Max Gladwell

High gas prices are penalizing everyone, but none more than those who’ve made large bets on cheap oil.

The global economy depends on one thing above all else: petroleum. It touches everything. Now that the price of oil has been pushed to nearly $140 per barrel, driven almost entirely by simple supply and demand, the pain is being felt throughout said economy.

As we were (bike) riding down Main Street the other day, a bright yellow Hummer H2 passed going the other way. And it occurred to us that, “Wow, that guy is really paying an idiot tax.” He (or she) is being penalized at a far greater rate than non-Hummer owners, and it stems directly from their own stupidity. And by stupidity, we mean shortsightedness, naivete, and a general sense of importance or invulnerability. Not only does it cost more to fill the tank, but who’s going to buy a Hummer these days? Anyone who has a recent loan is probably already under water. The depreciation has to be accelerating.

The idiot tax is not limited to individuals. Companies like General Motors, who manufacture the Hummer, are also being penalized. The company made perhaps one of the largest strategic blunders in the history of business when it discontinued the EV1 electric car and destroyed all of them. Not only was it a poor strategic move, but it cost the company dearly in brand equity from all of the bad PR. GM figured it could muscle its way around increasing efficiency (CAFE) standards with litigation and lobbying, which would enable the company to keep churning out inefficient SUVs and Hummers. After all, that’s what the market wanted. Unfortunately, while the market may never be wrong, a company that bases its strategies on the market of today can be caught with their pants down in the market of tomorrow. We hate to say it, but if GM had listened not to the market but to the US government, it might have found itself in a better position to deal with these new market conditions. Which is pretty much what Toyota did.

Toyota prepared for the CAFE standards by developing hybrid technology. The company didn’t think that it could simply bully legislators into folding. Toyota actually thought it would have to comply. This is how the Prius came into being. Indeed, it seems like we’re living the ’80s all over again.

Last week, an article in The New York Times sought to quantify what we’re calling the idiot tax. It found that a typical Ford F-250 pickup truck would cost $100,000 to own for five years.

So it makes sense to consider the full costs of ownership, which include insurance, interest, repairs, taxes and, of course, gasoline. If gas remains near $4 a gallon, as many analysts expect, a big vehicle like the F-250 will cost $100,000 for an owner who keeps it for a typical amount of time (five years) and drives it a typical amount (15,000 miles a year). The gas alone would cost about $30,000, up from about $10,000 in the 1990s.

No wonder, then, that Americans are changing their driving habits so quickly. With sales plummeting, General Motors said Tuesday that it would stop making pickup trucks and sport utility vehicles at four of its North American plants.

The company is also considering selling its Hummer brand, an emblem of the megavehicle. Rick Wagoner, G.M.’s chairman, explained the moves by saying that he thought the shift toward more efficient cars was “by and large, permanent.”

The unyielding reality is that price matters, enormously. That’s all you need to know about the car market these days.

While the F-250 costs $100,000 and a fully loaded F-150 — the better-known, smaller Ford pickup — costs about $70,000, a Ford Focus still costs less than $40,000 over five years. A Honda Civic Hybrid does, too. A Toyota Prius costs only a little more. A Subaru Outback station wagon runs $50,000 or so.

To put this in perspective, the difference between a Focus and an F-250 over five years is $60,000. The annual pretax income of a typical family in this country is also about $60,000. So choosing a F-250 over a Focus is like volunteering for a 20 percent pay cut [or to pay an idiot tax]. The relative resale values might cushion the blow a little, but not much.

“The real concern,” said Nathaniel Keohane, the head of economic policy and analysis at the Environmental Defense Fund, “should be our vulnerability to $7-a-gallon gasoline that is a function of global demand and stagnant supply.” Goldman Sachs recently suggested that $7-a-gallon gas was conceivable.

As unpleasant as it’s been, the run-up in gas prices has brought one big advantage. It has shown how flexible American consumers are — how well they can adapt to new prices without turning their lives upside down.

Last month, according to the new sales numbers released on Tuesday, the Toyota Corolla and Camry and the Honda Civic and Accord all surged past the F-series. It was the first month since December 1992 that a car — not a truck — was the country’s top-selling vehicle.

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• Detroit’s Big Three Automakers Go for the Bailout
• GM Could Be Serious About “Gas Free.” A Look at the History Behind the Chevy Volt.
• The Time for Sustainability is Now. Or, Seeing the Glass of the Global Economic Crisis as Half Full
• The Gas Price Cloud Has a Green Lining, Part 1
• A Tale of Two Efficiencies: Negawatts and Mass Transit

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