General Motors in Denial? Toyota realistic?
GM, Toyota Differ
On Future Direction
Of Gasoline Prices
By NEAL E. BOUDETTE
Staff Reporter of THE WALL STREET JOURNAL
September 1, 2005 3:43 p.m.
DETROIT – General Motors Corp. said on Thursday that it expect gasoline prices to decline "significantly" by the end of the year after the recent spike in prices as a result of the hurricane damage to oil production facilities in the southern U.S.
Paul Ballew, GM's executive director of global market and industry analysis, said the car maker doesn't believe gasoline prices will remain above $3 a gallon.
"Let's be very clear about that. The markets don't believe they will and the forecasters don't believe they will," Mr. Ballew said in a conference call with reporters.
"If you look at the future and forward markets on in December, everybody anticipates that the constraint will be relieved and that gas prices will be coming back down rather significantly," he said.
The recent spike in wholesale gasoline prices to $2.60 to $2.70 "is abnormal relative to demand, relative to supply. It's being driven by the fact that we've taken 10% of our refining capacity off the market for the short term."
GM believes "the market in total is smarter than any of us individually and if you look at the market in total it expects prices to come back down rather significantly by year end," Mr. Ballew said.
In contrast to GM, a top executive from Toyota Motor Corp. said the Japanese car maker expects gas prices to rise.
"The cost of oil is going to continue to increase," Jim Press, president and chief operating officer of Toyota's U.S. sales unit. "In the long term and the short term."
Mr. Press said this view is based on the fact that demand for oil is rising and even before Hurricane Katrina U.S. refineries were operating at full capacity. "As we look forward, the fact is our country doesn't have the cushion in refining capability," Mr. Press said.
He added that oil companies are now reopening older oil wells they had previously abandoned. Since it will probably be more costly to get the remaining oil out of these wells, "they are investing capital for higher-cost oil," Mr. Press said.