The scary thing is how high the price of oil could eventually go. Notional price ceilings for a barrel of the black gold keep getting broken. In the US, trucks are already taking a battering in the market and Detroit is clearly playing catch-up now that cheap gas has apparently gone.

How bad will it get? We'll have to wait and see. As I keep telling people, it's early days. The price of oil looks more volatile than it used to be. The weak dollar has channeled speculative funds into something that has resembled a one-way bet. But the market could yet move the other way and there might be a mini stampede if it did.

If that seems like wishful thinking, maybe it is. With the growth of China and India in particular, perhaps we'll simply have to accept that a long era of cheap energy has come to an end. There just isn't sufficient supply, it seems, to cope with the much higher global demand that occurs every day. Adding more production capacity quickly is clearly problematic and we won't be digging up Antarctica for a while yet, so at least the penguins can relax.

And I don't think they are crying themselves to sleep over at OPEC.

But the high cost of gasoline is perhaps not entirely a bad thing for us in the long run. We might be encouraged to be a little more thoughtful with our energy usage and economize more than we would otherwise have done. We'll be less wasteful and we can be good to the environment at the same time. And, let us not forget, there are tremendous technical advances going on continually in this industry and they will keep on coming.

There's already a diesel Mini that produces less CO2 than a Toyota Prius. Take a look at a Tesla Roadster and tell me there's no hope for a greener future with cars. Lithium-ion batteries with decent performance characteristics are being developed. It's not all bleak if energy prices are eventually higher but nevertheless reflect the real costs of primary extraction and fuel usage, including any associated negative externalities for society at large. 

That silver lining thought might ease the current pain a tad but for the fact that there is other pain being inflicted on us at the same time. It's a kind of double whammy.

In the US and Europe we're also facing an economic slowdown being wrought by the ongoing credit crunch. Punch drunk consumers who are suddenly getting mauled by obscene energy and food bills also face falling property prices in some places (most notably the US, UK and Spain).

And if that was not enough, there's the growing realization at the main Central Banks that injecting liquidity via lower interest rates risks fuelling inflation even further. Interest rates ain't coming down as quickly as some of us might like and a shortage of funds on wholesale credit markets is even sending mortgage rates up in Britain.

Say hello, potentially, to a taste of the stagflation we experienced in the 1970s when oil price shocks simultaneously brought us inflation and recession to go with other delights of the time such as Rod Stewart in tights, strutting union shop stewards and a wailing Jimmy Osmond. Not pretty.

So, that's broadly the not so good news right now and it makes life tough for all car companies, but especially those like Ford and GM who are also busy restructuring and trying to get their houses in order.

Its like mending your roof while the hurricane is still blowing.

It won't be easy, of course, but both companies are clearly doing the right things and getting the building blocks for a viable future in place. And Chrysler? Thats a funny one, but there is value buried in there, however bleak things look when you major on making products that are rapidly going out of fashion.

But if things are that bad, how are automotive companies keeping themselves afloat? Two words: Emerging Markets (EMs).

For the car companies they offer a source of growing volume, which is important to both spreading high investment costs and raising revenues. That volume is more than compensating for flat or declining volume in traditional markets. For both OEMs and major suppliers EMs also offer the opportunity to outsource and save on component manufacturing costs and increasingly on component product development costs like engineering as well as R&D, too.

Without growth in the BRICs and elsewhere, things would be an awful lot worse in the automotive industry right now. Yes, things are a little grim at home for Ford and GM but both companies are doing very well elsewhere in the world. It's the same story for the Europeans, too Fiat, Renault, PSA, Volkswagen, BMW and Daimler. Activity in EMs has become absolutely vital for all these companies. Without the support of EMs it would be a very different story.

So there it is. Yes, things are bad, but they could be much worse and thank goodness for EMs. They may be effectively stinging us all on their voracious appetite for oil and other commodities, but their economic development was inevitable when their economies were opened up and deregulated.

And on a per capita basis they are still using a lot less energy than us, as they are keen to point out during the Kyoto rows.

EMs are economically highly inspirational and you cannot blame them for that. The genie has been well and truly let out of the bottle.

And in the automotive industry we all have a big vested interest in EMs not catching an economic cold, especially while we have a slight case of the shivers ourselves.

Dave Leggett

Dave Leggett is editor of leading auto industry website just-auto (www.just-auto.com).  Under his direction an experienced editorial team and network of international analysts provide a unique blend of up-to-the-minute news, research, commentary and analysis. just-auto is also a major publisher of market research reports (www.just-auto.com/store/).

Dave maintains an online blog that provides a topical commentary on latest developments in the global auto industry, key events, people and his daily experiences at: Daves Blog (www.just-auto.com/blogs.aspx).