Oil prices affect on boat prices

[GAJ0004]

I am sure you have all been seeing the drop in gas and oil prices lately. I had a boat dealer tell me a long time ago that the majority of the materials that go into boats are based from petroleum products. I would be curious to see if this drop in oil prices becomes long term if this will have any affect on boat prices. It would be nice to see prices come down, although I am sure it is wishful thinking.

[ForrestGump]

It takes forever and a day for a downturn in spot market costs for manufacturing consumables to turn into a depression in retail pricing.

[6balls]

A reduction in materials cost more likely to increase margin, not decrease MSRP.

[Bulldog]

Everything takes forever to adjust... Look at how the airlines are still charging "fuel surcharge" gas here in Alberta is the cheapest it's been for quite a while.

[Jordan]

One could argue that cheap gas will increase demand for boats.....and the price that people are willing to pay.

[Wish]

I'm just glad the petrol I put in keeps going down. Almost at $2.

[klindy]

$1.79 here in Texas. Going back up already. Was at 1.78 last week.

[oldjeep]

Fuel is a pretty insignificant cost compared to just owning a boat. While it'll be nice to pay less at the pump, it doesn't really impact the math for buying 50k - 120k boats.

[Horton]

Expect oil back to $100 a barrel within 18 months.

[thager]

Might be longer than that. Boys I know are a defiant group. They don't really need the money as they are swimming in it. Will have to fall below $ 43 a barrel before they get at all nervous. They're still drilling. If the big guys win we are all screwed by more moneyopalies.

[MattP]

Unfortunately I trust @Horton‌ but I have my opinions too

[Horton]

I work for Chevron and no one I know has a clue. Venezuela and Russia are screwed. I may be screwed.

 

T. Boone Pickens says 12 to 18 months

[m_pags]

I'm with @Horton on this one. As the owner of a few gas stations I watch the oil and RBOB markets pretty close and its amazing at the things can cause the market to go up or down (weekly inventories, jobs reports, Geo Political events, weather or just because they can). I have no idea why prices have dropped to their current levels but I sure wouldn't change my long term fuel budget. Just enjoy it while we can!

[LeonL]

Back to original post.....it's highly unlikely that any manufacturer would lower prices on an established product based on lower raw material costs. LIke @6balls said, just increase their margin.

[Than_Bogan]

The key factor is buyer price-sensitivity. If one boat manufacturer lowered its list by say $1000, would that make you a lot more likely to buy it? If nearly all of us answered yes, then competition would force boat manufacturers to pass any reduction in materials costs directly to the consumer. If we're all much more concerned with features and/or brand loyalty, then we aren't very price sensitive, and there's no reason any manufacturer should lower price.

 

I personally suspect the truth lies somewhere in the middle.

 

As far as predicting the future of oil prices: Long term it's remarkably stable in real currency, so "revert to mean" is a great prediction. Short-term, consulting a Psychic is gonna do just as well as consulting an industry expert!

[klindy]

At some point the oil/gas is worth more in the ground. It WILL go up eventually. The question is when.

[Horton]

the length of the supply chain and the number of people who have to touch a barrel of oil to convert it from crude to boat epoxy is pretty long. I would be surprised if the boat manufacturers realize a noticeable change in materials cost.

 

My guess is that the chemical companies that make the epoxy or the precursors to the epoxy could realize a small short-term increase in profit.

[Dano]

Saudi will only be willing to lose money for so long. Iran, Venezuela and others wl begin pressuring for reduced production and inflated prices. Next OPEC meeting will be the tell.

[Than_Bogan]

It will be interesting to see if anybody still controls enough of the production to do that price manipulation crap. There's been a lot of diversification since OPEC's days of total dominance.

 

For me personally, low gas prices kinda suck! Skiing on a public lake less than 30 minutes from Boston, there's always the threat of boat traffic. High fuel prices discourage recreational boaters a LOT more than they discourage addicts. The last few seasons, we didn't even have to switch to early morning in July and August: we were able to get good water after work. Some of this could be a "culture change" -- maybe there's just no such thing as recreational boaters any more. But I still fear low gas prices :).

[skidawg]

I am w/ Horton on this, but I'm optimistic the prices will start to increase this summer (or else I'll be shopping for employment outside of the industry). Any ballers hiring????

[Than_Bogan]

Well, Massachusetts has a short season and pretty nasty winters, but we ARE hiring. In fact, we at Cognex can't find enough qualified people in various engineering and operations roles -- maybe because anybody that smart doesn't want to live here :).

[Horton]

@Than_Bogan‌ do @skidawg‌ and I need to actually have "qualifications"?

[Than_Bogan]

@Horton 'Fraid so. But there are a lot of roles open. We sell mainly into fancy modern factories and they are building those at an insane rate all over the world right now, especially in China. So we're definitely having trouble keeping up. Classic "nice problem to have."

[Horton]

I like to work from 10 till 2 and take a 2 hour lunch.

[Skoot1123]

Agree with the short term lower costs increase short term profit margin. If there was really a distinct advantage to a boat company (or anyone selling something) in dropping a price they might do it via a mfg rebate instead of lowering the MSRP of the boat. A rebate is something they control on a per month basis (known money going out vs unknown amount). Creative accounting is what it amounts to - but when its all said and done I don't think the boat manufacturers will lower any costs. In fact - I want them to be profitable - very profitable, because that means I as a consumer will get better products (as long as they are investing in R&D - think Mastercraft and the Prostar).

 

As far as industry is concerned - really low oil prices aren't good for ANYONE. Short term drops are nice - and enjoyed at the pump. But long term we need investment from the drilling companies and oil/gas/shale exploration. That provides lots of direct jobs and TONS of indirect jobs.

[jerrym]

Boats hulls are constructed from polyester resin and glass fiber. The price of oil will help the resin producers' cost basis, and competition and smart purchasing agents will push the price of resin downward. This will start happening soon. Unfortunately the cost of resin has decreased as a percentage of the cost of a boat, with speed controls, touch screens, 2000 watt stereos etc. now being standard equipment. Not much hope for any significant price relief on the boats. We'll just have to settle for a 30% drop in fuel costs.

[skiray]

My 2 cents - Oil prices get blamed for raising prices, not lowering them. Price deflation is not a consideration for boat manufacturers due to oil prices.

 

Oil prices will come back. "Everyone" is against low prices. Big oil, oil employees / support organizations, oil producing countries, environmentalists... The list goes on.

[skidawg]

I'll work from 10-2 and skip lunch

[Fatroll]

Cheaper gas means more tubes and "Bro's" wakesurfing and boring us to death with their heelside only wakeboard jumps. Excuse my bitterness, I ski on public water. ;)

[DmaxJC_ski]

@Horton‌ oil better be back up long before 18 months or the preverbal $h#% will hit the fan around here!! I might be looking to sweep boathouses and polish boats to keep busy. It's not supposed to hit as hard as 09, the oil companies are lacking major infrastructure to house the production cardium horizontal craze. Boat prices here are determined by the US dollar, and at 1.16 US an average 200 nautique right now is $84,000 base, wakesetter 20 vtx, middle or the row equipped is $100,000. So oil goes up, dollar goes up, boats go down for us up north.