Oil closed at a 29-month high last week, and this is something that Sirius XM Radio shareholders can't ignore, writes Rick Aristotle Munarriz, The Motley Fool column at msnbc.com.
It's not just about the obvious hit on disposable income. Higher gas prices encourage drivers to spend less time on the road. That's bad news for satellite radio, Garmin's GPS systems, General Motors OnStar subscriptions, or any other company relying on heavy auto usage to justify the expenditures.
If you're not driving as much as you used to, shelling out $15 a month for satellite radio becomes a less compelling value proposition.
Americans logged 3 trillion miles on the road last year, according to the U.S. Transportation Department. This is the highest tally since 2007, which capped off an impressive two-decade streak of increases. The recession obviously tripped up the auto industry after that, but it's hard to dismiss the spike in gasoline prices in 2008 as an important contributor.
The satellite radio industry suffered its only two quarters of sequential declines in subscribers during the first half of 2009. Is Sirius XM doomed if oil prices keep climbing given the unrest in the Middle East?
Let's get one thing out of the way: Sirius XM's stock isn't returning to its pocket-change prices. There are no bankruptcy concerns, and even a lull in subscriber growth is unlikely to derail Sirius XM's profitability.
Pain at the pump may also be a good thing for satellite radio. There are no more Cash for Clunkers rebates, but skyrocketing prices should drive owners of older gas guzzlers without satellite receivers to trade in their jalopies for fuel-efficient hybrids that have factory-installed Sirius or XM receivers.
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