What lower gas prices will mean for the auto industry

What lower gas prices will mean for the auto industry

It seems no one expected oil and gasoline prices to fall so far. The U.S. Energy Information Administration now says prices at the pump will average $2.84 a gallon in 2015, down from $3.39 this year.

The light trucks and SUVs that American drivers never seem to tire of (though less so in the Washington area) will become more affordable. Other than increased sales for those vehicles, what will the drop in fuel prices mean for the industry overall?

–Much of the industryês long range production planning has been built around a base case for ever increasing and ever higher oil prices,” writes NADA chief economist Steven Szakaly in the Used Car Guide November Guidelines. The models hitting the market in the next five years are in large part the result of an effort to increase fuel economy.

–In a market with effectively falling gasoline prices, it is questionable whether OEMs will be able to charge for these added gains in fuel economy,” Szakaly writes. NADA will closely watch Congressional debates on CAFE standards in the next two years, with a Republican-controlled Congress and falling fuel prices.

Looking for a strong finish to the year, NADA is sticking with its 16.4 million light-vehicle sales forecast for 2014.

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