The Glass is Half… - Tire Review Magazine

The Glass is Half…

In various conversations during SEMA, a few people suggested that falling gas prices would help boost driving miles and, therefore, tire sales.

Local radio commercials from obviously desperate car dealers suggest that falling fuel prices make it a great time to buy the pickup or SUV of your dreams.

So-called experts suggest that lower oil prices and falloffs in steel and other tire raw materials will lead to sharp drops in retail tire pricing, which will boost retail tire sales.

One goof said that less-than-$2 gas would lead top increased business for casinos!

Perhaps. Those are logical arguments. Cannot fault the reach for optimism.

But it appears to be well-misplaced optimism, the kind of “Ozzie & Harriett” hope we reach for when things look their worst.

The reality of the situation is a lot more complicated than 1+1+2 economics. Math is pretty straight-forward stuff, but predicting human behavior is the big wild card.

Not that I am any smarter than world-class economists like, well, Greenspan, here is what I think:

• Falling gas prices will have no real impact on driving miles. Job fears and tightening household budgets will keep Americans off the roads at around the same rate as the rest of 2008. And this will be a long-term trend. There will be slight upticks, to be sure, but on an overall basis, American driving miles will come down and stay down.

• Retail tire prices may come down slightly as retailers look to boost revenues. Tire pricing from manufacturers, though, will probably not reverse until mid-2009 when they have a better gauge of where raw materials costs are truly headed.

• American drivers will NOT swarm back to pickups and SUVs. Even when things return to “normal,” drivers will discover that they can make it with smaller, more fuel efficient vehicles and fewer driving miles.

• We will go from a consuming society to a saving society. Credit cards will remain, but Americans will use them sparingly. Cash and checks will become, at least in the near term, the preferred currency.

• With sharp cutbacks in the Canadian oil sands and among mining companies worldwide, the OTR tire market will take a big hit through 2009.

• Small business bankruptcies are rising rapidly and tightening business credit and access to operating funds will drive this trend further.

• Unless there is a major (like big major) near-term improvement in the economy, the tire industry landscape of December 2009 will look nothing like it does right now.

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