Posted by: bmeverett | May 24, 2009

CAFE olé


Here we go again. The Obama Administration has announced with enormous fanfare another smoky wisp of trivial energy policy. This time, he’s revisiting our old friend Corporate Average Fuel Economy (CAFE) standards. Surrounded by adoring governors, members of Congress, our newly state-owned auto industry and radical environmentalists, the president promised to increase the efficiency of our vehicle fleet to 35.5 mpg (42 for cars and 26 for light trucks, vans and SUVs) by 2016. The President’s remarks, which used the word “extraordinary” six times, claimed that “No longer will we accept the notion that our politics are too small, our nation too divided, our people too weary of broken promises and lost opportunities to take up a historic calling.” The President believes that oil “places our future in jeopardy.” OK. Let’s see what exactly this new standard does to save us and our planet.
The President quoted several numbers, all of them appallingly misleading. He claimed that his 35.5 mpg standard for 2016 is “an increase of more than eight miles per gallon per vehicle”. That statement is technically true – compared to the 2009 standard of 27.5 mpg. The President is conveniently forgetting, however, that the Energy Independence and Security Act adopted in 2008 under the Bush Administration set a 2016 standard of 33.2 mpg. President Obama has increased the 2016 standard by 2.3 mpg , not 8 mpg. A quick calculation shows that this “extraordinary” accomplishment will reduce US oil consumption in 2016 by about 2% – very much within the margin of error of the forecast.
President Obama also claimed that “As a result, we will save 1.8 billion barrels of oil over the lifetime of the vehicles sold in the next five years. Just to give you a sense of magnitude, that’s more oil than we imported last year from Saudi Arabia, Venezuela, Libya, and Nigeria combined.” The White House press release duly noted that this statement was followed by applause. The “lifetime of the vehicles sold in the next five years” is probably 20 years, since we historically replace about 7% of the fleet each year. The President is therefore comparing 20 years of savings with one year of imports. The claim is not so spectacular when stated properly, “We will save every year about 5% of the oil we import from our 2nd, 4th, 5th and 15th largest suppliers.”
How about carbon dioxide, the dreaded greenhouse gas? At 20 lbs of CO2 per gallon of gasoline, our 10 billion gallon savings from the President’s new fuel standards will reduce emissions by about 0.05% compared to the standards already passed under the Bush Administration.
Once again, President Obama seems to be claiming the dawn of a new day in America through a tiny adjustment of the policies adopted under previous Administration – the one which supposedly left him in this mess. Didn’t any of the reporters covering this event do his homework?
The President’s new proposal may not bring any meaningful results, but it’s not without significance. President Obama is making a very powerful claim – that new fuel standards have no cost, since consumers would save money. I expect he’ll use this argument a lot.
Most of the improvement in fuel efficiency will come from forcing the public to buy smaller cars, not from hoped-for high-tech improvements, as the President is implying. It’s certainly true that buying a Honda Fit with a sticker price of around $15,000 will save you money versus a Honda Accord with a sticker price of around $21,000. People buy Accords because bigger cars are safer and more comfortable and perform better than small cars. Economics 101 tells us that a person buys an Accord instead of a Fit because he concludes that that is the best use for his $6,000. Otherwise, he’d buy a Fit and spend the money one something else.
We don’t need government to force us to save money in that way. According to that argument, we’d all be better off if the government forced us to eat at McDonalds instead of at the Olive Garden, to move from a house to an apartment or to watch TV instead of going to the movies.
Watch out for this argument when the health care debate starts. One way to reduce the cost of health care is to limit the amount you are legally allowed to purchase. You won’t be able to spend your savings on a bigger car, but you can use the extra money to pay for nice funeral when you die younger.

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Responses

  1. Давно искала эту информацию, спасибо.

  2. прочитал с большим интересом — очень очень понравилось

  3. Мне кажется очень полезная штука

  4. Хорошая работа!


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