As of 2007, when gas prices were on the rise, the price premium for a hybrid (a gas-electric vehicle) was about $5,000 versus a conventional gas-burning vehicle. Even at those higher gas prices, the break even for a hybrid compared with gas was six to 10 years. Today, with gas down 2005-2006 levels, we can only estimate that the break even for a hybrid would be extended to 10-15 years.

These numbers don’t compute for a country in the throes of recession. Since the start of the recession in December 2007, as recently announced by the National Bureau of Economic Research, the number of unemployed people surged by 2.7 million, and the unemployment rate rose by 1.7 percentage points.

With people out of work, the argument that higher prices at the pump would translate into more sales of hybrid and electric cars is on the verge of crumbling. We can see it today. Gas prices at their lowest in years, but no one is spending money on anything — simply because they don’t have it. And it will likely take consumers years to get back on their feet.

The brilliant Dr. Chu, director of the Lawrence Berkeley National Laboratory, has flogged the notion that it takes a combination of regulation and higher prices to rein in energy consumption. He advocates that the U.S. tax gas to the levels of Europe and Japan, forcing American consumers and the auto industry into a green lifestyle.

But the underlying assumption here is that consumers have money to spend, and that they’re willing to spend it on the green-car premium.

While the Big 3 surrender, waving the green flag in the halls of Congress, Detroit still hasn’t proven that it can make a red cent on small cars. And even if they can pad in a modest margin, they still find themselves in the quality battles they have consistently lost to German and Japanese car makers.

Now we’re seeing a return to higher gas prices as drillers cut back on exploration.

Oil and gas drilling activity in the U.S. in the wake of falling energy prices.

In its weekly accounting, Baker Hughes Inc. reported Friday that the number of drilling rigs working in the U.S. had fallen to 1,790, down 12% from the September peak and down 2% from the same time last year.

Given that rising gas prices are in the cards, it seems that consumers will now be forced to stay home rather than try to conserve fuel through green vehicles for years to come.

GM and the other big-three Detroit automakers have feasted on the fast-growing market for pickup trucks and SUVs for years. But with gas now above US$4 a gallon and climbing fast, big-rig drivers are mailing their keys back to the auto finance companies today.

I’ve talked to a half-dozen people in just the past few weeks who are ALL trying to unload their big gas-guzzling trucks or SUVs. One friend of mine drives a Chevy Suburban: GM’s top-of-the-line road hog. She’s had it for sale over a month now…No takers. In fact, even the local Chevy dealer won’t take it!

Anyway, back to the GM shareholder meeting…In its quest to stop bleeding red-ink, GM is backing-up its entire business plan. The company is shuttering four U.S. production plants – all of which built trucks or SUVs.

“Higher gasoline prices are changing consumer behavior, and they are significantly affecting the U.S. auto industry sales mix,” says CEO Rick Wagoner. Imagine that!

Now that US$2 gas is gone forever, GM has very high-hopes for its plug-in electric hybrids. GM should have made that switch years ago, rather than being asleep at the wheel and building Hummers instead.

You may not find these battle-ready Hummers on GM car lots much longer – but be sure to look for sleek new plug-ins coming to a dealer near you for the 2010 model year.

MIKE BURNICK, Senior Editor & Global Markets Analyst

EDITOR’S NOTE: The days of $2 a gallon gas may be gone forever. As this crude-reality sinks in, you’ll see a major switch toward hybrid cars, and other alternative energy investments. In fact, it’s already started. Read our special report: How to Profit from the Great Fuel Revolution to find out where this investment money is headed now.

Source: No More Hummers in America – Shocker!