Gas Guzzlerss Demand and Fuel Price Changes

Table of Contents

Background
Introduction
Objectives
Analysis
Conclusion
Recommendation
Works Cited

Background

Hurricane Katrina and Rita Churning which knocked the Gulf of Mexico destroying oil rigs caused a substantial rise in oil prices (Zikmund and Babin 150). As a result, analysts anticipated a significant fall in the demand for gas guzzlers and high-performance vehicles such as SUVs. Nonetheless, the sale of SUVs was already on the decline prior to the hurricanes (Zikmund and Babin 150). Therefore, observers anticipated a further decline due to the high price of fuel. They had assumed that the high cost of fuel would discourage consumers from purchasing gas guzzlers.

Introduction

In the automobile industry, fuel prices are not the main procurement considerations. Buyers seeking to purchase a vehicle consider a number of factors before making a conclusive decision. The factors that are predominantly vital include its price, its make, its model, and its performance. According to research conducted by the National Automobile Dealers Association, fuel prices are the last considerations in the list of factors that influence consumers choice when purchasing an automobile. This case study seeks to analyze the demand for Gas Guzzlers putting into considerations changes in fuel prices.

Objectives

This study seeks to:

Analyze the effects of increasing fuel prices in the demand for gas guzzlers
Examine the factors that influence consumers demand for gas guzzlers
Investigate the extent of demand for gas guzzlers

Analysis

This case clearly shows that the demand for gas guzzlers is still on the rise despite the fluctuating fuel prices. Most observers anticipated a fall in the demand for fuel guzzlers. This notion was influenced by the declining supply of fuel from the gulf. However, soon after the hurricanes, the demand for gas guzzlers stabilized (Allcott and Wozny 27). According to the NADA report, fuel prices were ranked the least among the factors that influence demand for gas guzzlers (Zikmund and Babin 150).

Most of the people seeking to purchase a car are generally concerned with its cost, its model and its performance (Zikmund and Babin 150). Fuel consumption does not have a significant impact on buyers decision to buy a car. The statics provided in this case show that fuel economy does not significantly affect the demand for gas guzzlers. Only 3% of the consumers thought that fuel prices are the most important factor compared with 11% who felt it was the least cause of worry (Zikmund and Babin 150).

Conclusion

This paper has analyzed the impacts of fuel prices on the demand for gas guzzlers. The paper has outlined some of its projected objectives in analyzing this particular case study. In this study, it has been established that despite the rising cost of fuel, the demand for gas guzzlers remained relatively high. The paper also gives a critical analysis of the case in a clear and concise manner.

Recommendation

The demand for gas guzzlers does not depend on the cost of their maintenance. To reach a consensus between the manufacturers and the consumers, production of high-performance vehicles that have a low fuel consumption engine is necessary. This will reduce consumers fuel budget without plummeting the performance of the car. On the other hand, it will increase sales and financial reimbursement for automobile manufacturing companies. SUVs are high-performance vehicles and gas guzzlers. Nonetheless, their demand is unlikely to fall even with the fluctuating cost of fuel.