Gasoline prices are becoming so unbearably high that one of Canada's top banks is predicting a "mass exodus" of vehicles from U.S. highways within four years, with a slightly less dramatic drop expected in Canada.
CIBC World Markets said in a report Thursday that gas prices in the U.S. will hit US$7 a gallon -- the equivalent of C$1.86 a litre -- two summers from now. That marks a 70 per cent increase over today's record levels.
"Over the next four years we are likely to witness the greatest mass exodus of vehicles off America's highways in history," wrote chief economist Jeff Rubin.
There will be about 10 million fewer vehicles on U.S. roads by 2012 and average kilometres driven will drop 15 per cent, the report said.
Canada will only experience about 70 per cent of the U.S. decrease, said CIBC economist Benjamin Tal.
"Canada will feel the pain, but it's not going to be the same as in the U.S.," Tal said in an interview, noting that there will be about 700,000 fewer cars on Canadian roads by 2012 and a 10 per cent decrease in average kilometres driven.
In the U.S. case, low-income families will account for the biggest change, whereas in Canada the greatest shift will come from the middle-income bracket, Tal said.
"In Canada more low-income Canadians have access to public transportation, therefore the adjustment will not come from them. The adjustment will come from middle class families that will start giving up the second or third cars," he said, adding that much of the higher tax Canadians pay tends to be invested in urban transit systems.
Another report Thursday from Scotia Economics said record-high gas prices are leading to a big change in purchasing habits.
"With Americans abandoning their gas-guzzling SUVs and pickup trucks for small, more fuel-efficient vehicles, we estimate that the average fuel-efficiency of this year's fleet has climbed by nearly 20 per cent from the previous model year," said auto industry specialist Carlos Gomes.
Small cars now account for one-quarter of overall U.S. sales, up from 16 per cent last year, the Scotia report said.
"In fact, small cars and fuel-efficient crossover utility vehicles now account for 42 per cent of the U.S. market, up from 30 per cent in 2006 and double their sheared as recently as 2001," Gomes said.
One the other hand, sales of pickups and SUVs are down to only 19 per cent of U.S. volumes, compared to 36 per cent in 2001.
The meteoric rise in global crude oil, which was trading above US$138 a barrel on the New York Mercantile Exchange midday Thursday, has been a major factor in soaring pump prices.
The average pump price in Canada Thursday was C$1.38 a litre, nearly 30 cents higher than what it was a year ago, according to the price-tracking website Gasbuddy.com.
Americans were paying US$4.07 a gallon, the equivalent of C$1.08 a litre.
