Fracking For Fords

By Lloyd Graff

2015 Ford F-150 aluminum frame shown at the 2014 Detroit Auto Show

Going into 2015, the machining folk have an interesting reversal of fortune from recent years. Automotive sales are nudging towards 17 million with trucks and SUVs taking 52% marketshare. The new Ford F-150 with the aluminum body is just hitting the showrooms, and Honda’s CR-V was last month’s top seller. The remarkable drop in oil and gas prices should expand volume especially for trucks. It’s possible that the weak retail sales numbers from Black Friday indicate more buyers gravitating to auto dealerships.

The losers in the oil plunge are the folks heavy into oil exploration and drilling products. Until recently there was a $20 to $30 per barrel “political risk” premium built into oil prices. The American fracking boom turned this premium on its head, but the market did not take notice until last month. Now the political risk has shifted to the downside as the Saudis keep up their output to punish Iran, Russia and the American shalers. It will be interesting to see if President Obama okays the Keystone Pipeline to inflict more pain on the Russians and Iranians via oil prices, though it is less important today than two years ago. The Alberta tar sands oil will ultimately get into the world market through a Canadian port or a U.S. port unless prices fall far enough to make it uneconomical.

The huge solar farms in the Arizona and California deserts are reaching parity with carbon fuels, which is another huge development. If a real breakthrough occurs soon in battery storage capability, the oil and gas industry could see long-term flat to dropping prices. The oil patch guys are quite worried now, which explains the recent Halliburton – Baker Hughes merger.

New home sales are still rather sleepy compared to 10 years ago, with family formation limping along, immigration shriveled and mortgage money hard to get. College debt also dampens demand. This is not changing much, but the overhang of foreclosed dwellings has substantially shrunken. Banks are loaded with cash, but the regulators are forcing them into super conservative investments like U.S. Government bonds, which cramps small business borrowing for startups and machinery.

With manufacturing down in Europe and China, it will be worth watching to see if companies there become more aggressive in penetrating the U.S. market. The Euro and Japanese Yen have dropped substantially in value, which could make European and Japanese products more competitive here.

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As a University of Michigan alum I have never been a big fan of Ohio State football, but I admit that I admire Urban Meyer as a coach. He dealt with the adversity of losing All-American candidate Braston Miller at quarterback, replaced him with freshman JT Barrett who had a Heisman Trophy-type season only to get a broken ankle in his 12th game. Then came the news about OSU’s defensive lineman Kosta Karageorge, who had gone missing from a self-inflicted gunshot wound. His body was found in a garbage dumpster at the Columbus bus station Sunday.

If Meyer can beat Wisconsin in the Big Ten Championship game this Saturday, he is worthy of Coach of the Year. But perhaps we should wait for more of the Kosta Karageorge story before we get carried away.

Question: Do you decide whether or not to buy a truck based on the price of oil?

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11 thoughts on “Fracking For Fords

  1. Val Zanchuk

    I think oil prices are too volatile to base a long term purchase on today’s price. You buy the truck for its value to you regardless of the oil price. If the value is limited by the oil price, then a shorter term deal, such as a lease or lower cost used vehicle would make more sense.

     
    +1
  2. Robert

    Solar farms and wind energys is not even close to the efficiency of carbon based energy. Germany for example has attempted to convert to wind energy, only to find that that they are dependent on fossil fuel electrical energy plants to keep the power grid up, because the wind doesn’t blow enough to provide stable peak power production, consequently German power cost is 5x the rest of Europe. American solar power plants also cannot produce energy reliably because the sun does not shine all the time. If it weren’t for of our tax money being poured into solar and wind, energy costs to the consumer would be horrendous and would not be sustainable.

     
    +3
    1. allen

      The numbers I read say Germany’s electrical power is about three times U.S. with the record going to Denmark which has electricity costs of three and a half times that of the U.S. average.

      Both Germany and Denmark depend on Swedish hydro-electric power to smooth out the fluctuations in wind power. Not only can’t electricity be stored in any meaningful sense but power generation has to closely match power consumption so throwing a power generation technology into the mix that’s inherently uncontrollable means something’s gotta give.

      In the case of wind power you need a base load capacity that’s not too far off the minimum power requirement – coal or nuclear – and as wind increases you don’t cut back on the conventional power, you shut down wind turbines. Base load capacity, in order to be economical isn’t very responsive so when the wind blows hard you don’t throttle back the coal plant, you stop wind turbines.

       
      +1
  3. Jack

    Been driving a truck for almost 30 years. I like and use my truck.
    Price of oil isn’t the deciding factor.
    But I did tell my wife recently, when I retire I may get a Subaru, not because of the price of oil, just that maybe I won’t need a truck any longer. She doesn’t believe me.

     
    +2
  4. Kiwisceptic

    Plus if you consider Solar and wind are hugely subsidised to combat a problem that doesn’t exist ( catastophic anthropogenic global warming ) by a gas that is plant food and less than 400 parts per million and helping to green the planet and the sheer fraudulent folly of the renewable energy proponents becomes apparent

     
    +2
    1. Alf

      It is greater folly to assume that inexpensive fossil fuels will always be available, and not to prepare with renewables.

       
      +1
  5. Art Santana

    Recently went on a hunt to Kansas from Salt Lake (900 miles) on the way we took a Ford 150 (2013 model) averaged 18 miles, not too bad. Came back on a Toyota Tundra that yielded 12.5 miles per gallon. Big difference and I am happy that Ford continues to work on efficient trucks. I heard that they are planning on removing side mirrors for LCD cameras that will reduced 3 to 5 miles per gallon more. Here in our neck of the woods, every other vehicle on the road seems to be a truck, so MPG does make one think before buying. Glad to see the Al frame on Fords.

     
  6. Tony

    Clearly the price of oil has nothing to do with deciding to buy a truck or not, when we are talking about 12-15mpg. Up through the late ’70’s, fuel economy was completely ignored- then the oil crunch of the early ’80’s became a reality, and the government and auto makers got realistic about it, but then spouted off about how the future would mean automobiles that routinely achieved 30, 40, or even 50 mpg. Unfortunately, fuel economy is still roughly the same as 30 years ago, in spite of the facts that autos are lighter, more aerodynamic, etc. Someone please explain to me why this is so.

     
  7. Peter

    The frame of the truck is steel the body and box are aluminum, not as noted in the caption with the photo, see Ford add below. Time will tell if aluminum is a good choice for a box material.
    Peter Schroth

    ALUMINUM-ALLOY BODY AND STEEL FRAME
    Over 10 million miles of cumulative testing in the making.

    Class-exclusive* cab and box fabricated from high-strength, military grade, aluminum alloys
    Fully boxed frame with eight crossmembers (five through-welded) made of up to 78 percent 70,000-psi high-strength steel (up from 23 percent in the 2014 F-150 frame); up to 60 lbs. lighter with state-of-the-art roll-forming process that minimizes weight
    Vehicle weight up to 700 pounds lighter than before resulting in better fuel efficiency, greater towing and payload capacities, improved power-to-weight ratio for faster acceleration, enhanced handling and braking responsiveness

     
  8. Tim Matthews

    I don’t think many of us buy trucks based on the price of gas. My truck serves a valid purpose in my business and life and I can’t do without it. BTW, my truck is an 11 year old GMC Yukon XL with a 5.3 liter V8 and it gets 20 mpg on the interstate at 75mph.

     
    +1
  9. Jeff Davis

    Agree that battery technology will be Oil’s next kick in the pants – with Elon Munsk driving that bus in the fast lane. Green Technology and the Renewable Industry will continue to grow jobs even as subsidies dry up (like here in Ohio). Unrest overseas used to lead to oil price increases (supply issues), but with all the new domestic supply available it leads to price decreases (lower overseas demand) and Keystone approval will only continue this trend. And when the economics starts to understand the significant hidden costs of air, water and soil pollution from the sands projects (wiki Oil Shale Economics) – the current shale oil investment boom may just go bust if oil starts to level out around $70 indefinitely.
    Oh yea – GO BUCKS!

     
    +1

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