The article being reviewed is titled ‘Auto Executives Dismiss Fears of Plateau in Global Demand’ which appeared in The Wall Street Journal on January 13, 2016. The article discusses the impact of increasing utility of cars due to falling oil prices, which have resulted in expectations of demand increasing over the coming period.
Fall in oil prices have resulted in gasoline prices coming down to $2 per gallon or even lower in some areas. Auto companies expect that such prices will persist in the near term and as a result the demand for cars is expected to go up (Rogers and Bennett, 2016).
In the past few years of high oil prices, companies had started manufacturing electric fuel or hybrid cars with the argument that the utility for high fuel consuming gasoline-run sedans is decreasing which will modify consumer behaviour towards higher demand for electric and hybrid cars (Rogers and Bennett, 2016).
However, with oil prices coming down, the utility of owning gasoline run cars has increased once again, which has meant that the consumer demand for sedans and SUVs has gone up.
The article mentions that most companies are shifting their manufacturing patterns towards high end cars and SUVs. Further, although the demand is going up, but the margins are declining, affecting the profitability of the companies. As a result, many companies have resorted to higher share buyback programs and larger dividends (Rogers and Bennett, 2016).
In my opinion, the article makes a valid argument regarding the effect of utility of a product on the demand for the product. As the utility for gasoline cars was declining in the past due to higher prices, demand had plateaued, however, as oil prices have declined, the utility for such cars has gone up pushing the demand too.
Works Cited
Rogers, Christina and Bennett, Jeff. Auto Executives Dismiss Fears of Plateau in Global Demand. The Wall Street Journal. Web. 13 Jan. 2016. <http://www.wsj.com/articles/auto-executives-dismiss-fears-of-plateau-in-global-auto-demand-1452713128>.
