Car sales trend linked to oil prices

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As oil prices plummet in the wake of a market shortfall, local auto retailers have seen sales trends flip. Oil prices are hitting record lows of $26 a barrel, the lowest since 2003, and the market is expecting a challenging year.

The Exchange closed with a strong comeback after plunging early in the day, with the S&P finishing in the green 38 points, the Dow Jones finishing 210 points up and the Nasdaq closing in the positive 119 points. These numbers all show a strong uptick within the market, signalling to investors a sign of hope. Hattiesburg car lots expect to be affected.

“Typically, in the oil business, you work two weeks then come home two weeks, or so, but now a lot of guys aren’t going back out,” said Marc Kubicki, Ryan Chevrolet sales manager .

Kubicki said with the prices being as low as they are, the dealership is experiencing a heavy influx of customers buying larger vehicles in Hattiesburg.

“The Chevy Volt was a great car with amazing technology, but people just weren’t into it,” Kubicki said.

According to Kubicki, location affects people’s taste in vehicles. Kubicki said that the oil prices have affected the consumer more than they have the dealerships. He also said the features in cars are driving the selling point, mentioning Bluetooth capabilities and radio services as a few examples.

Kevin Mattice, general manager of Dean McCrary KIA, was also one to notice that car buying has changed since the price dropped in oil.

“People are buying trucks and SUVs and leaving smaller cars on the lot,” Mattice said. “Often times, no one would even open the doors.”

He said that the oil industry has also been experiencing a hard time, noting that as people are coming back home, they are not able to go back out, as there are fewer contracts. Mattice also discussed the problem with the oil industry dropping workers’ time on the rigs.

“Offshore oil workers time has been cut in half, and when their money relies on that, it gets hard.”

Sales and lease consultant at Toyota of Hattiesburg Drew Womack also weighed in on the situation.

“People are more likely to buy SUVs and larger vehicles,” Womack said. “Their concerns seems to be with comfort.”

Womack said the prices of larger vehicles are rising as more are being sold, and the prices on smaller cars continue to fall at the local Toyota dealer. Mattice said that prices remain steady at KIA.

Edward Sayre, USM associate professor of economics and department of political science chair, said there are two factors involved in the oil price drop at home and abroad.

“One is the opening up of the spickets by Saudi Arabia,” Sayre said. “They’re able to withstand much lower oil prices than other countries, than most other producers, and because of their wanting to push out a lot of the higher cost producers that we’ve seen arise – especially with North American shale production. They have been more than willing to increase their revenues just by increasing their volume.”

Sayre said Saudi Arabia is trying to out compete Iran before it enters the market, deliberately driving down prices and affecting Iran and North American producers.

“Right now, we have two things,” Sayre said. “We have Saudi Arabia pushing the price down deliberately to hurt both Iran, as well as North American shale producers. But in addition to that, people are anticipating Iran to come into the market, which is going to increase the volume even more. In anticipation of more volume, they have already calculated that and pushed down oil’s future prices.”

“I would expect for the next four to five months to be fairly steady,” Sayre said. “I wouldn’t expect the crude oil prices to stay as low as they are right now, that there will be some seasonal volatility. Things will change a little bit depending upon weather conditions, geopolitical issues that go on, if there’s additional turmoil in the Middle East [or] something unforeseen happens with the war against ISIS.”

With the markets closing higher on Friday and the end of January nearing, it may be that the worst is gone. Iran has begun oil production now that the sanctions have been lifted due to the nuclear deal signed by Barack Obama. The country has restarted production at 500,000 barrels a day. Organization of the Petroleum Exporting Countries has been considering calling an emergency meeting, but has not done so, hoping to avoid further damage to the oil markets.