New Fuel Economy Standards a Good Thing

This past Friday, President Obama announced new corporate average fuel economy or CAFE standards that would require the average vehicle sold in the United States to provide 54.5 miles per gallon. The White House estimates the program will save consumers $1.7 trillion in fuel costs by 2025.

Projections on the policy’s actual benefits are mixed. The Michigan-based Center for Automotive Research claims the more efficient cars would cost $10,000 more, thereby overwhelming the $8,000 savings on fuel the new designs would save over a vehicle’s useful life. The Boston Consulting Group estimates a much lower added cost of $2,000, which would save consumers a net $6,000.

Conservative ideologues will likely bemoan the new fuel standards as an outright assault on free market capitalism. That said, there are two reasons why more pragmatic conservatives should support this measure:

1. It Reduces Dependence on Fossil Fuels

One research report claimed that the fuel savings would result in $152 billion of added spending power that could create up to 700,000 American jobs. Furthermore, the country would spend less on oil, which props up petro-kleptocracies like Saudi Arabia and Venezuela. An economy less dependent on fossil fuels is ultimately safer and more secure from the effects of geopolitical unrest half way around the world.

2. Free Market Capitalism Applies Only to Companies Operating Under Free Market Conditions

It is well and good to be a strong proponent of free market capitalism, but it is unfair to expect the government to allow firms to benefit from the free market in good times, but to lavish tax payer dollars on them when they fail. If a firm takes money from the government in bad times, they should expect more government interference in return.

And the automotive industry is the poster child for government largesse.

By my count, American auto companies have cost the American tax payer nearly $90 billion over the last three years.

Source: CNN, Reflections of a Rational Republican

Consumers should get something in return.

That said, if the major automakers were to pay back the government in full, like many banks did, I would have a problem with all this government interference.

Until then, it is time for Detroit to pay the piper.

About Sean Patrick Hazlett

Finance executive, engineer, former military officer, and science fiction and horror writer. Editor of the Weird World War III anthology.
This entry was posted in Business, California, Clean Energy, Clean Tech, Climate Change, Energy Security, Finance and Economics, International Security, Media, Middle East, Peak Oil, Policy, Politics, Taxes, Technology, Unions and tagged , , , , , , , , . Bookmark the permalink.

12 Responses to New Fuel Economy Standards a Good Thing

  1. Vern R. Kaine says:

    Interesting perspective, Let’s see if this forces the market to meet social concerns. I know the sales for energy-efficient vehicles have been low compared to SUV’s and F150 trucks, but now that more SUV’s and such are coming out hybrid, perhaps the sales numbers will change.

  2. Moe says:

    The new CAFE’s will be a very good thing. Of course, we could shortcut the whole process and just tax gas back up to $5/gal and watch the market kick into high gear then! Two summers ago, when gas shot up, it kick started the entire EV industry in the US. It also changed driving habits and I remember thinking it a remarkable example of how quickly people adapt.

    Did you see the pres of GM today – he was on (I think) with one of the Sunday gasbags. It was a fascinating interview. He said they can’t make enough alt energy cars like Volt. He also said the stricter CAFE’s mean Detroit et al will be designing new products, retoolling and manufacturing new stuff with new faciclities . . . and that means jobs. Or something like that.

    • I didn’t see the interview, but I hope American automakers rise to the challenge, because I still think the Japanese are ahead in fuel efficiency.

      • Moe says:

        Americans have time and again embraced fuel effiient cars only to have Detroit pull back when gas got cheaper or more abundant. The oil crisis in ’73 was one example. Before that, ‘foreign’ cars were rare. By ’74 Toyotas were all over the roads.

        This time, maybe because of the bail out (I”m sure pressure was brought to bear), it sounds like they’re really in. I hope so, cuz that’s the future and we’ve ignored it far too long.

  3. The problem “conservative ideologues” have with things like increased emissions standards is not the issue itself. Who wouldn’t want to stick it to OPEC and drive the price of their product down until their CEOs are rolling in to the office on camels? The problem is with the whole green movement and the job losses and energy price increases that, in the words of our president, “…will necessarily skyrocket”.

    I was watching Allen West speaking on the House floor the other day as he went through a list of a few of FY ’10’s 43 federal regulations and the estimated cost in lost jobs and private revenue. He then went on to give the same estimates on proposed green initiatives. The number of jobs at stake based on the report West cited was staggering, far higher than my most pessimistic estimates. Even more surprising to me were some of the regulations West mentioned. One was an EPA restriction on the amount of dust allowed on American farms. Another was an EPA requirement for microwave oven manufacturers to measure and report back the on how much energy their ovens use while the units are off. The most ridiculous item he mentioned was a Department of the Interior program that would impose an additional tax on Christmas trees in order to promote Christmas trees. Obviously all of this nonsense will increase production costs and these are just the funny little fringe items.

    This is the problem many have with jumping all over what appears to be a no-brainer coming out of Washington. It comes right down to a simple lack of trust…a well-earned lack of trust.

    • I totally agree that regulations have gotten completely out of control. That said, things like CAFE standards have worked in the past. I am happy to recommend a policy that has 1) been proven to be effective, and 2) improves national security. I believe CAFE standards meet these two tests.

  4. As to your assessment that corporations accepting federal bailouts should expect increased federal regulation, Personally I was against the auto bailout then and I still feel it was a mistake. But I suppose if their going to allow the governement to “help” then they should expect the government’s brand of help. But what do you do about Ford then? They accepted no handouts to the great frustration of the fed. I understand, Ford is simply screwed and will also be forced to comply. But you can’t rationalized increased regulation with being owned by the fed in Ford’s case.

  5. Moe says:

    A country needs national economic policies and goals beyond mere profit. Unless jobs and quality of living for its citizens is part of the plan, it’s a failure. CAFE is a smart and sensible start. As, I beleive, would be a serious federal investment in developing alternate energy sources, including gas. This is how new industries get started.

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