Soaring oil prices are prompting consumers to ditch gas
guzzlers for more fuel-efficient models, according the Scotiabank's
automotive industry specialist.
Last year's U.S. sales of sport utility vehicles were down by a
third from their peak in 2001, Carlos Gomes said from Toronto on
Friday, as the price of crude oil retreated to under US$98 a barrel
after hitting a record $100.09 a day earlier.
``I think that clearly highlights the shift in vehicle purchasing
habits that is occurring, not only in the United States, but also in
Canada as well,'' he said.
Gomes said sales of so-called crossover utility vehicles, similar
to SUVs but generally lighter and thriftier, have jumped from one
million in 2001 to 2.8 million in 2007.
And hybrid vehicles, powered by both gasoline and electric
motors, have seen sales go up by 40 to 50 per cent over that time
frame, Gomes added.
``They're still a fairly small portion of the market, but
definitely we are seeing people shift to more fuel-efficient
Railways and airlines whose businesses rely on diesel and jet
fuel are also feeling the pinch. Some have passed on higher costs to
customers, while others have held back their fuel costs through
Canadian National Railway Co. (TSX:CNR) calculates its fuel
surcharge monthly based on movements in the average price of West
Texas Intermediate crude oil. For January the charge is set at 17.37
per cent, said railway spokesman Mark Hallman.
``As part of its fuel management strategy, CN has had in effect
for years a fuel surcharge that is designed to recover, over time,
increased costs associated with rising fuel prices,'' he said.
``The surcharge moves up when oil prices rise, and declines when
oil prices fall,'' Hallman said.
``CN no longer has a fuel hedging program, as the company
believes the fuel surcharge is the best means of managing
fluctuating diesel fuel costs.''
CN also said last summer it would be buying 65 new fuel-efficient
locomotives in addition to 65 already ordered. The new engines are
15 per cent more fuel-efficient than the 145 older ones the railway
plans to retire.
The record high price of crude has prompted Air Canada (TSX:AC.B)
to increase its transborder fares by two per cent, said spokeswoman
Fuel costs have been incorporated in the base fare of domestic
and transborder flights since 2004. The airline tacks a fuel
surcharge onto fares in some international markets, but any changes
have to be approved by the Canadian Transportation Agency.
Fuel costs are the airline's largest expense, she noted, and
every US$1 per barrel increase in the price of crude costs the
country's largest airline C$28 million per year.
``We're just going to keep following and monitoring the
fluctuation of oil prices and ensure that we remain competitive in
all these markets,'' Arthur said.
Air Canada's fuel hedging program locked in 45 per cent of its
fuel requirements in the third quarter ended Sept. 30, and saved $17
million. At the same time, the stronger Canadian dollar trimmed fuel
expenses by $46 million.
Fuel coasts are ``a challenge for the entire industry,'' Air
Canada CEO Montie Brewer told analysts in November.
WestJet Airlines Ltd. (TSX:WJA), whose business model is focused
on competitive pricing, doesn't have a hedging program, said
spokeswoman Gillian Bentley.
``We haven't always put an increase on our fares as soon as oil
goes up. We do monitor it,'' she said.
``When it becomes unsustainable, that's when we would increase
our base fare.''