A victory for car buyers and drivers (and taxpayers, too)

  • 9 August 2018
  • NormanL

Only briefly noticed, but possibly very important over the long term, was a Trump administration decision to freeze current car fuel economy standards at 37 miles per gallon.

Why is this a big deal? It's not just about making cars less expensive. It's also about making them safer, something the Obama administration decided wasn't all that important:

...Obama bureaucrats were acutely blind—perhaps willfully so—to economic and technological trends in 2012 when they set a fleetwide average benchmark of 54.5 miles a gallon by 2025. The Environmental Protection Agency assumed unproven technologies would be widely adopted, but many have stalled or combusted. Dual-clutch transmissions resulted in a sudden loss of power and throttle, for example.

The EPA projected that oil prices would be about $125 a barrel today and “high-cost petroleum liquids projects” in unstable regions and biofuels would be among the “most important components” of new supplies. Production in Venezuela and Libya has plunged, yet oil prices are about $70 per barrel as U.S. shale drillers increase output.

Americans prefer bigger cars, which makes it harder for automakers to meet the escalating Cafe targets. SUVs and pick-ups make up about two-thirds of vehicle sales. Incremental improvements in fuel efficiency are also becoming more costly. Carmakers should be able to achieve the standards over the next couple of years due to credits for technologies like low-leakage air conditioning systems.

But automakers would have to sell hundreds of thousands of electric cars—or buy credits from those that do—to meet future Cafe targets. And consumers aren’t buying electric cars en masse despite subsidies that can amount to $10,000 a car in California. Former CEO Sergio Marchionne estimated that Fiat Chrysler lost $20,000 on each electric car it sold. Carmakers then must raise prices on SUVs and pick-ups.

As prices rise to meet the new standards, consumers would also wait longer to replace their cars. The average age of a car is approaching 12 years, up from about 8.5 in 1995. Newer cars are more efficient and safer, so longer vehicle turnover could result in more traffic fatalities and increased CO2 emissions.

California is likely to fight the freeze in court. While any speculation on the outcome of such litigation is difficult, in the meantime, the administration has opted to do the safe, sensible, economically smart thing and stop the mad dash toward less safe, more expensive, high mileage cars.