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Oil analyst Tom Kloza has a term for the volatility of consumer behavior with gas prices: “petronoia.”
Consumer volatility is one of the largest factors affecting gas prices, says Kloza, chief oil analyst for Oil Price Information Service and one of the panelists at Wednesday’s Automotive Aftermarket Industry Association (AAIA) Town Hall event.
Panelists say not to be too comfortable by the current low oil prices: cost per gallon is sure to continue to fluctuate.
Kloza says there are three pillars to oil pricing: fundamental, seasonal cycles and crowd behavior. It’s this third pillar that seems to be a wild card.
“Crowd behavior is really behind this mess we’ve gotten ourselves into,” says Kloza, who adds that the current seasonal low oil prices will likely increase over the next four months. He predicts a price per gallon range from $1.75 to $5.
Volatility is one of the biggest challenges to oil prices. “The last 60 days of the year, we’re going to see very low prices,” adds Kloza.
Consumers tend to put more stock into gas savings than other types of spending. “The currency of saving money on gasoline is akin to the money you spend on the golf course and on fantasy baseball,” he adds. “People will do crazy things to save money on gas.”
Consumers have modified their long-term behavior to brace for high fuel prices despite current gas price lows, says David Portalatin, director of Industry Analysis for The NPD Group, Inc., and another Town Hall panelist.
“I’m convinced consumers are waiting for the other shoe to drop,” says Portalatin. He points out behavior changes like switching jobs to be closer to home and changing the vehicles they drive as examples of the long-term behavioral changes in consumers.
He advises the industry to continue to reach their customers. “I believe there’s no greater time than now to engage your customer,” says Portalatin. “Consumers are highly motivated to get their cars’ operation as efficiently as possible.”
Panelist Frank Ordonez, president of Delphi Product & Service Solutions, says thinking “green, safe and connected” opens the doors for plenty of new products to move through the aftermarket, like alternative fuel systems, safety-related technology like adaptive cruise control and pre-crash sensing and telematics. “I think the future of the aftermarket is as robust as can be,” Ordonez adds.
Tony Zanders, president of Heritage Auto Repair and chair of the Car Care Professionals Network (CCPN), sees optimism ahead for service providers. “I don’t think the service industry is going to see any decline.”
He adds: “We don’t just fix cars, we serve customers.” Zanders says fuel prices have prompted drivers to get that transmission replaced or the major work performed rather than buying another vehicle, which they’ve done in the past.
The event was moderated by AAIA President and CEO Kathleen Schmatz.
