$2,500 cars = $200 oil?

Last week we were talking about oil hitting $100.

Is it too early to think about $200?

Not on the New York Mercantile Exchange. Options for December delivery of crude at $200 are the hottest bet in the market, with the number of contracts rising a record tenfold in the past two months, according to Bloomberg News.
On Thursday, the Indian automaker Tata Motors is expected to unveil a car that sells for $2,500.

That’s less than some Americans will spend on a big-screen high-definition television before the Super Bowl. But it’s within reach for many in India’s emerging middle class, where the nominal per capita income is $1,089, according to the International Monetary
Fund.

The car, of course, is not something most Americans would want to drive. Tata’s design codifies cheap, and the sacrifices are legion, according to a description in the New York Times. Standard safety equipment for most U.S. vehicles, for example, costs more than $2,500.

The new Tata will not, by our standards, be safe or environmentally friendly, and it probably won’t be fun to drive. It has a maximum horsepower of about 35, the Times reported, so it’s more lawn mower than muscle car.

But that’s not the point. Tata knows that most people who already own cars won’t be interested in its new model, whose name hasn’t been revealed.

It’s targeting the hundreds of millions of people in the developing world who now ride scooters or bicycles or walk.

If it succeeds, crude prices may continue their climb of the past year. The Tata probably will consume far less gasoline than the sport utility monstrosities common on American highways, but even the addition of several hundred million lawn mowers would rattle the markets.

“This is going to really shoot demand to levels we have not seen before,” said Michael Economides, an oil expert at the University of Houston and a former adviser to several state-owned oil companies. “That’s going to open up segments of the population that weren’t accessible.”

Houston Chronicle