Monday, December 22, 2008
One of the few bright spots in the current economic maelstrom - a storm that seems to be dragging everything down with it into some very dark place from whence there may be no return - is that energy prices have come down to reasonable levels again.
Gasoline prices today are at levels last seen when the housing boom was just kicking into high gear - about the time that thousands and thousands of American homeowners figured it might be a good idea to take Citibank up on their generous offer and borrow against the equity in the house to go out and buy that Escalade or Hummer they so desired.
The 2004 model UAEs (that is, Urban Assault Vehicles - haven't hear that one in a while) are beginning to show their age, but the fact that they're showing anything at all right now is one of the most surprising developments in 2008, a year that is mercifully set to conclude in less than ten days.
We were out and about for most of the day today and it was clear that the trend that began about four months ago has intensified to such extremes that one might think a time machine had been activated, transporting us all back about three or four years.
Real estate prices are certainly much closer to their 2003 levels than those of 2006 and stock prices are not all that different from four years ago either, the moves of these two asset classes having a distinctly different feeling on the way down than on the way up.
But, interestingly, driving ridiculously large trucks and automobiles makes sense again and their owners are happy to show it.
More importantly, buying ridiculously large trucks and automobiles when gas doesn't cost much more than $1.50 a gallon seems to make sense too! You almost expect someone from the government to say, "Go out and buy an SUV to support the economy", as was done during the last economic downturn (a reference escapes me here - someone at the Federal Reserve?).
A report at CNN/Money this afternoon notes the sharp increase in sales of trucks and SUVs in recent months, the combination of cheap energy and huge dealer incentives apparently pushing hesitant buyers over the edge - at least those who managed to survive the last year with their job and credit intact.
Trucks and SUVs are now outselling those gas-sipping hybrids that dealers couldn't keep in stock just a few months ago. Prius owners don't look nearly as smart as they did over the summer when Hummers would sit and sit in their owners' driveways, the once-proud driver of the monstrosity not able to summon the courage to watch those number spin round and round at the filling station as others looked on.
At the peak, it cost between $150 and $200 to fill up one of those big Suburbans or Lincoln Navigators (see the SUV Fill Up Index from July 16th), but now you can fill up a bone-dry tank for $50 or less.
For those who only aspired to be so ostentatious, opting instead for something like a Chevy Tahoe or a Nissan Armada, they can usually get away for less than $40.
For the rest of us, it's amazing how much gasoline a $20 bill buys today.
This is the bright side of the meltdown.