US to Adopt Tighter Fuel Efficiency Standards

President Obama will announce today that the US government wants car makers to increase the efficiency of America's fleet of road vehicles. According to official leaks, the Corporate Average Fuel Economy [CAFE] standards will demand that passenger cars and light trucks get an average of 35.5 miles per gallon by 2016. Currently, the CAFE standard is 27.5 miles per gallon for cars and 23.1 for trucks. What is most interesting is the alliance of supporters backing this; it is composed of the usual antagonists among state and federal officials, the car companies and environmentalists.

Customarily, the auto makers have opposed increases in CAFE standards because it adds to the price of a vehicle. Indeed, the figure being kicked around is $600 per car to meet these 2016 standards. Existing requirements already add around $700 to the sticker price. However, owners should save enough gas to make up for this in the long run.

The Alliance of Automobile Manufacturers' [AAM] other main complaint was trying to build cars that met various, inconsistent state requirements. The California Air Resources Board, for example, creates standards for California that 14 other states follow. Since the Obama administration is boosting CAFE standards to levels California wants by 2016, the state government there has decided not to pursue its own plans for now.

Dave McCurdy, president and CEO of the AAM, said, “President Obama's announcement ends that old debate by starting a federal rule making to set a national program. Automakers are committed to working with the President to develop a national program administered by the federal government." Moreover, GM and Chrysler are in no position to resist, so their taking the best deal they can get.

As for the environmentalist lobby, they win pure and simple. While not quite gloating, Frances Beinecke, president of the National Resources Defense Council, said, “These new national rules build on California's ground-breaking standards to tackle global warming pollution from cars and trucks. Starting in model year 2012, the new standards will deliver cleaner, higher-mileage cars nationwide, cut global warming pollution, and save drivers money every time they fill up.”

The losers here are the oil companies. The standards could save up to 1.8 billion barrels of oil between now and 2016. According to the Energy Information Agency, that's 86 days worth of oil that America won't consume. With that kind of demand loss, it is hard to see how the oil industry will ever regain the profitability it had just 9 months ago.

© Copyright 2009 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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