Bill proposed in Congress would require NHTSA to use realistic gas prices to set CAFE
The energy bill that was passed by Congress last December requiring corporate average fuel economy to be raised to 35 mpg by 2020 had some interesting little known elements in it. Among other things, the bill required NHTSA to set the standards at the maximum feasible level for any given years meaning that the 35 mpg threshold could be reached well before 2020. The problem lies in that word feasible. In setting standards NHTSA was required to factor in projections for what fuel prices would be in future years. That's why when NHTSA released its draft proposal for the first round of fuel economy standards, the average was set at 31.6 mpg by 2015 which caught some people by surprise. However with gas at $4 /gallon this spring, it looked like the reality would overtake the law. It turned out that NHTSA used a projection of $2.42 /gallon in 2016 to set the 31.6 mpg standard. Representatives Ed Markey (D-MA) and Todd Russell Platts (R-PA) this week introduced a bill that would require NHTSA to use more realistic projections in setting the standards. Under this proposal the standard could be moved up to 35 mpg by 2015. Again all of this demonstrates that mandating a fuel economy standard is probably a wrong headed approach. If higher fuel prices suddenly make higher fuel economy feasible, why not just set a minimum floor price for fuel and if prices drop below this level, tax it up to the minimum. We've seen this work in Europe where average fuel economy is much higher than in the US based largely on higher fuel prices. Then there is the issue of the bogus fuel economy calculations.[Source: markey.house.gov]
Reader Comments (Page 1 of 1)
BillySharps 2:17PM (8/02/2008)
I've thought prices have been the main driver of fuel economy and the basis of high-mileage vehicles for a long time. We don't need complicated regulation to move our fleet towards better economy. The price of gas will do it just fine. The only reason Toyota can't make enough Priuses to satisfy demand is the price of gas, not government regulations. Increase the percentage of federal tax on a gallon of gas and people will naturally migrate towards smaller, more efficient vehicles. Gas in my area is dropping below $4/gallon. I say raise the price of gas by 10 or 20 cents per year by raising the federal gas tax. It will give people enough time to adjust to higher prices, and they won't be caught with their pants down the next time prices spike. We'd be doing them a favor.
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axiom 4:48PM (8/02/2008)
"We don't need complicated regulation to move our fleet towards better economy. The price of gas will do it just fine."
Actually, we do need that regulation. If you let the price of gas set the standard, with no long-term benchmarks, then you'll have what we have today: huge layoffs, plant closures, and unmovable stock. THAT is not healthy for the auto industry, nor for consumers, or the economy which depends on those workers who risk being laid off or idled. THAT is the reason the standards exist.
Gas prices are too volatile to depend on. If higher economy standards had been set years ago instead of remaining stagnant, guess what, we might not be in such an energy crisis. The entire economy is threatened right now, and the risk for another potential gas shock causing hyperinflation (and a Depression) is not over. The car makers only care about maximizing profit NOW. Thats why they kept rolling out huge SUVs, which, thanks to volatile oil prices, are now unmarketable and too expensive to maintain for many.
How dumb to you have to be to say you want market conditions to decide economy standards. Its that kind of thinking thats almost killed GM! Market conditions said lots of SUVs was a good business move last year - guess what, a year later market conditions say an SUV is dead weight. The automakers can't switch their products that fast. THEY NEED long term benchmarks and regulations. They might not like it, but its a hell of alot better than losing half your stock value in a few months and having to lay of a fifth of your workforce just to remain solvent..
BillySharps 4:33PM (8/02/2008)
To add, the increase in tax will help pay for road repair and infrastructure improvements. We can also use the tax to bring the price of gas closer to the price of diesel by lowering the tax on diesel and raising it on gas, which will make diesel vehicles more popular. A feebate is another idea to help mitigate the effects on poorer citizens.
axiom 9:15PM (8/02/2008)
"If higher fuel prices suddenly make higher fuel economy feasible, why not just set a minimum floor price for fuel and if prices drop below this level, tax it up to the minimum."
Yeah. Its not like people have anything better to do with their money, than pay taxes with it. We ARE NOT Europe. We're more spread out so we go farther distances, more of us use cars because we need to, and we do not have their kind of mass transit systems in place for people who wouldn't be able to afford your tax idea.
The tax idea only made sense when prices were low and people wanted to force higher economy cars onto the market. Well now prices are high so instead of taxing people for the hell of it how about we keep those economy regulations, raise them significantly so oil shocks don't disrupt the economy in the future, and keep raising them every few years just so the car companies don't get lazy on us.
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Mike!!ekiM 10:40PM (8/02/2008)
- You're more spread out, and yet, you're also buying 500 hp Mustang GT's. With the new car cycle being 4 years gas price Volatility is the Last Thing You need.
A gas tax is reasonable, when the alternative is bankrupt auto industry. With a gas tax we are guaranteed to get high mileage cars.
Do we have to go thru every reason we need a gas tax and a carbon tax every single time.
- Global Warming( and don't talk to me about Exxon's BS Movies, that Never Pass Scientific Peer Review )
- Transfer of Our Wealth to Arab States, that fund terrorists.
- Pollution
- And the volatility of the market, and a bankrupt auto industry.
- Road and Bridge Infrastructure!
Sheesh, these ought to be enough good reasons.
Look, we've tried the Greed Market, errrr, the Free Market and it's been a Catastrophe. Now, it's time for a Regulated Market, with a proven track record of success.
Stedwoo 4:39PM (8/02/2008)
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"If higher fuel prices suddenly make higher fuel economy feasible, why not just set a minimum floor price for fuel and if prices drop below this level, tax it up to the minimum. We've seen this work in Europe where average fuel economy is much higher than in the US based largely on higher fuel prices."
Amen to that! Many companies will not invest in Fuel saving devices or long term cost because of fear that gas prices will go back down. This will show companies that they do not have to worry about long term outlays to a short term issue. If the cost of gasoline goes down to below 3.50 a gallon people will start wasting fuel again and undo the recent gains.
A lady on the news last week said that she was going to stat riding the bus to work but now that gas was under $4.00 gallon she was going to keep driving. It was only a saving of 8 dollars a week for a $90 outlay. By riding the bus/train she would be saving close to $40.00 a week but was worried about 8.00 dollars. "Idiot"
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BillySharps 7:18PM (8/02/2008)
@axiom
>>Actually, we do need that regulation. If you let the price of >>gas set the standard, with no long-term benchmarks, then >>you'll have what we have today: huge layoffs, plant >>closures, and unmovable stock. THAT is not healthy for the >>auto industry, nor for consumers, or the economy which >>depends on those workers who risk being laid off or idled. >>THAT is the reason the standards exist.
The long term benchmarks are the incremental tax increases on gasoline. Set the price to automatically increase by $0.20 per year, and people will bank on an increase. The market will be naturally drawn to higher mileage cars.
The volatility of gas prices may not be healthy for the auto industry, but I don't see any way to moderate that volatility without taxes.
>>Gas prices are too volatile to depend on. If higher >>economy standards had been set years ago instead of >>remaining stagnant, guess what, we might not be in such >>an energy crisis. The entire economy is threatened right >>now, and the risk for another potential gas shock causing >>hyperinflation (and a Depression) is not over. The car >>makers only care about maximizing profit NOW. Thats why >>they kept rolling out huge SUVs, which, thanks to volatile >>oil prices, are now unmarketable and too expensive to >>maintain for many.
Perhaps we wouldn't be in a crisis now if we had increased the standards. On the other hand, we could have artificially raised the price of gas over time and we wouldn't be facing a worldwide battery shortage either. Raising the price of gasoline achieves the same goal as regulations, but it achieves that goal naturally using market forces. If the price of gas is high, people will demand better fuel economy by buying hybrids and diesels and smaller cars.
>>How dumb to you have to be to say you want market >>conditions to decide economy standards. Its that kind of >>thinking thats almost killed GM! Market conditions said lots >>of SUVs was a good business move last year - guess what, >>a year later market conditions say an SUV is dead weight. >>The automakers can't switch their products that fast. THEY >>NEED long term benchmarks and regulations. They might >>not like it, but its a hell of alot better than losing half your >>stock value in a few months and having to lay of a fifth of >>your workforce just to remain solvent.
I had to go back and read my own post because I didn't understand why you said this. I never said I wanted market forces to set standards. I suggested we increase the federal gasoline tax so that, as a consequence, the market would demand fuel economy (which is what is happening right now). Market conditions said SUVs were a good idea last year because the price of gas was below $4.00 per gallon. Today's market conditions say SUVs are a terrible idea, and that's because the price of gas is above $4.00 per gallon. If we were to raise the federal gas tax so gas stayed at or above this level, market conditions will continue to say SUVs are a bad bet. Make the price of gas permanently high, and auto makers will naturally turn out cars that get better mileage. It's very simple and very effective.
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John Rowell 12:32AM (8/03/2008)
"NHTSA used a projection of $2.42 /gallon in 2016"
Now that's just laughable - gas is over $4.00/gallon now, and it's nowhere near 2016. It will probably be near $10/gal by then. But electric cars will be much more common by then too.
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Mike!!ekiM 7:56AM (8/03/2008)
I'm wondering how high gas can go.
IF gas/oil prices are being controlled by Arab / Wall Street hedge funds, they they know the Start of the recession was a $100 to $120 a barrel of oil.
Every Dollar you push oil past 120 is a dollar closer to a Global Recession and if you go above 150 you should see a Global Depression. So, it's my belief that oil won't hit 150, assuming our ARAB - WALLSTREET OVERLORDS aren't complete idiots.
But, then look at Housing? For the previous 2 years Wallstreet knew the CDO paper they were writing was JUNK. Yet, it still went on till the crash. So, accounts of the real-estate market indicate they are STILL WRITING JUNK mortgages!
yaman 12:22PM (10/25/2008)
Thanks for all.
Kktc
Regards , Yaman
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