Gasoline prices are predicted to hit $7 per gallon in the U.S., making it too expensive for millions of Americans to drive a car, according to a new energy report from CIBC World Markets.
There will be 10 million fewer cars on the roads over the next four years with crude oil prices expected to hit $200 per barrel in 2010. This will translate into higher gas prices for motorists and businesses, forcing lower income families to take alternative forms of transportation.
U.S. households earning less than $25,000 a year will be the hardest hit with higher fuel costs. At current driving habits, the cost of fuel will consume 20% of their income, up from 7% today. About 20% of cars owned by lower income households would likely be taken off the road in the next four years, the report said.
A 122% increase in gasoline prices in the past four years have significantly impacted American driving habits and decisions. Americans have driven 4.3% less in the past year, or about 11 billion fewer miles than in 2007. Per capital gasoline consumption in the U.S. has fallen by almost 5% since 2004 and the drop is expected to continue as prices inch higher.
The decline has hammered the auto industry with auto sales dropping to 14 million units in the U.S. from 17 million since the turn of the century. With a further 75% increase in gasoline prices, auto sales are expected to further drop to 11 million units by 2012, the lowest level since the early 1980s.
The report noted U.S. driving habits would likely begin to mimic those of Europeans, which have experienced high fuel prices for years.