Fueling Decline: Obama’s New Mileage Standards

Thanks to new rules announced today by the Obama administration, the fuel efficiency of our nation’s cars and trucks will double over the next 13 years.  With gas prices once again nearing $4 per gallon, the Environmental Protection Agency (EPA) is trying to spin this as a win for consumers:

The Administration’s combined efforts represent the first meaningful update to fuel efficiency standards in decades. Together, they will save American families more than $1.7 trillion dollars in fuel costs, resulting in an average fuel savings of more than $8,000 by 2025 over the lifetime of the vehicle. For families purchasing a model Year 2025 vehicle, the net savings will be comparable to lowering the price of gasoline by approximately $1 per gallon. 

Even if you trust the EPA’s math (which you shouldn’t), the numbers still don’t add up.  According to an analysis (which has been pulled off the website) by the Center for Automotive Research, stringent mileage standards could add $10,000 to the cost of a new car.

Let’s do some quick math, shall we?  If something costs you $10,000 and saves you $8,000, you are still in the hole for $2,000.  This, President Obama said, would be “good for middle class families and it will help create an economy built to last.”

The Heritage Foundation’s Nick Loris explains:

We are fortunate to have President Obama and his expertise in the auto industry looking out for the consumers and saving us money. But will consumers actually save money? It depends on whom you talk to. The government acknowledges that increased fuel efficiency standards will increase the upfront cost of a vehicle but that higher prices will be offset by savings on gasoline. Generally, these cost savings assume that the buyer keeps the vehicle for its entire lifespan, which usually doesn’t happen, and it also assumes the government’s increased price tag is accurate. Automotive systems engineers argue that it’s not—it’s much higher.

Higher prices reduce demand and force people to hold onto their older vehicles longer. Reduced demand means fewer cars produced, which means automakers have to shed jobs. The Michigan-based consulting firm Defour Group projected that a 56 mpg standard would destroy 220,000 jobs.

This is the logical conclusions of President Obama’s You-Didn’t-Build-That mentality – consumers should not be trusted to make rational decisions, and we (the government) will do it for them.

That mentality, of course, ignores that consumers are rational.  In a mileage standard critique from 1985, Heritage explained how consumers make rational decisions:

That [second] oil crisis, which drove the retail price of gasoline above $1 per gallon–despite price controls–gave consumers their first real economic incentive to purchase fuel efficient automobiles. They did so in great numbers. In response, U.S. automakers embarked on an $88 billion capital expenditure program to increase gasoline mileage and improve the quality of their products. By 1984 the fuel efficiency of the U.S. automobile fleet had improved by 70 percent over 1975 levels In addition, the average weight of a U.S. built car had dropped by 1,000 lbs a key change since weight is the single most important determinant of automobile fuel efficiency. 

But clearly, consumers are not driving this new standard.  Gloria Bergquist, vice president of the Alliance of Automobile Manufacturers, said that despite her group’s support for the standards, they remain concerned.  ABC reports:

In addition to consumers buying fuel efficient vehicles in greater numbers, she said, clean diesel needs to become more available – it’s only in roughly half of U.S. service stations – as do charging stations. Half of new vehicles sold in Europe se clean diesel, she said, while in the U.S. that number is closer to two percent.

Needless to say, it sounds like we could be in for a raft of new subsidy requests by the auto industry.  Subsidies for hybrids, charging stations, clean diesel and the like are not out of the question; in fact, we already do much of that.

This much is clear: more government means less consumer choice and, ultimately, even more government.


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