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With Gas Prices Rising, When Will You ‘Freak Out?’
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CNBC Correspondent
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AutoNation CEO Mike Jackson calls it the "freak out point." It's the price for a gallon of gas when consumers will freak out and make a conscious decision to change their driving habits, the type of car or truck they will buy, or perhaps decide not to buy at all.
When gas prices spiked in 2008, people started freaking out when gas hit $4.00 a gallon. It eventually topped off at $4.11 in July of that summer.
This time around, Jackson thinks the freak out point is higher, closer to $4.50 or 5.00 a gallon.
Why does this matter?
Right now the auto industry is in the midst of an extended comeback. And a big part of that comeback is the return of small business owners who are buying pick-up trucks and SUV's for their businesses. While the new models are more fuel efficient than the ones being replaced, it's still a big commitment to buy a new truck (or trucks) for the company. With gas prices where they are right now, the small business owner is OK upgrading his company truck. But, will they feel the same way if gas hits $4.50 or $5.00? Maybe not.
The most recent report on gas prices shows the national average is $3.10 a gallon (up 44 cents from a year ago), and the Energy Department thinks there's an 8-10% chance the price eventually rises to more than $4.00 in August and September.
Jackson thinks gas prices will have to go well above $4.00 a gallon before people freak out because we've already experienced $4 bucks and for many of us, it won't be a big deal. I think he's right. As gas prices have started edging higher, I hear fewer people complaining. Some of that is due to the fact this rise in prices has been more gradual, but there's also the fact the economy is doing better. When gas spiked in the summer of 2008, the economy was starting to slide, the stock market was in the tank, and people were worried about their jobs.
So what's your freak out point?
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