Symbol of supply and demand

June 14, 2004
If there were a single symbol of the seemingly schizophrenic US attitude toward crude oil supply and demand in recent years, it would have to be the wide-body hero of Desert Storm.

If there were a single symbol of the seemingly schizophrenic US attitude toward crude oil supply and demand in recent years, it would have to be the wide-body hero of Desert Storm.

No, I'm not talking about retired US Army Gen. H. Norman Schwarzkopf. I mean the Hummer, the popular high-priced, low-mileage, all-terrain vehicle that was introduced to US television viewers during that war.

The odd-looking vehicle probably garnered more prime TV time during that conflict than Schwarzkopf and CNN star correspondent Wolf Blitzer combined as it was seen night after night roaring across sand dunes in pursuit of Iraqi forces that had invaded Kuwait.

Popular vehicle

It created such a favorable impression among TV viewers that the manufacturer, AM General Corp., announced in 1991 that it was coming out with a civilian version in response to popular demand.

Since then, General Motors Corp. has enjoyed a lucrative business marketing to US drivers the H2 civilian version of the H1 military Hummer.

Proponents point out that the H2 Hummer has unbeaten cross-country ability, durability, and safety records. According to Automania, an online automotive assessment site, "All the models have a 6.5 l. engine displacement V8, an automatic four-stage or two-stage gearbox, and a permanent four-wheel drive, as well as an air conditioner.

On request of the customer, the Hummer is equipped with a system that allows it to pump its tires on the move, a winch with a pulling capacity of 3.6 tons, an audio system with a CD player and a trunk on the roof.

The most powerful Hummer, weighing 4.7 tons, is equipped with a diesel engine with a turbocharger that goes up to 195 hp, and reaches up to 134 km/hr. It is capable of overcoming slopes of 60º and fords of 0.8 m.

What more could an average suburban soccer-mom want in the way of transportation?

Fuel consumer

Unfortunately, the Hummer also is one of the biggest gasoline-guzzlers on the market. Consumer Guide's online assessment of the 2005 Hummer said its "over 8,600 lb gross vehicle weight exempts H2s from [the US Environmental Protection Agency's] mileage-reporting program, but our test H2 wagon averaged just 10.7 mpg, even with mostly highway driving."

In a 2003 survey by J.D. Power & Associates, civilian owners ranked the Hummer last in a benchmark poll of vehicle owner satisfaction because of excessive fuel consumption.

In a May 6, 2003, report by Reuters news service, a top GM executive was quoted as verifying that the H2's high fuel consumption was the No. 1 complaint among owners.

The vehicle's gas-guzzling ways apparently did not immediately impact Hummer sales, however. The Reuters report said, "Hummer is the only GM division that has sold vehicles this year [2003] without costly sales incentives, such as the 0% financing offer that has swept the industry."

Consumer Guide said, "The H2 was a hot seller in its first year, but high fuel thirst and record [gasoline] prices deflated demand and swelled dealer inventories in early 2004."

That's not to imply that the Hummer is solely or even primarily responsible for the currently tight supply of gasoline in a growing US market.

In recent years, a wide variety of heavier-bodied, more-fuel-consuming trucks and sport utility vehicles has become the vehicles of choice among a growing number of US motorists.

However, it's ironic that the civilian version of the Hummer is a contributing factor in the tight US gasoline market at the same time that the military version is still on duty with the US-led coalition forces in Iraq as part of the continuing effort to make the Middle East safe for oil production.

"Retail gasoline prices may be 39% higher than a year ago, but this has not stopped demand growth in its tracks," said Paul Horsnell, Barclays Capital Inc., London, in a June 3 report. "To get the US gasoline market into balance, demand does have to fall, given that the supply side has little left to offer."

Meanwhile, GM plans to introduce a smaller version of the Hummer in 2006. The new H3 "should be over a foot shorter and some 7 in. narrower and lower than H2 on a wheelbase of about 119 in. It should also be somewhat lighter, though piggish fuel thirst may remain a deal-breaker for some prospects," said Consumer Guide.