I have seen a plethora of articles like this one on MSN proclaiming that now is the best time ever to jump into an SUV. The articles invariably point out the low price point and their prediction that gas prices will go down to "normal" levels in the future, which in turn makes SUVs less costly. Of course, these articles completely ignore the why the price of SUVs are so low and how exactly gas prices are going to go back down.
The simple economics explanation for the low SUV prices is that demand has dropped. And an economist would assume that people were acting rationally and decided that the costs of an SUV were not worth the benefits. Of course, markets can be wrong, but a basic presumption of all economics is that markets work efficiently. The price is set by what the collective society values a product as. It is true that emotion (something economics struggle to grasp) can disrupt markets and many of the articles point out negativity towards SUVs now, but there is no evidence that this emotion is what is dragging down prices. In fact, it is pretty clear to me that emotion was artificially boosting SUV in the past; people were feeling patriotic about driving Hummers, and SUVs were the new it product. Regardless there is no credible evidence that SUV prices are going to rebound in the future; the entire argument rests on the assumption that current prices will trend back to past prices over time, but this assumption is fundamentally flawed, just ask anyone still looking for tech stocks to hit 2000 highs.
This flawed reasoning also affects the conclusion that gas prices will drop. The entire argument rests on the memory of $14 per barrel oil of the 90's. But those prices were unnaturally, historically low; OPEC was having trouble controlling supply, industrialized countries were not driving up demand and emerging markets were not humming yet, and there was a period of relative calm in the world. But all of these conditions are gone. OPEC has reigned in its exports, the US has wholly abandoned conservation under Bush, the emerging markets are gobbling up huge quantities of oil, and I see no way that even relative peace will return to the world, especially the oil rich Middle East in the next few decades. My question is where the drop is prices is going to come from. No article has even begun to address this; every single one relies on the false promise that gas was cheap and it will be cheap again.
To me it seems like mere hogwash to be proclaiming now the time to buy a SUV. Certainly some Americans need a SUV for their business related needs or would want one for recreational purposes, such as towing a boat, but if buyers of cars ignore the clear trend of higher gas prices based on a flawed notion that prices must come back down, they are going to stick themselves in gas guzzlers that are going to lock their finances into buying gasoline to run the behemoths.