Each of these claims deserves careful analysis.
REDUCED GASOLINE CONSUMPTION
The most efficient (and effective) means of reducing gasoline consumption is to raise consumer prices. In the very short run, consumers just pay more for gasoline. However, as high prices persist, they reduce their vehicle miles traveled by combining trips, foregoing some travel, and perhaps commuting by carpool or public transportation. In the long run they purchase more fuel efficient vehicles, which ususally means smaller, more lightweight cars. Lundgaarde's article attributes recent huge declines in SUV sales to high fuel prices, suggesting that the "long run" is well underway. Ironically, fuel-efficient driving (e.g., abiding by Interstate highway speed limits) appears to be only a last resort despite the fact that it improves fuel economy substantially for most vehicles. Consumer behavior thus suggests that interest in fuel economy is limited.
In any case, tightening regulatory standards on automobile and truck manufacturers is among the least efficient means of reducing gasoline consumption. First, it takes many years to materialize in the showroom and more than a decade to work its way through the fleet. Tightening CAFE will make vehicles more expensive, causing consumers to hold onto older vehicles longer. This delays the effective turnover of the fleet and reduces any gains in fuel economy tighter CAFE standards otherwise would achieve.
Second, tighter CAFE standards are virtually assured of forcing consumers to buy new cars that they won't like. Even if regulators could brilliantly design new CAFE standards that precisely reflect consumer preferences on average, only a small fraction of consumers are average consumers.
Third, CAFE standards always have unintended consequences. Previous rounds led manufacturers to make cars smaller and lighter, and hence less safe. Thousands of annual highway fatalities are attributable to CAFE standards.
The absence of any economic rationale does not take away CAFE's huge political advantages over gasoline taxes. CAFE enables policymakers and regulators to avoid bearing responsibility for the consequences. Public ire will be directed at manufacturers instead, as they struggle to market vehicles that few consumers want to buy. If policymakers simply increased gas taxes, however, the public would know exactly who was responsible for their misery. (Indeed, if they were to just leave current conditions alone they could achieve the effect of high gasoline taxes while forcing oil companies to bear the blame.)
CHANGES IN FUEL ECONOMY STANDARDS WILL BE "FAIR"
Fairness is in the eye of the beholder. In the automobile business, it's usually code language for rules that benefit U.S. manufacturers and the expense of imports. Globalization of the industry in recent years makes it less obvious what impacts various alternative schemes would have on different companies. Lundgaarde's article points out that Detroit manufacturers prefer uniform percentage increases in fleet fuel economy but Honda and Toyota do not. The higher your current fleet average fuel economy is, the harder it would be to achieve any uniform percentage increase. NHTSA Administrator Runge admits that this poses a challenge:
"That's why we have to be really innovative and really smart," Dr. Runge said. "Some of the smartest people in the country are working on this."NHTSA will need the smartest people in the country to accomplish the impossible. A fair prediction is that they will come up with something that everyone hates, and judge it a success on that basis.
Lundgaarde's article says nothing about whether NHTSA also intends to craft new CAFE rules that are fair to consumers. For example, previous CAFE rounds destroyed the family station wagon as a viable automobile and gave us the minivan and, ironically, the SUV--both of which are "light trucks" under CAFE that can meet less demanding standards.
REDUCING OIL IMPORTS
CAFE will have a negligible effect on oil imports for several reasons. First, as outlined above, it will take years to redesign vehicles to meet the new standards and another decade to roll over the U.S. vehicle fleet. Even a Draconian new CAFE standard (for which there is negligible political support) won't have any measurable effect on oil consumption for a long time.
Second, consumers will adapt. If they are forced to save fuel by driving econoboxes, they will drive more miles because the marginal cost of driving declined. (In contrast, a high gas tax increases the marginal cost of driving and makes additional fuel consumption more financially painful.)
Third, the quantity of oil imported will only increase as the price of crude declines from current levels. Oil is cheaper to produce in Saudi Arabia and elsewhere, so as prices fall these sources will dominate world production yet again. High world prices diversify supply; low prices do not.
The policy merit of reducing oil imports has always been a bit dubious, usually rooted in national security considerations. Fair enough. But it is logically obscure how "energy independence" aids long run national security, and it cannot be accomplished in the short run anyway. Thus, if long run national security concerns dominate, then it seems more logical to keep domestic oil off the market and use up foreign oil first.
UNINTENDED BUT FULLY PREDICTABLE CONSEQUENCES OF TIGHTER CAFE REGULATIONS
The scholarly literature on CAFE is clear. It kills. The most cost-effective way to reduce fule consumption has always been to reduce size and weight. Forcing families to buy smaller, lighter weight cars compels them to bear added risks of injury and death. Romantic public policy preferences do not repeal the laws of physics.
The government can prevent this only by prohibiting manufacturers from complying by reducing size and weight. Assuming that rules could be devised to impose this constraint, it means the resulting CAFE standards would be even more expensive to meet, raising the cost of new vehicles even more, and adding additional delay to fleet turnover. Protecting consumers from increased rates of injury and death requires reducing CAFE's effectivnesss or raising its costs.
REGULATORY ANALYSIS
The public deserves a credible, complete, balanced and objective analysis of the benefits and costs of any proposed changes in CAFE. Such an analysis is currently required by presidential Executive order 12,866, and specific policy statements made by OMB. Given the Bush administration's apparent support for strengthening CAFE, it is not clear that it intends to hold NHTSA accountable for preparing such an analysis. It is even less clear that the administration will insist on rigorous independent, external peer review of NHTSA's analysis to ensure that it is, in fact, a credible, complete, balanced and objective portrayal of the likely consequences of new CAFE regulations. (The administration issued a government-wide policy on peer review in December 2004, but exempted regulatory impact analyses from these requirements.)
Thus, the public is wise to be deeply skeptical (if not reflexively distrusting) of any and all CAFE proposals, except perhaps a proposed repeal of the statute.
WSJ link: http://online.wsj.com/article/0,,SB111629671592335445,00.html?mod=politics%5Fprimary%5Fhs
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