GM is Making a Big Mistake

[buyacargetacheck]

As I write this light sweet crude oil has topped $75 a barrel. Hear me out. As I've said before Global Peak Oil Production is going to hit the industrialized world like a ton of bricks in the face. It's already begun. The smallest rumors in petroleum or gasoline disruption magnify themselves many times in price increases. Gasoline will be over $5 a gallon nationwide soon.

Meanwhile, GM is making investments in large SUVs, crossovers, V-8 powered RWD sedans and mending its "performance" and "luxury" nameplates because that's where the profit is. For now.

Soon, these vehicles will be languishing on the lots with HEAVY incentives despite their goodness. GM would do well to think ahead a few more years and start positioning Pontiac as another value brand much as it was (and actually has been) for many years. Same with Saturn. Dealers will soon be screaming for 4 door and wagon versions of a "Pontiac" Cobalt and/or Aveo. A G5 sporty coupe is not enough. GM should also think about installing a 1.8 L or smaller engine in the Deltas.

Folks, performance is dead. Long live performance.

[bowtie_dude]

Peak Oil is just a friggin conspiracy driven by liberal hippy scientists and people whose interest it serves. We're no where NEAR peak oil production, its just that God-damned Iran is freaking everyone out.

[buyacargetacheck]

Here's what Dick Cheney (talk about a liberal:) said in a speech while he was still CEO of Halliburton http://www.peakoil.net/Publications/Cheney_PeakOil_FCD.pdf:

By some estimates, there will be an average of two-percent

annual growth in global oil demand over the years ahead,

along with, conservatively, a three-percent natural decline

in production from existing reserves.That means by 2010 we

will need on the order of an additional 50 million barrels a

day.

GW Bush advisor Matthew Simmons agrees and has further stated that he believes Saudi Arabia's reserves are much lower than publicly stated.

Peak is real. Ford seems to understand this as Mark Fields has made some public reference to it. Surely someone at GM understands as well, but this understanding isn't reflected in their product strategy.

[buyacargetacheck]

By the way, the whole "liberal" versus "conservative" thing is a distraction. It's not real.

[bowtie_dude]

Here's what Dick Cheney (talk about a liberal:) said in a speech while he was still CEO of Halliburton http://www.peakoil.net/Publications/Cheney_PeakOil_FCD.pdf:

By some estimates, there will be an average of two-percent

annual growth in global oil demand over the years ahead,

along with, conservatively, a three-percent natural decline

in production from existing reserves.That means by 2010 we

will need on the order of an additional 50 million barrels a

day.

GW Bush advisor Matthew Simmons agrees and has further stated that he believes Saudi Arabia's reserves are much lower than publicly stated.

Peak is real.  Ford seems to understand this as Mark Fields has made some public reference to it.  Surely someone at GM understands as well, but this understanding isn't reflected in their product strategy.

Its still a theory based on hypotheticals and guesses. The current market high for oil is artificial, and gas prices are still inflated even above what $75 a barrel would cause. Otherwise Exxon wouldn't be raking in record profits year after year.

[bowtie_dude]

By the way, the whole "liberal" versus "conservative" thing is a distraction.  It's not real.

I'm neither liberal nor conservative (libertarian, thank you). Doesn't change the fact of who, by and large, supports the theory vs who, by and large, doesn't.

[Matt276]

It can be real. We better be prepared.

[buyacargetacheck]

Its still a theory based on hypotheticals and guesses. The current market high for oil is artificial, and gas prices are still inflated even above what $75 a barrel would cause. Otherwise Exxon wouldn't be raking in record profits year after year.

No doubt there are guesses involved. But there are also guesses used to support the official line. That's why OPEC hasn't changed its reserve figures since at least 1986 when it was agreed that the individual OPEC nations would export the same percentage of total production as each had in total reserves. In other words, "reserves" suddenly spiked so members could export more.

As far as Exxon is concerned, the big global oil companies' reserves are falling big time. That's because the reserves lie mostly in countries where peak production has already occurred (e.g., lower 48 USA in 1971). Their own reserves are shrinking and they are becoming more and more buyers of OPEC crude and finished products. Exxon (and the rest) don't set the price of either oil or gasoline; the global market does. The huge consolidation in companies over the last 20 years (Exxon-Mobil, Chevron-Gulf-Texaco-Unocal, Conoco-Phillips, BP-Amoco-Arco, Total-Elf-Fina) has been an effort to keep reserves up and costs down. But the politicians will milk this for all it's worth.

The science behind peak oil is real. The proof is in the fact that the formulas are reproduceable and the peak curves are easily observable in countries where its already happened (USA and North Sea to name two).

Iran is but a political symptom of a bigger depletion problem. Remember, crude was around $25/barrel in 2000, way before there was any talk of invading Iraq or stopping a nuclear Iran. You ain't seen nothing yet.

[buyacargetacheck]

It can be real. We better be prepared.

Peak is real. Liberals versus conservatives isn't. There's only one team running things - the globalists.

[buyacargetacheck]

By the way, GM isn't the only automaker with their heads in the sand. Toyota is set to pump out big pickups and SUVs like rabbits. They're just a little better positioned because of the Corolla, Matrix, Prius, xA and Yaris, all fuel economy champs. Their factories can easily switch production if necessary.

Edited April 21, 2006 by buyacargetacheck

[Northstar]

Trucks, SUVs, and crossovers may sell in lower numbers, but they will still sell in pretty big numbers.

Trucks are needed by many people for work, so I'd say that market is pretty safe.

SUVs are the only market here I see losing many sales, and mostly because the sales will be going to crossovers. People are still going to need something other than a car to go on family trips, so they have the choice between an SUV, crossover, or minivan.

Crossovers are the new thing, and they'll still rise in sales for quite a while. GM having class-leading crossovers in the Lambdas is going to help them a ton. Again, people need something to move the family around, and currently lots of them are switching to crossovers.

[Camino LS6]

It is pathetic that we haven't developed any of the following into viable alternatives. It should have been started in the 70s and in place by the end of the 80s.

Propane

ethanol

natural gas

Hydrogen (non-fuel cell)

Bio diesel

A diversified fuel supply could do so many good things for the world (other than OPEC). The developed world has been damn lazy about this for decades too long.

[Drew Dowdell]

Uh...GM and Ford are the only manufacturers that offer full sized trucks and some SUVs that can run on an alternative to petrol.

Guess what... Toyota doesn't. You can have as many hybrids as you want, but at this point they still ALL run on petrol.

Ford could have a super trump card if they made the Escape Hybrid a FFV.

I'm really hoping GM is smart enough to make the Hybrid GMT-900s FFV.

An E85 burning, active fuel management, hybrid Avalanche could really take the wind out of Toyota's hybrid sales.

[sciguy_0504]

If we could put a man on the moon, we can make a cost efficient, publicly acceptable fuel. I always have thought about how oil is made. From crushed up rocks, dead animals, leaves and the like, correct? Could we not speed up that process in ovens or something? Use our landfills to make some sort of oil cousin? Brazil made a law in the 1970's, I believe, that stated all cars by XXXX will run on sugar-based ethanol. It recently stated it is no longer dealing with OPEC.

By the way, Toyota has a new Highlander, RX, Sequoia, LX and Tundra in the future, a far cry from the GMT900 program.

[Mr.Krinkle]

the old brooklyn union or keyspan whatever the hell they call themselves...the gas company over here had their fleet cars run on natural gas.

it just never became widespread...kinda fishy in a way.

all these alternatives have decent prospects although biodiesel supposedly isnt any cheaper than the highest ga prices weve seen.

the saddest part is places like china or "third world" nations will probably never see these advances. as it is they burn coal and contribute to more of the worlds pollution than the US ever will. the point, they will wind up using the rest of the oil even if we can wean ourselves.

[Drew Dowdell]

Bio-diesel isn't cheaper then gas per gallon because the infrastructure isn't up to speed yet.

Bio-diesel *is* cheaper per mile of use though since you get much better mileage then gasoline.

[Camino LS6]

I forgot methane.

[Drew Dowdell]

I forgot methane.

*farts*

[buyacargetacheck]

It is pathetic that we haven't developed any of the following into viable alternatives. It should have been started in the 70s and in place by the end of the 80s.

Propane

ethanol

natural gas

Hydrogen (non-fuel cell)

Bio diesel

A diversified fuel supply could do so many good things for the world (other than OPEC). The developed world has been damn lazy about this for decades too long.

None of these "alternatives" alone will make up the difference in petroleum depletion. And, in fact, all of them require fossil fuel inputs to make them work. Natural gas is in decline in the US. We'll soon need to import Liquified Natural Gas which will be earmarked for all the power plants we've built in the last 20 years that run on the stuff. Not gonna be used for cars in a big way.

Hydrogen is a pipe dream. An energy loser.

Think about it. Oil is highly energy rich. The stuff comes out of the ground and is highly flammable. Corn isn't. Corn requires lots of top soil, lots of diesel for the tractors, lots of petroleum-based fertilizer and pesticide, factories to shuck the corn, petro-based chemicals to make the ethanol. The ethanol PR program GM is running isn't a real solution for anything other than to get people thinking that GM is a leader in alternative fuels.

The future does not include driving around. It does mean doing less with less. We need to get used to a future with fewer cars, less college education, fewer "careers," less tv, less fast food. The sooner we accept this and understand that our "leaders" have no control over the situation (other than miltarizing and securitizing our lives) the better off we'll be. This car fetish we all have is ok for now. Just know it isn't long for the world.

[Mr.Krinkle]

they say oil needs to top 100 a barrel before it gets really nuts.

they also say if we reduce consumption by 3% wed have them by the balls. (for a change)

the market sets the prices. they stick to those guns unflinching.

the only solution is to have many more options than 2 or 3. oil companies dont want that becuase the prices will drop off again. like it or not theyrre holding the cards and were just watching from the side.

no one has the balls to really change things. for whatever reason.

[pow]

The key is to reduce fuel consumption... ethanol and biodiesel vehicles still contribute to greenhouse gas emissions.

[Camino LS6]

Hydrogen is viable right now with existing engine technology if an infrastructure is created.

My main point is that greater diversification is the answer, not a wholesale conversion to a single alternative fuel.

[buyacargetacheck]

My main point is that greater diversification is the answer, not a wholesale conversion to a single alternative fuel.

Yes, that will eventually be attempted. The best alternative fuel will prove to be human food for walking.

[Camino LS6]

Another aspect of the problem is the sad state of public transportation in this country. And our failure to move toward tele-commuting in a meaningful way even though a huge number of jobs require only a computer and internet access.

[Drew Dowdell]

The key is to reduce fuel consumption... ethanol and biodiesel vehicles still contribute to greenhouse gas emissions.

but they are much closer to a "Net 0" then regular petrolium.

The CO2 that comes from Ethanol is just the CO2 that was absorbed by the plant in the first place.

[Drew Dowdell]

Hydrogen is viable right now with existing engine technology if an infrastructure is created.

My main point is that greater diversification is the answer, not a wholesale conversion to a single alternative fuel.

Hydrogen isn't viable because it isn't a positive energy source. It takes more energy to create usable hydrogen then the hydrogen provides in return.

[Intrepidation]

The simple fact of the matter is that oil companies jack the prices up because they can. Everyone who ones a motor vehicle needs gas to run them, and they depend on it to go about their lives (school, work, etc). Most of the alernatives that were mentioned, save hydrogen, are oil products, so you won't be saving money using the various fuels that come from the same source. Hydrogen power would make a great alternative, but they are still in experimental stages and are far too costly for the general public to be able to afford. Plus, there are no Hydrogen filling stations up yet. Hydrogen is a long way off as far as replacing gasoline.

If the oil companies see a big decline in sales after gas prices reach a certain price (such as when people stop making unecessary trips in their cars), and a backlash insues, then perhaps the gas prices will go down a bit.

Take last year. The oil companies claimed that the Hurricanes disrupted the oil refineries in that region, causing a "shortage". However I'm sure they simply used that as an excuse to jack up the prices. When gas hit 3 bucks for that brief period, there was a pretty big drop in gasoline sales, as people started only using their cars for the basics. Seeing their precious sales decline, they started lowering the price of gas. They used the Hurricanes as a convenient excuse again, saying that "some of the refineries are working again so we have more oil now" Even though they were still damaged. Now in 2006, the oil companies want to make record profits again, so they are going to raise the price of gas more, under the excuse that the price is only going up due to teh switchover to "summer gas". What remains to be seen is if theirt will be a backlash again when gas hits 3 bucks everwhere, and if it will be big enough to get the oil companies to drop the prices once more. Temperarily of course.

That's my theory anyway

[sciguy_0504]

Oil companies do not, for the most part, set prices for oil. The market does. Oil is a commodity, like gold and titanium, that is sold on the stock market. The market can easily raise and lower oil prices. I read an article earlier today that said many pension and mutual funds were throwing tons of money into oil this week and that is really the main reason the price rose. Remember, when a stock or commodity is hot or in demand on Wall Street, its price rises. The funny thing is, the monetary gain people receive from their pension and mutual funds due to investing in oil is going to go right to filling up their tank.

Think about it: take the Iran crisis for example. People hear about it and automatically assume that if it gets out of hand oil prices will rise dramatically. So they invest in oil, hoping to buy it at $65 and sell it off at $90 at the height of the crisis in order to make a profit.

[Drew Dowdell]

Except that the price of refined gasoline is rising faster then the price of crude oil.

[Intrepidation]

Back to GM makinga big mistake...what choice did they have? As edmunds said before the Tahoe debuted GM is "damned if they do, damned if they don't" With gas prices skyrocketing, smaller cars becoming more popular, and increasing critizism of large SUV, the timing couldn't be worse, wspecially while tha Asian brands are introducing smaller, cheaper, fuel efficient cars. This leave GM wide open for critizim that they are out of touch with reality and can't adjust to the market fast enough.

On the flip side, the old SUVs were aging fast and needed to be replaced to be competetive, they were due for the redesign. GM would take fire for leaving them alone (a la Cavalier). Plus, GM needs to make money, an SUVs like the Tahoe make big profits, on top of that it's one of the few segements still dominates, and they can't afford to let the Asian brands take that market share too.

[Drew Dowdell]

GM should get the credit <and often does> for making the most effiecient of the full sizers. That they can also run on E85 should be trumpeted from the mountaintops... even if people can't fill up with E85 locally.

It's about perception, they may never buy E85, but in their mind they could..... just like they *could* use that 66k new Escalade to go offroading in.

[Charger4U]

As I write this light sweet crude oil has topped $75 a barrel.  Hear me out.  As I've said before Global Peak Oil Production is going to hit the industrialized world like a ton of bricks in the face.  It's already begun.  The smallest rumors in petroleum or gasoline disruption magnify themselves many times in price increases.  Gasoline will be over $5 a gallon nationwide soon.

Meanwhile, GM is making investments in large SUVs, crossovers, V-8 powered RWD sedans and mending its "performance" and "luxury" nameplates because that's where the profit is.  For now.

Soon, these vehicles will be languishing on the lots with HEAVY incentives despite their goodness.  GM would do well to think ahead a few more years and start positioning Pontiac as another value brand much as it was (and actually has been) for many years.  Same with Saturn.  Dealers will soon be screaming for 4 door and wagon versions of a "Pontiac" Cobalt and/or Aveo.  A G5 sporty coupe is not enough.  GM should also think about installing a 1.8 L or smaller engine in the Deltas. 

Folks, performance is dead.  Long live performance.

good point

[CaddyXLR-V]

Oil companies do not, for the most part, set prices for oil.  The market does.  Oil is a commodity, like gold and titanium, that is sold on the stock market.  The market can easily raise and lower oil prices.  I read an article  earlier today that said many pension and mutual funds were throwing tons of money into oil this week and that is really the main reason the price rose.  Remember, when a stock or commodity is hot or in demand on Wall Street, its price rises.  The funny thing is, the monetary gain people receive from their pension and mutual funds due to investing in oil is going to go right to filling up their tank.

Think about it:  take the Iran crisis for example.  People hear about it and automatically assume that if it gets out of hand oil prices will rise dramatically.  So they invest in oil, hoping to buy it at $65 and sell it off at $90 at the height of the crisis in order to make a profit.

But unlike gold and titanium, people need gas to live their daily lives. Why are monopies not allowed? The gas companies basically have a monopoly, because they know they dont have to compete with each other. If one raises their price, the rest raise their price too.

[Snate]

The root source of all of this is a small piece of rectangular green paper...thats it in a nutshell. There is way too much involved in all facets of oil for any business to change their ways.

[balthazar]

Meanwhile, GM is making investments in large SUVs, crossovers, V-8 powered RWD sedans and mending its "performance" and "luxury" nameplates because that's where the profit is.  For now.

At least GM isn't investing billions in brand new plants to build hundreds of thousands of brand new segment full-size trucks with brand new unprecedented platforms with brand new unprecedented engines. Y'git me?

[longtooth]

As I write this light sweet crude oil has topped $75 a barrel.  Hear me out.  As I've said before Global Peak Oil Production is going to hit the industrialized world like a ton of bricks in the face.  It's already begun.  The smallest rumors in petroleum or gasoline disruption magnify themselves many times in price increases.  Gasoline will be over $5 a gallon nationwide soon.

Meanwhile, GM is making investments in large SUVs, crossovers, V-8 powered RWD sedans and mending its "performance" and "luxury" nameplates because that's where the profit is.  For now.

Soon, these vehicles will be languishing on the lots with HEAVY incentives despite their goodness.  GM would do well to think ahead a few more years and start positioning Pontiac as another value brand much as it was (and actually has been) for many years.  Same with Saturn.  Dealers will soon be screaming for 4 door and wagon versions of a "Pontiac" Cobalt and/or Aveo.  A G5 sporty coupe is not enough.  GM should also think about installing a 1.8 L or smaller engine in the Deltas. 

Folks, performance is dead.  Long live performance.

Oh hush, and never mind all that. the end around is that they'll have an enviable portfolio built here and imported   fine mid-sized and small cars.