspirations and car users financial self-interest. Low fuel prices make switching to alternative fuelled vehicles less likely. So, the subsidy costs are likely to be higher and last longer. But that is unlikely to deter policy makers . They see larger prizes: opportunities to re-shape global car production and grab a larger slice of profits for the future and to reduce the capital flow to the oil-producers. Electric cars is the game changer of the 21st century.

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The Euro Crisis and the European Motor Industry

The four most likely effects of the Euro Crisis are: 1. The ECB will become the forced buyer of EU sovereign debt. 2. It will have to choose between ‘printing money’ and allowing inflation or ‘belt tightening’ 3. If it chooses the first option, the EMU will remain intact. 4. If it chooses the second, weaker countries will be forced to leave the EMU. Vehicle makers and retailers face reduced demand in Europe as it faces the potential of a ‘double-dip’ recession.

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Election Special 2: Is the UK motor industry about to be over-taxed?

While the main UK political parties offer a similar outlook for motoring costs and charges in most respects, they differ in one: road pricing and congestion charges. HGV road pricing is already in place across the EU. The Liberal Democrats plan to introduce it to the UK in 2015, if elected and then extend it to cars. But a strong case can be made that road pricing is poorly targeted and unfair. More importantly, an alternative policy – carbon trading – could be more effective. Interested? Read on..

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Which way for vehicle commodity prices in 2010?

While doom and gloom faced auto makers sales and marketing staff in 2009, their colleagues in purchasing and money management should have been upbeat. Key commodity prices collapsed between June 2008 and January 2009 enabling astute buyers and money managers to lock in low prices for the whole of the year.    Steel and plastics prices were both down 65% on 2008; aluminium dropped 50%. Even crude oil prices – averaging $90/b in 2008 fell to $60/b in 2009. Depending on when they made their contracts – or how well they hedged  – car makers could have made spectacular material cost savings  per unit in 2009.      Motor vehicles use four essential input commodities: steel, aluminium, plastics and oil. They all have one factor in common: volatile prices, whose impact auto makers try to minimise by hedging,  purchasing and volume. In 2009 the price collapse worked in their favour. But with 30% of global vehicle capacity still unused, lower volumes and relentless demands for cash, can auto makers cope as 2010 shapes up to be one of the most difficult auto markets to forecast?     

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Will oil prices go crazy again?

Oil prices are rising again and we can see it at the pumps. But the price rises are much lower than they could be. Why? Because oil is sold in dollars and the £/$ Exchange Rate has been lower than trend for 6 months. Which means …. that prices will rise sharply as the £ strengthens. Is that all? Sadly not, OPEC is determined to reduce output to push up prices as well. Oh, and the speculators are back in the oil market. How bad will it get? Oil futures for the next 12 months give prices in the £60—$70 per barrel range. But, if economic demand takes off and the £/$ strengthens and OPEC keeps its foot on the production brake, we could be back to $90—$100 this time next year. Happy days!

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