A View from Here

Bill's Sisson's weekly Trade Only blog

Consumer confidence, measured in nautical miles per gallon

The continued turmoil in Libya and the Middle East has parked concerns over rising fuel costs on the front burner.

The most recent consumer confidence figures bear that out. After five consecutive months of gains, The Conference Board reported Tuesday that consumer confidence dropped to 63.4 in March from 72 last month. Analysts attribute the decline to rising gasoline and food prices (stemming in part from expectations about inflation), the poor labor and housing markets and uncertainty about Japan.

As one senior economist put it, the average American is getting “whipsawed” by gasoline prices. There’s no question that the price of gasoline can have a psychological impact on consumers, eroding confidence and reducing discretionary spending.

Early this month, AutoNation CEO and Chairman Mike Jackson told interviewers that the industry had not yet hit the “freak-out” number where people trade in SUVs for fuel-sipping cars. That number, he said, was above $4 for a gallon of regular — which puts crude in the neighborhood of $125 a barrel.

It’s higher than that for boats, but how much higher? What’s the number that causes the use of existing boats to drop? Or a potential buyer to wait until the world simmers down a bit before pulling the trigger?

After our experience with escalating gasoline prices in 2008, we’ve all grown a bit hardier in the face of rising fuel prices. And although few of us believed that fuel prices would stay low, the timing of these most recent increases is unfortunate. With a bit of a breeze finally at our backs, the last thing we need this spring and summer are headwinds from the fuel dock.

We are still a long way from the highs set in 2008, when crude nearly hit $150 a barrel and boaters were shelling out somewhere around $4.90 for a gallon of gas and more than $5 for diesel.

That summer I remember hearing the rationale that even if you didn’t take your boat out as often because of the price of fuel, it was nice just to go down to the marina and hang out on it — use it as a waterfront cottage. There’s truth to that, but boats and boaters are happiest under way. You can’t build a healthy industry when the price of a gallon of petrol or diesel keeps your boat in the driveway or tied up in a slip.

Despite recent significant improvements in engine technology, powerboats generally are not an efficient form of transportation. It takes a fair bit of power to get most boats over the hump and on plane, especially those in need of a diet.

A tug or trawler might get 4.5 nmpg cruising at a displacement speed of 7 or 8 knots. In our world, that’s damn efficient, even if it may be a tad slow for many. I recently saw the numbers for a 40-foot sportfisherman powered by twin 800-hp diesels: about 32 knots at 2,100 rpm, which translates to less than 0.5 nmpg. A 35-foot center console with triple F350s might get about a mile a gallon at 30 mph, its optimum cruising speed.

Members of the tribe understand that this is what you burn — and this is the price you pay — to run fast or to own a particular type of boat. To date, it sort of goes with the territory. But I wonder about first-time buyers who know little about boats, the young couple who drive into a dealership in a Jetta or Mini Cooper or small Honda. Will they get it?

Consider where the cost of energy could be headed in five years, a decade, 25 years. You don’t want to be caught flat-footed, trying to sell ice to Eskimos in the middle of a long winter when your competition is selling snowmobiles and heating oil. The car companies today have far more fuel-usage balance between SUVs and trucks and more fuel-efficient vehicles, making them less vulnerable to fuel price spikes than they were in 2008. Can we say the same?

If you plan to stay in the industry long-term, you might do well to consider fuel efficiency when you update your product line, either as a builder or a dealer. Modest power, modest speed, modest accommodations in a lightweight hull: It doesn’t have to be complicated to be more efficient. That market is there today and growing as we speak.

Comments

2 comments on “Consumer confidence, measured in nautical miles per gallon

  1. Steven Weiss

    I’ve long been amazed that powerboat builders have done so little to respond to the ever increasing cost and environmental concerns surrounding high-speed, high-powered power boats. I believe that many in the powerboat-buying market would consider more fuel efficient designs if there was more development – and choice – in the marketplace. To that end we have developed a series of fuel-efficient powered cruising boats – PC Powerboats. These designs offer a middle way between the high-powered, fuel-guzzling twin engine designs so often seen sitting idly in their slips, and the displacement mode trawlers that wallow along at sailboat speeds.

    See our line of single-engine, semi-planing powered cruising boats at http://www.weissyachtdesign.com. While on the site, you can also download a document which more fully details our PC Powerboat philosophy.

  2. sunshine state

    The fact that history repeats itself is so predictive in the pleasure marine industry realm.

    “Dual Mode” vessels offering comfortable and efficient “hull speed” along with bonafide mid teens (knots) planning have been in existence for decades. Perhaps surprising examples include 42 & 53 Hatteras Motor Yachts and the Hatteras 1980-84 vintage “Dual Mode” 48 Motor Yacht.

    Recent developments in diesel engine design addresses the sometime harmful effects of operating high performance engines at low speed operation for protracted periods of time.

    Europe based Beneteau has been pursuing this design and market since 2002.
    Beneteau “Swift Trawlers” have recently emerged in the US almost as if by magic.

    On another note in the world of fuel price psychology,it amazes me that no one in the industry is willing to approach the question as to why,as in the case of Florida,marina fuels are priced quite a bit higher than highway fuels when in fact there is not a highway tax levy on the marina fuels.

Leave a Reply

Your email address will not be published. Required fields are marked *

Comments are moderated and generally will be posted if they are on-topic and not abusive. For more information, please see our Comments Policy.