The Economist relies on a partially false hypothesis (Efficient Markets Hypothesis). Specifically, people discount gains that are not tangible to them or won’t occur until a long time in the future. Fuel economy is one of those gains. Many people aren’t willing to sacrifice power or pay more for a more efficient vehicle, even if in reality they didn’t need the extra power during the vehicle’s lifespan and they saved more than they paid.
The other thing that forced economy standards helps fix is cases where the payment relationship is indirect. Rental car companies don’t pay for the fuel their vehicles use, so they are going to buy the least efficient available. Rental car renters do pay for the fuel, but tend to pick a rental based on daily rental rate and not factor in efficiency.
Another example is apartments. I once had the displeasure of staying in an apartment where the A/C unit was terribly inefficient and obsolete. The landlord had no incentive to replace it or pay for an efficient unit. I had picked the apartment because it was offered for a bargain rental rate, unaware that I’d be paying $300/month to air condition a tiny apartment. So I lost financially. Had the government set a minimum efficiency standard for new A/Cs (they did) and required new apartments to be at a minimum level of insulation (they do), in the long run this kind of problem would be avoided.
But there is a lot of evidence on their side. Pickup truck & SUV sales go up, and hybrid car sales go down whenever gas price comes down. Which means a high gas price does encourage people to buy more fuel-efficient vehicles.
What about the loss of jobs at smog check stations (or local variant), companies that sell emissions-related parts(both OEM and aftermarket) and test equipment/tools?
Negative. That’s an example of evidence supporting my side. People who take a slightly longer term view than next week will realize that gas prices must remain high on average, even if they are low this week, because it is very difficult and expensive to extract oil from the ground in order to make gasoline. All the easy oil was drained long ago.
The current period of relatively low prices is such that many projects that require ~$60/barrel to break even will not get approved in the future. Once many of the more expensive projects run out of recoverable hydrocarbons in their existing wells, built during the boom, they will stop contributing to the oil market and prices will rise.
Anyways, most people don’t do this kind of analysis. They’ll buy a truck and gas will be back to the 5 year mean of ~$3/gallon in a few months. For that matter, most people will agree to buy a new truck at all, purely as $40-$70k status symbol, never using the cargo capacity of the vehicle more than once or twice a year…
The purpose of CAFE is to act as a non-tariff barrier to penalize non-US carmakers who make small passenger cars and no huge pickup trucks, like VW and Hyundai.
The CAFE target for 2025 for 1/2 ton trucks which are Ford/GM/Chrysler’s main profit center is 23 mpg, the base model trucks from all three are already rated at 20-21mpg. The Detroit truck makers will have zero problems achieving the 2025 CAFE target as long as they don’t make any small, efficient cars. Meanwhile the even larger 3/4t and 1t trucks that they sell at enormous profits are not even counted at all. Meanwhile a company that made primarily small, efficient cars will be squeezed to achieve the much higher standard for small cars with no profit margin. Hence the proliferation of huge pickup trucks driven by soccer moms today is basically due to CAFE taxing more efficient cars like station wagons out of existence.
It works nicely in conjunction with the “Chicken Tax” which levies a 25% tariff on imported pickup trucks. The entire thing was a law written by the car company lobbyists and the UAW.
It’s evidence showing that high gas price leads to people buying more fuel-efficient cars. Isn’t that exactly what you are arguing against?
And “gas price must remain high on average” is a ridiculous statement. Sure, it costs money to extract gas, but how do you know the current price is the high price or the low end, and how long is eventually? It’s been 2 years since oil price fell from $100 a barrel to $50. It’s been <$60 ever since.
IMHO, One thing that CAFE has done is promote new technologies that produce lighter smaller engines that make more power and have less emissions and better mileage.
A 6 or often a 4 cylinder engine today can run circles around an old V8. And will last much longer. It used to be that an engine that makes it to 100,000 miles was a rare thing.
How? If Ford makes small cars and Hyundai makes small cars, why does CAFE mean that Hyndai must make their cars be more efficient? I suspect you’re completely correct, it sounds just like the sort of corrupt thing our government would enact, but how is the rule phrased to work out this way?
You can read the wiki. CAFE stands for Corporate Average Fuel Eonomy. It’s a complex calculation(intentionally) of the fuel economy figure for each vehicle you sell. The actual calculation has changed over the years but in all its variations it essentially made provisions that “light trucks” and “passenger cars” had to meet separate standards. The “NAFTA” and “non-NAFTA” fleets must also separately meet standards. “heavy duty” trucks over a certain GWVR were always exempt, so for example the Hummer H2 (the big stupid looking plastic one) was never part of GM’s calculation.
Also the headline CAFE fuel economy figure reported in the news was a number completely pulled out of the governments’(read, the car company lobbyists’) ass. If you look at the chart, in 2017 the “44 mpg” standard for small cars actually translated into 33 mpg in terms of the actual EPA rating on the window sticker. Because “big gubmint is forcing carmakers to make 100mpg cars! Ooogabooga!” sounds scary, it not actually being true in any way shape or form is of little concern.
The end result is that every single four wheeled conveyance sold in the US now needs to be a “light truck” in some way, or otherwise be a 6l diesel F350, in order to meet CAFE requirements. Sales of huge gas guzzling pickup trucks are through the roof and so much higher per capita than any other civilized country that it’s now a national archetype and every soccer mom on the road drives a giant truck with pristine, untouched beds. Cars like the Lexus NX and Infiniti Q30/QX30 are sold in other markets as hatchbacks with more efficient aero but come to the US with mandatory less efficient off-road bumpers in order to qualify as “light trucks”. Station wagons are a CAFE death penalty unless carmakers raise the suspension and add body cladding to make them into “light trucks” instead of “passenger cars” - see Subaru Legacy/Outback, VW Golf Wagon/Alltrack, etc.
So now every third vehicle on the road is a huge 8,000lb truck.
I did read the article. Hence my question to you. I can buy a Ford Fiesta with manual transmission, a very inexpensive small car from Ford. It is not a light truck, and gets near 40 mpg in the real world. I can also go buy a new Hyundai or Toyota or Honda for slightly more money and similar gas mileage. As far as I know, Ford isn’t allowed to make the Fiesta less efficient than the minimum simply because Ford also sells a bunch of F-150s.
Now, yes, your point is taken. This loophole puts a stupid number of gas guzzlers on the road, and yes, most trucks have pristine empty beds and have 1 passenger, and most SUVs will never see offroad use for their entire vehicular lifespans.
So your message is that
a. CAFE is overhyped, since the real world MPG requirements are a fraction of what they say in the law.
b. CAFE only affects a fraction of vehicles sold, since big vehicles are exempt, and by driving purchasers to big vehicles, it actually may lower efficiency
And you propose a gas tax instead, which is not the worst method, but I argue would only be marginally effective because most people don’t correctly calculate their costs over a long period of time.
Let’s suppose you decided to buy an F-150. It gets 20 mpg and costs $46k. It lasts for 200,000 miles. Gasoline has an average price of $3 over vehicle lifespan. So you spend 30k, almost the price of the vehicle, on fuel.
Or you buy a Toyota Camry. 40 mpg, 23k price. Only 15k in fuel over vehicle lifespan. So half the purchase price and half the fuel consumption.