On August 28, the Obama Administration officially adopted the stringent CAFE (Corporate Average Fuel Economy) standard that had been discussed and debated for months. Praised in some quarters and derided in others, the new regulation mandates a dramatic increase in average gas mileage, to 54.5 miles per gallon in the year 2025.
35.5 MPG By 2016
National fuel-economy standards already had been adopted for the 2012-2016 period. By the end of that time, the average new vehicle is supposed to get 35.5 miles per gallon.
Throughout the discussion that led to the 54.5-mpg requirement, critics—inside and outside the auto industry—insisted that such a figure was impossible to meet. Now that the requirement is a reality, will the automakers be able—and willing—to comply?
History does not provide a positive answer. In 1975, the National Highway Traffic Administration (NHTSA) announced the first fuel-economy standard: an average of 27.5 mpg, to be phased-in over the next decade. By then, GM and Ford were moaning that they could not possibly meet the stated goal, seeking to reduce the 1986 average to 26 mpg. Each year, similar hand-wringing declarations of impotence emanated from Detroit. And each year, the federal government let the auto companies off the hook once again.
Maybe it’s different today. After all, for the past couple of years, automakers have made substantial strides in reduction of fuel consumption. Between April 2008 and April 2012, average fuel economy of new light vehicles increased by close to 14 percent (about 2.7 miles per gallon).
Costs Vs. Savings
While nobody admits to opposing improvements in fuel economy, critics insist that prices of automobiles will rise significantly, due to the cost of the technology needed to attain higher CAFE figures. Bill Underriner, chairman of the National Automobile Dealers Association, told Auto Remarketing magazine that the mandates for 2017-2025 model years will add almost $3,000 to the price of a new vehicle. “This increase shuts almost 7 million people out of the new-car market entirely,” Underriner added, “and prevents many millions more from being able to afford vehicles that meet their needs.”
In contrast, officials within the Obama Administration estimate that the new standards for fuel economy and reduced greenhouse-gas emissions will save consumers more than $1.7 trillion at the gas pump. In addition, U.S. oil consumption will drop by 12 billion barrels, sharply lessening the nation’s reliance on foreign oil.
New Jobs
Mindy Lubber, president of the Ceres organization, is among those who insist that both the auto industry and the U.S. economy will benefit from the new mileage standards. A report commissioned by Ceres, produced by Management Information Systems (referred to as an independent analyst) states that the 54.5-mpg rule will create nearly 484,000 new jobs nationwide. “Automakers—particularly American ones—have been caught flat-footed on fuel efficiency in the past,” Lubber wrote in Forbes magazine. “This time, things are different. Automakers are already working toward” the new standard. (Forbes.com: Auto Industry and U.S. Economy Will Benefit Under New Mileage Standards)
Bill King, president of the United Auto Workers union, cites a 2012 study by the BlueGreen Alliance, predicting 570,000 new jobs by 2030. This will happen as consumers spend less on fuel and more on other goods and services. “Cleaner vehicles that significantly reduce our nation’s oil consumption are good for the auto industry and its workers, good for the environment and good for our nation’s economy.”
Especially as Election Day draws closer, we can expect to hear a lot more about the 54.5-mpg standard, from both proponents and opponents.
