Neal E. Boudette wrote an interesting article GM, Toyota Differ On Future Direction Of Gasoline Prices (subscription required).
The recent spike in wholesale gasoline prices to $2.60 to $2.70 "is abnormal relative to demand, relative to supply. It's being driven by the fact that we've taken 10% of our refining capacity off the market for the short term."
GM believes "the market in total is smarter than any of us individually and if you look at the market in total it expects prices to come back down rather significantly by year end," Mr. Ballew said.
In contrast to GM, a top executive from Toyota Motor Corp. said the Japanese car maker expects gas prices to rise.
"The cost of oil is going to continue to increase," Jim Press, president and chief operating officer of Toyota's U.S. sales unit. "In the long term and the short term."
Mr. Press said this view is based on the fact that demand for oil is rising and even before Hurricane Katrina U.S. refineries were operating at full capacity. "As we look forward, the fact is our country doesn't have the cushion in refining capability," Mr. Press said.
I know that they both cannot be right. It will be interesting to see how gas prices play out over the next several months.
As an aside, there have been several negative articles on GM recently as well as a few positive articles, including one well written Barron's article Can GM Break Through? (subscription required). In this article Richard Rescigno interviewed Mark LaNeve, chief North American marketer, General Motors.
I find the GM story interesting because I believe the company is in a very difficult position, even though it is doing well with regard to quality as indicated by the J.D. Power awards. Unfortunately for GM, I think its legacy costs and its product line that emphasizes gas guzzling SUVs and Hummers will prove difficult in this environment. Taking the opposite view is Kirk Kerkorian, an 87 year old billionaire who recently purchased a huge stake in GM. Obviously given his age, Kerkorian is not looking to be a buy-and-hold, long-time, passive investor.
So I am curious how this story will eventually play itself out. I have written several short articles on GM, where I have indicated my bearish outlook. For those interested, you can use the search feature to see my prior articles regarding GM.
I remain short GM stock.
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