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Obama's Fuel Standards May Have Unintended Consequences

By May 20, 2009

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President Barack Obama greets California Gov. Arnold Schwarzenegger during a press conference announcing fuel efficiency standards in the Rose Garden of the White House May 19, 2009. Obama announced a new national fuel and emission standards program for cars and trucks with the intention of cutting vehicle carbon emissions and raising mileage-per-gallon by 30 percent.

About the only people who seem pleased with President Barack Obama's new gas mileage and fuel emission standards are environmentalists.

Obama's new rules will require automakers to produce a fleet of vehicles that have an overall average of 35.5 miles per gallon by 2016. The president's reworking of the Corporate Average Fuel Economy (CAFE) laws essentially moves up the deadline for this standard by four years. Between 2012 -- the first model year for the program -- and 2016, the president wants to see an average annual increase in fuel efficiency of 5 percent.

Many outside the environmental community worry that automakers may not be able to meet the president's deadline, and if they do, American car buyers won't provide a significant enough return on the industry's investment. There are also concerns about the effect such fuel efficiency standards will have on vehicle safety. According to the Heritage Foundation, improving fuel efficiency to the degree Obama desires will require cars and trucks to be lighter, which means they'll be more dangerous in collisions.

There are also concerns about the timing of the president's announcement as well. President Bush outlined a more ambitious plan in 2008, but the hefty $50 billion price tag and its impact on the American auto industry forced the administration to abandon the plan.

Currently, no auto manufacturer meets the 2016 standards, and only Toyota and Honda are less than 10 miles-per-gallon away from the president's goals. Part of the problem is that the cars Americans want to buy aren't economic to drive. Large families require larger vehicles, meaning smaller, more fuel-efficient vehicles aren't practical and larger more fuel-efficient vehicles aren't affordable. And while Obama maintains that the more expensive green automobiles cost less in the long run, consumers who see the additional $1,300 added on to the price tag (that's the estimated cost per vehicle of meeting the president's goals) will look for a cheaper alternative.

The annual rise in summer gas prices also could complicate the president's avowal of long-term savings with green vehicles. In the past month, fuel prices have risen by 25 percent, and every summer they get higher than the preceeding year. If 2009 prices reach the levels they did in 2008, even the most economic and fuel efficient vehicles won't save consumers money.

Studies show that regardless of the vehicle used (hybrid or otherwise), the best gas mileage comes when people adjust their driving habits. Reducing or eliminating aggressive driving, using cruise control and avoiding excessive idling are all ways to improve fuel economy. And of course, Obama's famous campaign line about driving with properly inflated tires also helps.

The best way for Americans to save money on fuel, however, is for fuel prices to remain low. Placing the burden of reducing fuel costs solely on auto manufacturers isn't enough. Obama should also be working with domestic oil producers to find ways to lower costs for the consumer and negotiating costs with foreign suppliers before summer prices go wildly out of control (again). Working with domestic companies, however, is preferable because it not only lessens US dependence on foreign oil, it also reduces the stress on automakers and generates jobs in the bargain.

Obama couldn't have picked a worse time to keep his promise to environmentalists. The president's tough new fuel efficiency standards will force American auto manufacturers to spend more money when they can least afford it, and raise prices on consumers when they can least afford it.

Let's just hope the president's liberal idealism doesn't drive a sake into the heart of the Detroit auto industry once and for all.

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Comments

May 20, 2009 at 1:52 pm
(1) Matthew says:

All investment decisions should evaluate risk/return given different investment alternatives. I encourage you to look at investments like this, aimed at curing the environment in the same way.

Scenario 1: The environmentalists are right. We act quickly and aggressively, or the human race experiences a catastrophe of human suffering never before experienced in recorded history. It would appear that the scientific community with very few exceptions, endorses the view whole heartedly. If true, debates over cost, and auto buying preferences are irrelevant. I would be like learning that you’ll die without heart surgery, and deciding that you couldn’t afford the interest on the loan to pay for it.

Scenario 2: The environmentalists are dead wrong. This is the far more interesting scenario, because the results of placing a bad bet on investing in curing the environment are hardly dire.
- Pollution: Surely having less of it can’t be a bad thing. I don’t think anyone believes that smog is good for your health. One in two of us die of cancer now — and cancer is as prevelant in wild animals as it is in humans. What changed in the last 100 years? Let’s test not breathing in chemicals all day long and see what happens
- Oil: It’s not like using less of this can be such a bad thing. I don’t foresee $1.25/gallon returning any time soon. The recession hasn’t even bottomed out — 6 million American’s are out of work — and oil prices are already climbing again. Some people think we’re running out of the stuff all together, and if we do, forget environment catastrophe — without enough oil, we run out of fertilizer, food, and cost effective logistics in a big hurry. What if we could cut oil consumption in 1/2? Hardly a terrible consequence to a bad investment is it? Saves American’s money, and let’s not forget, that national security is heavily co-related to energy independence. I tend to think it a good thing to stop shipping money to countries that spit out jihadists like pez
- Cars: A little innovation from the big 3 wouldn’t be such a bad thing would it? Notice that Honda, Nissan and Toyota all APPLAUDED Obama’s announcement. I can only assume this is because they equally confident that they can innovate and get there, and that America doesn’t have what it takes any more. What’s wrong with DEMANDING innovation from our automakers? In 25 years, they’ve given 50% of their market share to foreign competitors. Competitors make far more fuel efficient, reliable cars — and American’s have voted with their dollars to pay for them — and at a premium no less. Now we find ourselves in a severe recession and it is the GM and Chrysler facing chapter 11 — not Honda and Toyota. We need Americans that remember that innovation is the lifeblood of capitalism and free markets… and that frankly, this is our birthright. Don’t be such a chicken!

Having seen the evidence I have, I can not immagine the environmentalist scientific community being wrong. Forget the small arguments, the big annimal pictures are scary enough: glaciers are dissapering, the ice shelf covering greenland is sliding into the sea, polar ice caps are shrinking. So, no, I can not immagine the scientist being wrong, but if they are, the downside of believing them is hardly catastrophic.

On the flipside, if the environmentalists are right, and we don’t listen to them, the consequences to the human race are too terrible to contemplate. You stand on the side of the line that is fighting against those that would make things better. I can only hope that when you write a column like this, that the science you endorse against environmentalists has no room for error in your mind. You will undoubtably convert people to your way of thinking. With that power comes immense responsibility to validate what you say.

The word faces incredible perils today. The environment is only one. Economic collapse, dwindling oil supplies, failures of American business giants, terrorism — all are issues that require great creativity and vision to overcome. This is not the time for small ideas and small actions. This is not the time to let American buying preferences to dictate energy policy. This is the time for big ideas, and big actions. Obama seems to be fit for the task. I believe that America is fit for the task. Let’s hope we will all rise to the occation.

May 20, 2009 at 4:12 pm
(2) Tim says:

I’m tired of us being in peril. Can the environmentalists quit being so alarmist. It’s not that I don’t believe that human beings are having an effect on the climate. It’s not that I think we won’t simply be better off by polluting less, recycling, and conserving more. It’s that the alarmists have stuck with the world is ending scenario rather than refocus now that they’ve garnered our attention. Right, we get it so what do we do about it. At this point most alarmist ideas seem to go out of control and show very little foresight. What we really need are paths from agreed upon problems to real solutions. Simply legislating mandates for renewable standards or fuel mileage standards is looking at it from a pie in the sky standpoint.

Furthermore, Why are we looking at C02 regulations and fuel standards being enforced on cars at the same time. CO2 is generated by the burning of fuel, so if you cut down on the fuel you cut down on CO2 no?
I also don’t agree with the Supreme Courts ruling last April that CO2 is a pollutant. SO2 is a pollutant, CO2 is used in photosynthesis to generate O2: It’s not a pollutant.
The Carbon Cap and trade scheme is suspicious. Carbon sequestration sounds a lot like pumping gas into an oil field to increase the yields. They already do this, and now with this new plan the oil companies will have it paid for by the tax payers. Don’t believe me? Look at your electrical or telephone bill at the bottom you will see a bunch of mandated legislation “against power companies” which they in turn passed on to us. A word to the (un)wise, if suddenly there is no more resistance to an environmental measure, its best to take a step back and who stands to profit(eer) and at whose expense.

May 21, 2009 at 9:36 am
(3) Matthew says:

The reason environmentalists are alarmist, is that the risk to the planet is alarming. If people had seen the hijackers pre-911, not one would call them alarmist for trying to stop the attacks. The global scientific community is united that mankind is at great peril. Should they say nothing? Not wanting to be in peril is not the same as not being in peril. 10s, or perhaps 100s of millions of people could die, and our standard of living could be drastically reduced perminantly. That requires that people speak up. That requires that people act.

Auto standards are one step, of many many steps that must be taken. It’s being regulated, because not regulating has not worked to date, and we’re running out of time. Environmentalists have been ringing the alarm bells for 25 years, and no one has done anything yet. 5 years ago, the argument that free markets will self regulate was easier to make. The years from Enron to the current market collapse tell a different story — corporate America is focused on earnings per share (as they should be), but given free rain to pursue this goal, they will not act in the interest of society. We’re now re-regulating the financial markets to protect the public. It’s unfortunate, but it appears we need to do the same on the environment.

As for who stands to profit, let’s not forget who has all the money right now. It’s the current energy giants. Environmental businesses are a pimple on the ass of the energy industry. It’s hogwash that this is about environmentalist trying to get rich. As a capitalist, I hope environmentalists do teach us to create new industries — with the intellectual capital firmly owned by Americans. I do not want OPEC to reap the benefits of world energy consumption — I want Americans to! But profiteering from renewable engergy is an awful long way away. I think you’re right, this is about money, but it’s about the money being made by entrenched interest. It is big oil that has most of the political capital right now, and all the profits. They are doing everything they can to protect their turf, as they should, per the interests of their shareholders. Unfortunately, the needs of Americans and the world need to trump the needs of oil shareholders.

May 21, 2009 at 8:19 pm
(4) Tim says:

Exactly what risk are you talking about when you say that the “scientific community is united that mankind is at great peril.” I have concern that your answer might be d) all of the above. You see your statements are exactly the point I’m trying to make. By sticking with the alarmist agenda we are not able to focus in on solutions because you are not able to identify specific problems. I think we both want the same end results, I’d like to see renewable power, I’d like to see conservation readdressed on the big scale, I’d like a vehicle that gets better than 30mpg. However i disagree on your methods of informing others.

For starters, if the risk you refer to is global warming or climate change, it is far from true that the scientific community is ‘united’. If anything, the aisle is evenly split with new research studies or debunking of old studies giving cause for scientists to switch to the skeptical side. That’s not to say these guys think it is not necessary to think about how we are living on this planet and make responsible choices, it’s only to say that the alarmist position of impending doom is losing members. Please see this link http://epw.senate.gov/pressitem.cfm?party=rep&id=264777 and see how previous alarmist views have changed including that all to common global warming ‘hockey stick’ chart.

You say we must act, I say simply acting is not good enough. Everyone needs to refrain from ideological squabbles like this one about whether we’re heading towards ‘peril’. We need to responsibly make changes, keeping in mind that once implemented (in legislation) it’s almost impossible to change course. Like a driver caught in a snowstorm, it’s best to correct speed and direction in gentle increments. Slamming on the brakes, and yanking on the wheel yields a response that’s unexpected and is likely to end us on a course different than the one we wanted to begin with. A good example is the ethanol mandate. If you want consensus, I think it’s much safer to say that the consensus is growing that the mandates to blend more and more ethanol into gasoline is a bad for the environment and for food prices. Yet this mandate continues on autopilot with new increases occuring in the years to come.

What you’re bringing to the table brings us no closer to reaching solutions. It’s my opinion that alarmist ideology is wasted energy. We need to spend that energy that you and a lot of others have to craft GOOD legislation. This is a lot harder than what we’re doing here and congress really needs help. A mandate to use 20 % renewable energy is no good if you can’t outline how to build offshore wind. Capewind is a great example of how not having the proper permitting processes in place to efficiently bring available resources (wind) online hinders our progress. This lack of defined regimen scares away all sources of private capital investment that isn’t linked to the ideological mission of renewable power.

Deregulating the power industry was a fiasco. Fed to us under the guise that this would reduce our energy prices it has only helped to fuel severe price increases. Free markets only work when the end user, the one paying for it, has a choice. We have no choice and therefore it is not a free market. The competition that was supposed to drive down prices has instead steered investment to power generation solutions which can be cycled on and off to take advantage of the diurnal power swings charging the most for the least amount of fuel.

I don’t see how injecting measures to create investments in a given product stream does little but drive up the cost to the end user. If financial institutions were suddenly to make lots of money from the product stream of energy sold to consumers, where exactly is that money coming from. It’s sure as hell not coming from the power company. We’ll be paying for it I’m sure!

As much as we disagree with the how, I do believe we have common ground.

May 22, 2009 at 10:33 am
(5) Matthew says:

Tim… I think you hit the nail on the head,that we’re far closer then we are apart. If my passion was taken as a defense for idiotic legislation like Ethanol, or deregulation, then shame on me. Anyone that could use an abacus could project that both would be a disaster.

If we have a gulf, it’s on what constitutes good legislation, and is legislation the right way to achieve the end. I think the fuel standards is a positive, only because what I’ve seen says that the technology to deliver this, without having to fill landfills with batteries, is well within reach. There’s a great book called Winning the Oil End Game, that was commissioned by the defense department (if memory serves), which shows not only that we have the technology, but that we could crush our competitors if there was the impetus to invest in it. I think the fact that the fuel standards don’t intimidate the Japanese is another proof point that they are achievable. If so, the resultant decreases in oil demand — given that this is just one salvo is a larger objective, are impressive. We wont solve energy with one tactic… it will be 100 little actions. As an asside, I trust national defense agendas like this one above all others. They understand that dependence on oil is a national security threat. Defense takes such things seriously enough, that political agendas really don’t factor into the conclusion. Case in point — this study was commissioned during the Bush era, which at least publicly, would not endorse it’s findings.

I’ve seen the hockey sticking arguments. I do not find them compelling, not because the hockey stick argument is flawed, but simply because they focus on the minutia vs the big animal pictures that show we have seriouse problems (ie, dissapearing glaciers). I think this is entrenched interests spinning to save their life.

That said, our disagreements here is almost completely moot. We have plenty of incentives to solve energy, even if there was no immediate earth ending threat. I’m a rare combination of environmentalist and capitalist pig. I think we can innovate in energy, and as a subset, automotive, and lead the world.

The Roman empire collapsed, not from external threat, but because it’s population would not fight to maintain the standard of living they had fought so hard to build. The political system failed right along with the electorate — churning out legislation that was purely for show, to placate the population into thinking they were solving the problem.

I don’t want legislation for show any more than you do. What I want are the brightest minds in America to be locked into a room, and not let out until we chart a course to renewed global leadership. I don’t want this just for auto fuel standards… I want it for the full show – Nuclear, wind, tidal, geothermal… and definately NOT Ethenol!

I appreciate your thoughtful arguments. I’m a strong believer that the biggest cancer for our democracy in the last 20 years, has been the near extinction of impassioned dialog, who’s objective is not the crushing of an opponent, but the lifting of our collective knowledge. Finding middle ground takes hard work. It takes respect for the other side. It requires that the objective trump agenda. If we can find middle ground, then I have hope others can do the same.

May 23, 2009 at 9:35 am
(6) Sarah says:

I use to be the strongest skeptic of environmental dangers. I recognize Tim’s arguments. I heard them at my church. I made them to my friends. I cheered when Senator Inhofe’s Committee on the Environment and Public Works debunked Gore’s film. I started reading everying I could about the topic… and then I felt taken. Tim, the link you sent above… read more. I use to believe it, but it’s a total lie. Inahofe, the leader of that committee was the second largest recipient of campaign contributions from big oil in the entire house or senate, and has managed several lucrative projects that would be financially devestated if environmental controlls were put in place. Inahofe was part of legal effort to suppress a report by top american scientists, that showed how real environmental destabalization is. The bias of that comittee is now clear. I hate to say it, given that I voted for Bush, but I believe now that Bush’s team was beholden to big oil. They appointed energy and oil representatives to to environmental posts for pete’s sake! That committee was stacking the deck. I found out later that 20 U.S. Nobel laureates denounced the Bush administration’s political manipulations of science.
The 60 scientists that debunked global warming were found to be on big oil payrole. Prime minister Harper in Canada was a stong denier of global warming, and for good reason. His province (like our states) is sitting on an oil sand reserve with oil supplies almost as rich as Saudi Arabia. Harper wanted that letter sent to him. The oil sands are an environmental nightmare, but Harper was elected by western voters that all wanted the oil sands exploited.
1500 of the top scientists signed declaration of imminant danger, exactly on the scale that Matthew talked about above. The decenting oppinions are so far and few between, that it’s hard to call the conclusion anything but a consensus. The US National Science Committee refuted the findings of the CEPW, and confirmed the finding that man is causing environemental warming.
Note that the link you provided above, and the findings of the committee were strongly refuted. I’ll provide links for further reading.
I feel so lied to. My own church! My kids schools! Why would people try to stop those that would save the world. I question everything now.
This is a good article at a high level… but read everything you can. The more I read, the more I knew that there is a political campaign by big energy to deny the risks to the planet. Big engergy will profit… but only you and I and our famillies will pay the price http://www.prospect.org/cs/articles?articleId=7603

May 25, 2009 at 12:27 pm
(7) James says:

Conservatives are often better corporate shills than patriots. They would rather leave the nation vulnerable to petroleum cutoffs and border invasions than to threaten profits made with larger vehicles and cheap labor.

June 1, 2009 at 8:40 pm
(8) Tim says:

@Sarah – I highly doubt that 1.) a hypothesis was formed, 2.)a set of data was formed 3.)a scientific theory was formed from that data and 4.)That no other sets of data have disproven or cast doubt on the original findings that “Man is causing environmental warming”.

You do realize that I wasn’t arguing whether that is true or not, nor am I stating whether I believe it to be true. My point was that the environmentalist movement could really be bringing people on board if it could avoid being overly prophetic. You want corporate influence, watch the feedback from the efforts to regulate the unregulated financial’s gambling that’s poisoned the world’s economy.

@ James
We’d all be better “patriots” if we learned that labeling oneself or others as being “conservative” or “liberal” gets us nowhere. “They” as you would like to believe do not exist, good governance is built upon compromise. Ideological battle between liberals and conservatives is only fuel for ego’s, paychecks, and book deals.

@Matthew

I enjoyed our dialogue as well. Too often in this twitter-fed day and age it devolves into a digital graffiti of sorts. The internet is full of abandoned dialogue, lifeless, there isn’t any more interaction than responding to a spray painted message on a brick wall.

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