Brands Brace for Impact of Higher Gas Prices

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Forget new products, social-media marketing and sustainability initiatives – the biggest thing on the plate of many brands today may be how to cope with spiking oil prices.

Brandmeisters know better than most that nothing can play mind and pocketbook games with the American consumer quite as devastatingly as gasoline-price hikes. In 2008, a brief movement up through the $4-a-gallon level stalled auto sales and then led into the global economic meltdown.

“Higher gas prices in general will depress sales no matter what, because people will be worse off,” Sean McAlinden, chief economist of the Center for Automotive Research, told brandchannel.

“And in terms of people collectively feeling happy or unhappy, or measurements of how the American people feel about whether the country is on the right track or wrong track — the biggest measurements of those things are made at the gas pump.”[more]

If the conflagration in the Middle East settles down relatively quickly and energy traders can get some clarity around who controls supplies and whether the spigots will remain wide open, this week’s spikes in global oil prices could settle down relatively quickly.

But if the Mideast continues to boil, today’s prices could just be the beginning of long-term inflation in the value of oil. And that means, among other things, the potential for significantly higher gasoline prices for motorists around the world. Already, there were inflationary pressures under oil prices because of the strengthening economic recovery in some parts of the world.

Auto brands already have proclaimed themselves ready for rising gasoline prices because, nearly to a company, their vehicle offerings are much more fuel-efficient than three years ago. But their scenarios grow foggy if gasoline prices truly spike – as they did in the 1970’s and in 2008 – instead of rise gradually.

And if oil prices burgeon over the longer term, that will only add to the commodity-cost pressures that already are pushing up retail prices of everything from packaged foods to plastic food-storage containers.

Fasten your seat belts.

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