We own a 2005 Chevy Suburban that I drove off the lot brand new. The truck-based SUV has over 170,000 glorious miles on it. All of my children learned to drive in it, which means they’re now qualified to pilot vehicles of any size, including M1 tanks.
While the older two kids have long since gone off to college in other, smaller vehicles, the youngest is still in high school and recognizes the virtues of driving the biggest vehicle in the school parking lot.
Did I mention she’s a girl at an all-girl’s school?
The Suburban is never lost in the parking lot. She might be able to find it because it has a Texas flag emblem over the Chevy symbol on the front grill, or perhaps it is visible because it’s three feet longer, two feet wider, and four feet taller than every other car out there.
She can haul (at least) seven of her closest friends out to the beach or to a party, and other drivers ease out of her way when they see that big SUV coming toward them.
What’s not to love?
Still, it is 10 years old, and chances are my daughter will end up in college over 1,000 miles away. So sometime in the next year she will need a new (or rather, newer) car, and she already has a model picked out — the Ford F-150. As the conversation about her next vehicle has gone on over the past year, I’ve found myself wishing she had a second choice… not because I have a problem with her driving a truck, I just didn’t want to pay for one. They’ve gotten really expensive.
But that might be about to change.
Land of Trucks
We visited family in Texas over the holidays. While there, I couldn’t help but notice that, as they would say in local parlance, you couldn’t swing a dead cat without hitting a brand new F-150, Silverado, or Ram Truck.
It seemed as if every other vehicle was a shiny new pickup truck, and we all know why. The fracking boom has been in full force for five years, and Texas is the epicenter of the business.
With oil and money flowing like water, new trucks have been flying off of dealership lots. They are one of the symbols of success in Texas. Nothing says you’ve made it in oil country like a truck that costs more than a small home.
Now that oil has dropped more than 50% in the last six months and the number of oil rigs in operation has begun to fall, the easy flow of money in the oil patch might be drying up. With a break-even cost of $50 to $55, companies that are drilling new wells are taking a big chance.
Oil sits under $50 as I write this, so companies drilling new wells are losing money before they even start. That’s not a good business practice.
As I’ve written in these pages before, the Saudis don’t feel any pressure to cut oil production. They would rather see weak producers in the U.S. get choked out, and watch geopolitical foes like Iran and Russia squirm with ballooning budget deficits than slow down oil production and help all oil producers out of a jam.
With so much production available and demand softening as economies around the world slow down, it’s possible that the price of oil will remain low… at least for the rest of the year.
Which brings me back to pickup trucks.
Cheaper fuel prices make owning a big vehicle a bit easier on the wallet, and perhaps low oil prices will give some people the extra push they need to drive one. But there’s no doubt that as the oil industry suffers with the drop in oil prices budgets for new pickups will be slashed.
Meanwhile, individuals who work in the oil field are potentially facing layoffs and slowdowns, which aren’t conducive to new vehicle purchases either.
Just as this domino effect has occurred to me, I’m sure the VP’s of North American sales at Ford, GM, and Chrysler have all seen the writing on the wall as well.
Given that most of the profit in the auto industry comes from trucks and SUVs, I’d guess that executives at these companies aren’t nearly as happy about the prospect of falling truck prices as I am.