CAFE Craziness

Last week the Senate reached an agreement on raising the CAFE standards by 40%. This is the average fuel economy ratings of all cars and light trucks that a manufacturer sells. I mentioned this in a previous post but I want to go into more detail.

Currently the standards are different for cars and trucks with trucks getting a slight break. Also the definition of a truck is loose enough that, for CAFE purposes, my PT Cruiser is classified as a truck. This offsets Chrysler's bigger SUVs.

The new standards will establish a single standard for everything - cars, trucks, vans, and hybrids.

There are some serious problems with the new standard. There is no way to wring much more efficiency out of the gasoline motor. The only way to increase fuel economy is to make the car lighter or to give it a weaker motor.

Note - hybrids do not change this equation. Most of the hybrids on the market disguise the smaller gasoline engine by giving a short-term boost from an electric motor. The electric motor is powered by batteries which are charged by the gasoline motor. The net result is a fuel savings but nowhere near the new CAFE standards. The exception is the Prius which does average substantial fuel savings but mainly for city driving. The Prius runs on its electric motor and uses the gasoline engine to charge the batteries. During stop and go driving which is the worst for fuel economy, the gas motor doesn't even run much of the time. The Prius is not for everyone. It is slow and its expected life is half of conventional cars. Also, all of those batteries are heavy and take up a lot of room. In addition, on the highway, the Prius's economy drops and it is comparable to any other under-powered car.

This is the big problem. Current fleet economy is what it is because of consumer choices. If everyone put economy at the top of their priorities then no one would be buying SUVs.

The new standard is pretty high - 35 MPG. I just saw a Honda ad promoting their fuel economy being 34 MPG. Car makers will have trouble raising cars past 35 MPG. That means that they will have to cancel the less-efficient models.

I'm sure that ecologists are thrilled with this news. They would like nothing more than to outlaw the SUV. But they speak for a small minority of car-buyers.

Congress is dictating the the car manufacturers will have to make cars that the consumers do not want to buy and will fine the car makers if consumers buy too many of the wrong car.

This is not how a free economy works.

Worse, it probably will not save much fuel. By raising fuel efficiency, Congress is lowering the cost of driving. simple economics says that when the cost of something goes down, the demand goes up.

If Congress really wants to increase fuel economy, they should raise gas taxes. If people were paying $6/gallon they would reevaluate their car-buying priorities and driving habits. The Democrats would probably lose the next election but they would have the satisfaction of knowing that they made a real, direct difference.

Instead, the most likely result will be the death of the American car manufacturer.