The Crude Economy

A circular argument: How cheap oil affects tire prices

Nancy Marshall-Genzer Dec 18, 2014
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The Crude Economy

A circular argument: How cheap oil affects tire prices

Nancy Marshall-Genzer Dec 18, 2014
HTML EMBED:
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This is a busy time of year for the Goodyear tire store and garage in McLean, Virginia. People want a tune-up before heading out for the holidays, or maybe want to pick up a set of tires.

Store manager Eddie Adiyeh has been selling tires for almost 30 years, so he should know: Do tire prices normally go down, along with oil prices? 

“I don’t remember them going down when the prices went down,” he says. “But I remember them going up a little bit when the oil went up.”

Goodyear owns Adiyeh’s store, and sets the prices. So I called a Goodyear spokesman, Keith Price, and asked: Will tires get cheaper?

His response: “I’m not able to comment or speculate on what might happen to the price of tires.”

But Price did say it takes a while for a tire to go from factory to warehouse to distributor to store. He figures tires being made now, with cheaper oil, should be in stores this spring. 

So will they be cheaper then?

“It’s not entirely black and white,” says Nicholas Mitchell, a senior vice president and research analyst at Northcoast Research who follows Goodyear. He says oil makes up about a quarter of the cost of synthetic tires, the kind most consumers buy. Mitchell thinks competition among tire manufacturers will push down prices.   

“Someone will move first and try to lower prices to drive market share,” he says.

But here’s why it’s not black and white: With gas prices down, we’re driving more, and wearing out our tires faster. If demand for tires rises, Mitchell says, prices won’t fall as much. 

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