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Subsidized gas for buyers of gas hogs?

Posted by David Beard, Boston.com Staff May 19, 2008 10:51 AM

By Noah Bierman, Globe Staff

Americans are flocking to public transportation right now, demanding better gas mileage in their cars like never before, and - just maybe - seeking to use staggering gas prices to have a real debate about the true cost of oil dependence.

And then there's Chrysler's solution: artificially cheap gas. Sure, Toyota and Honda started selling hybrid vehicles while American car companies continued to rely on minivans and sport utility vehicles for the past decade.

But don't let that bother you, America.

Earlier this month, Chrysler unveiled an incentive with the most optimistic of titles, "Let's Refuel America."

Golly, this seems like a great deal, American innovation at its finest. Buy a vehicle like a Dodge Ram truck (13 miles per gallon in the city, 18 on the highway), and Chrysler will make sure you don't pay more than $2.99 per gallon for the next three years. You can choose almost any vehicle in the Chrysler fleet, except a sports car or the popular Jeep Wrangler.

So swig away on that gas and don't worry about the hangover. Chrysler's magic gas card will refund the difference on that Dodge Charger. (The most fuel efficient model gets 18 miles per gallon city and 26 highway.)

Chrysler spokesman Stuart Schorr assures that the program is also available for six vehicle models that get 28 miles per gallon or better on the highway. Those models are gaining in popularity, he said.

"I think people looking for a higher-mileage car will stay that way," Schorr said. "They won't change for the program."

Still, most Chrysler customers prefer something a little bigger. Only 33 percent buy cars; the rest go for SUVs, minivans, or trucks.

Schorr says more Americans want better fuel economy and the company is beginning to introduce some hybrid versions of its SUV and pickup trucks this year. But hybrid versions of SUVs and pickups rarely make giant leaps in fuel efficiency.

And with this program, Chrysler does not look like a company preparing to help America wean itself off gas. In fact, the gas incentive saves the most money for people who buy vehicles that get the worst mileage.

The new gas program gives buyers other options: They can take cash back or lower interest rates instead of the hedge on gas prices if they prefer.

It's easy to see why the gas deal will attract some customers. Those who buy a new car right now can save more money buying more fuel efficient vehicles - generally less expensive than trucks and SUVs - than locking in $2.99 gas prices for the next three years.

And what happens when the three years end? Programs like this one have the perverse economic impact of making gas more expensive, said Jeroen Struben, a postdoctoral associate at the MIT Sloan School of Management.

Stimulating people to buy more gas by disguising costs makes demand - and prices - go up in the long run, said Struben.

27 comments so far...
  1. Two problems w. this article:
    1. No mention of the details of the offer. It caps out at some rediculously low number...like 4,000 miles per year...something like $400 / year of savings. This is less than savings from other cash-back rebate programs. Not much of a deal, just a marketing gimmick. So it's not worth much attention, other than frowning on the concept.

    2. Third from last paragraph has a grammar mistake: "than locking in $2.99 gas prices for the next three years." It should be "then..." Maybe the Globe should spend a little less on tabloid articles and more on content editing and fact checking.

    (Note from editor: Use of "than'' is correct here grammatically -- "You can save more this way than that way.'' Useful note on the top-off limits you mentioned; it's a strong article, particularly on a day when gas is topping $4 a gallon in some places. Thanks for your comment. DB)

    Posted by Gene Daigle May 19, 08 01:14 PM
  1. Astute observations, but Chrysler is just taking a page from our own government's playbook. Gasoline has been artificially cheap for as long as the government has wielded foreign policy and military aggression in the region to guarantee supply. At least it's not tax revenue Chrysler is wasting.

    Posted by Troy from Boston May 19, 08 01:29 PM
  1. Astute observations? Actually, poster #1 is incorrect on both of his points.

    Point #1. The Chrysler offer is for up to 12,000 miles per year, for each of the three years. This is straight from www.letsrefuelamerica.com.

    Point #2. Clearly the guy doesn't know the difference between then and than, which is pretty sad.

    But even more sad is that he tries to poke holes in the Globe's fact checking and grammar, yet makes an idiot out of himself instead.

    Posted by Tara May 19, 08 01:49 PM
  1. In response to comment number 1 about limitations of program being 4,000 miles a year. The actual number is 12,000 miles a year.

    Posted by Stuart Schorr, Chrysler LLC May 19, 08 01:52 PM
  1. Why not subsidize gasoline?

    We (taxpayers) are expected to subsidize the mortgages of morons who spent more than they could afford and now face foreclosure.

    Actually, since it's a private company (Chrysler) paying for the gas, at least the taxpayers aren't getting screwed by this.

    Posted by Paul Gallant May 19, 08 02:02 PM
  1. Makes one wonder who is in bed with whom, doesn't it?

    The Bush administration proposes to have the auto makers reach a whopping 28 mpg standard for mileage by the year 2020.

    Americans should be demanding automobiles that get 100 miles per gallon by 2010.

    If we can put a battery-operated robot on Mars that runs longer than the Energizer Bunny then we should have the technology to make 100-mpg vehicles now!

    Wake up America! Unless we demand change, and act to make that change happen sooner than later, we'll never get off the oil standard.

    Posted by Dave McHugh May 19, 08 02:19 PM
  1. The ad references 12,000 miles peryear, not 4,000.00 as the writer proclaims.

    Posted by Joe Donovan May 19, 08 02:46 PM
  1. This just reinforces the fact that Japanese companies are run and managed by innovators and engineers, and the "Big Three" are, and have always been run by beancounters and admen.

    Posted by tony toolbag May 19, 08 02:51 PM
  1. Still, most Chrysler customers prefer something a little bigger. Only 33 percent buy cars; the rest go for SUVs, minivans, or trucks.

    And so Chrysler will continue "playing to its base," worried about retaining its existing market share, while its overseas competitors look to expand their market shares by offering new kind of vehicles.

    Posted by Otis Nihil May 19, 08 03:27 PM
  1. Actually Gene, "than" is correct, as in in comparison to, not as in "if/then".

    Posted by John May 19, 08 03:29 PM
  1. I love it! I hope Chrysler sells a boat load of cars!

    Road trips rule. Hemis rule. Mopar rules.

    Posted by 5x3 May 19, 08 03:41 PM
  1. The incentive is for 3 years or 12,000 miles. For people who commute 40-50 miles each way to work that would equate to about a half year. How is that saving money? Sounds like trickery marketing to me.

    Posted by S. McMahon May 19, 08 03:43 PM
  1. Gene Daigle:

    The offer is based upon the average gas consumption used by the vehicle you purchase for 12,000 miles per year for the first three years. In a car that gets 24 miles to the gallon average, that is 500 gallons of gas at $2.99 so a savings of about $380/year if gas stayed at $3.75. The worse your gas mileage, the more you benefit from this offer. It isn't all that much to get excited about, but if gas keeps going up it might be a decent offer compared with the cash back or interest rate offers.

    Posted by Dave C. May 19, 08 03:56 PM
  1. It also seems unfair to lump minivans into the discussion as "gas guzzlers." In reality, while they've never been trendy, minivans are a relatively fuel efficient way to transport a large number of people. A car like the Prius, if only seating 2-4 passengers comfortably, is actually less efficient than a minivan with 7-8 passengers. They've never been trendy, but for the larger American family, they're often the most affordable, practical, and fuel efficient option.

    Posted by Ben May 19, 08 03:57 PM
  1. Referring to comment #14:
    I don't have the actual load numbers, but I would wager that the overwhelming % of miles that a minivan is driven is actually driven with 1 passenger, i.e. the driver. Even if Mom spent every trip chauffering kids, and goes back home after she drops them off, 50% of the miles is spent with a single passenger.
    Ben (commenter #14) does have a good point, though, and it would be interesting to see if some agency has developed load numbers (average occupants per mile) for various classes of vehicles.

    Posted by Victor May 19, 08 04:53 PM
  1. To #5: There are potentially severe economic consequences for not bailing out mortgage lenders and borrowers - society could be much worse off overall if we do not do this. Not subsidizing gas, however, makes us all better off - but cutting down on pollution, inefficient growth patterns, productivity/time lost due to traffic , etc.

    Posted by james May 19, 08 05:03 PM
  1. Instead of offering $2.99 gas, Chrysler should offer something with it's SUV's that might REALLY help a buyer, like a set of 10-speed bikes to use when you run out of money to fill up your Hemi.

    Seriously, bottom line to everyone - if you can't afford it - get something else. Otherwise, pony up the cash at the pump like me and enjoy driving a sweet ride!

    Posted by Durango Hemi Owner May 19, 08 05:03 PM
  1. Dave McHugh:
    We do have the technology to make 100 MPG cars now. Of course any cars like that would be much smaller, have poor acceleration and lower top speeds. The Mars rover top speed is about 600 feet per hour (makes traffic at the Leverett connector look fast). The problem is that here in America most people want a car that has lots of horsepower for good pickup, drives great at 75 MPH and can carry lots of people and cargo comfortably. We want it all and blame the automakers when they can't give it to us.

    Posted by Dave C. May 19, 08 05:06 PM
  1. I find it interesting that even after Tara posted a link to the rules posted by Chrysler that there are some who simply cannot figure it out. if you do the math it is based on 3 years at 12000 miles per year per type of vehicle that you buy.

    http://www.chryslerllc.com/en/refuel/program_rules/

    not rocket since or a foreign language folks...

    Posted by John_Adams May 19, 08 05:35 PM
  1. Excellent article. Thanks for putting into words what's been simmering at the back of my mind since I saw that ad. I hate it when companies (or individuals, or the government) wrap themselves in the American flag and call green-minded folks "economy killers," meanwhile they encourage our citizens to consume things that are economically (in terms of our national dependence and individual wallets) and environmentally unsustainable. As oil prices continue to rise (and they will) what economic habits are better for our country: conserving energy wherever possible, or consuming like there's no tomorrow? (BTW, I like the hangover reference, Noah. The harder we suck on that bottle of oil now, the worse the withdrawal as it dries up.)

    Posted by Benjamin Oyer May 19, 08 05:51 PM
  1. So read through the rules....those of you with a little Honda should go buy an Aspen, put it in a garage for a couple of months and use the gas card to put gas in your 30 mpg plus car, then if you need a new car trade in the aspen for a newer Honda. The rules state the gas card is good on any card......

    think it through.... Aspen = 2400 gallons, your Honda gets 72000 miles on 2400 gallons (at 12000 miles per year that is 5 years of driving) and if gas goes to 4 dollars a gallon you have saved $9600.00 and have a brand new car.

    Posted by John_Adams May 19, 08 05:53 PM
  1. The price of gas keeps going up and up. Now we see that food prices are also going up because it costs money to produce and haul food to it''s destination. Food staples like wheat, rice and corn are getting expensive and fuel costs are partly to blame for this. It''s a vicious circle. Do the gas companies really think this will not come back to bite them. As public trust of oil companies continues to diminish, they may find they could be facing a strong consumer backlash. It''s true they hold the oil and gas but we hold the dollar and remember, it ain''t called the almighty dollar for nothing.

    Oil companies sell gas and carmakers sell cars that use gas so it's a mutually beneficial situation for both of them. The solution is to stop buying new cars for a year until carmakers start building 100% electric or hydrogen powered cars, not hybrids. This would send a message to both the carmakers and oil companies that they understand. Sorry car makers but you brought this on yourself by not speeding up the conversion. No pain no gain. Problem solved. Your welcome. Visit our website and take our gas price poll at www.nbtv.ca

    The results of the poll on NBTV indicate 76% of the public believe that the gas companies are fixing gas prices. 93% believe they are price gouging. 68% believe the gas companies and carmakers conspired to prolong our dependence on gas powered cars. 53% believe the gas companies and government conspired to keep the price higher than normal and sofar our new trust poll it shows that 100% of respondence DO NOT TRUST the oil companies. These are all the results up till now 12:49 pm Sunday May 18, 2008 You can check out the results yourself on www.nbtv.ca if you like

    Posted by Ted McKeown May 19, 08 06:03 PM
  1. Hey -- people should realize that by encouraging gas consumption by Chrysler-buyers, that pushes up prices for all of us.

    probably not enough to be significant -- wars 'n' all probably is a bigger effect :-)

    Posted by fredm May 19, 08 06:13 PM
  1. The real solution is to decrease dependency on cars and gasoline/oil. Period. Bike, take public transportation, carpool or walk! I live in Europe and the contrast between here and the car culture in America is stark. I think self-righteous gas guzzler owners will regret their habits, eventually.

    Posted by sj2912 May 19, 08 07:32 PM
  1. Until most of America including the vast majority of truck drivers learns to drive 55 MPH then all the crying is crap.

    How the heck can you complain when your doing 75 or 85 wasting gas????

    Posted by Clint May 20, 08 11:09 AM
  1. Over tha past 75 years, US car companies have resisted nearly every innovation, including the invention of the turn signal (drivers used to have to stick their arm out the window to indicate which way they were going to turn), seat belts (too expensive), variable speed windshield wipers, and airbags to name a few. They have resisted every innovation claiming its too expensive, not worthwhile, etc. Now they resist any meaningful innovation to improve fuel economy. The only thing they understand is when their sales tank. So buy those Hondas and Toyotas. Eventually the idiots who run the big three will get the message. IF they would just build a well designed, fuel efficient, and reliable car, people will buy them. Then, they can drop the gimicks like GM's Onstar and Chrysler's silly fuel program.

    Posted by MO May 20, 08 07:39 PM
  1. "Eventually the idiots who run the big three will get the message."

    Not so sure. It's been nearly 40 years since the last gas crisis and they haven't gotten it yet. They only "get it" when they absolutely have to, and that would be when high gas prices demand they produce fuel efficient automobiles. I'm not holding my breath for the next wave of high mileage cars produced by Detroit to last very long. Let's face it, the majority of Americans aren't going to give up their big, comfortable, loud, smelly cars that easily.

    Posted by $200 a barrell and waiting! May 21, 08 05:44 PM
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