Old Gas Pumps
By the year 2025, cars and light trucks sold in the U.S. will have to earn a combined city/highway rating of 54.5 miles per gallon. That's according to new fuel economy regulations set forward by the Environmental Protection Agency and the Department of Transportation, which the Detroit Free Press and other sources expect to be announced today.
If that number sounds a little familiar, it should: back in July, the Obama administration and the EPA announced that they'd struck the very same deal on fuel economy with 13 major automakers, as well as the State of California and the UAW. The announcement today makes that deal official. If the feds follow standard operating procedure, there will be at least a 90-day period of public comment before the regulations take effect (though the Detroit News doesn't expect implementation before the end of July 2012).
The good, the bad
When President Obama announced the proposed regulations last summer, he cited three major reasons to support them:
1. Less dependence on foreign oil: higher fuel economy standards for vehicles mean that people and businesses will use less petroleum, much of which the U.S. imports from other countries. In a letter of support sent to the president earlier this week by over 100 members of Congress, the new regs could "remove the need for as much as 3.8 million barrels of petroleum per day by 2030".
2. More savings for families: President Obama said that the average family will spend $8,000 less on fuel per vehicle under the new guidelines.
3. Less pollution: with the new regulations in place, the U.S. will see fewer CO2 emissions, even before 2025. As the auto industry gears up for the 2025 deadline, the U.S. would emit six million fewer metric tons of CO2 by 2025, which is more than we pump into the atmosphere in a given year.
On the other hand, the new regulations won't come free. Critics point to:
1. Higher vehicle costs: boosting fuel economy is expensive, and automakers are likely to pass most of that cost to consumers. Estimates vary, but by the new standards could add between $1,500 and $6,500 to the cost of a new car. (Note: the higher figure includes expenses for electric vehicles, which are far more costly than combustion-engined rides.)
2. Higher costs of government: while the cost of fuel-efficiency itself might be mitigated by technological advances and economies of scale, there's no denying that someone's going to have to pay to oversee these new guidelines. Enforcing the rules that the Obama administration has already implemented for 2012 - 2016 are is slated to run $51.5 billion, which will be passed on to consumers at an average of $950 per vehicle by 2016.
What should you expect?
The good news for consumers is that the new regulations will result in savings on fuel. Whether they'll average out to $8,000 per vehicle remains to be seen, but the savings should be significant.
The bad news is that consumers will pay more for new cars -- even when inflation is taken into account.
Another bit of bad news is that the 54.5 mpg average is a fleet-wide average. Light trucks, vans, and SUVs will have to hit 44 mpg, while cars will need to reach a whopping 62 mpg. In other words, if you love your SUV, you won't see quite the same fuel savings as your sedan-driving neighbors. But then, you're probably already used to that.
Our super-unofficial inter-office poll reveals very mixed feelings about the new regulations.
On the one hand, some think that the market should determine demand for fuel-efficient vehicles. From that perspective, implementing regulations -- no matter how well-intentioned -- won't result in a country of happy, greener consumers. If people don't want these cars -- or worse, if they can't afford them -- they simply won't buy them. Some go so far as to argue that raising fuel economy standards will do nothing for our bank accounts or the environment without a simultaneous increase in the gas tax.
On the other hand, no matter where you fall in the global-warming debate, it's hard to argue that pollution is a good thing. And unless you work for the petroleum industry, you'd probably be happy paying Shell, Exxon, and others a little less.
The middle road would seem to indicate that regulation in moderation is a good thing. Too many rules, and you stifle growth. Too few, and you encourage chaos and disparity. The question is: do the fed's new regulations go too far or not far enough? Feel free to sound off in the comments section below.