New Yorkers enjoy their café lattes. But they won't like the higher CAFE standards that were voted out of the Senate Commerce Committee earlier this month, a warning to drivers this Memorial Day weekend that Congress is after their minivans and pickup trucks.
CAFE stands for Corporate Average Fuel Economy. Enacted in 1975, CAFE generally requires automakers to calculate average fuel economy — miles per gallon — across their fleets. For Democratic senators Barack Obama and Dianne Feinstein, as well as President Bush, more CAFE is better than less.
If the proposed bill becomes law, CAFE standards would rise to an average of 35 MPG in 2020 for cars, SUVs, minivans, and light trucks, defined as pick-up trucks, from levels of 27.5 MPG and 22.2 MPG for cars and light trucks respectively. Standards would rise 4% annually between 2020 and 2030. One blogger wrote about his beloved engine as "RIP V8."
The first CAFE standards, according to a 2002 National Research Council study, resulted in 1,300 to 2,600 more Americans killed on the roads in 1993, a typical year, because cars were lighter. If any pharmaceutical product had killed that many patients the manufacturer would be bankrupt. Families can sue Merck, but not Uncle Sam.
After dead motorists, the biggest losers from higher standards would be Americans who prefer large vehicles to carry families, equipment, and pets on daily trips or long vacations.
Other major losers would be the domestic car manufacturers, GM, Ford, and Chrysler, who have invested in plants that make large sedans and light trucks, Americans' preference. The industry is already restructuring to try to reduce labor costs; higher CAFE standards would be its nail in the coffin.
For several years, Americans have bought more light trucks, including SUVs, than passenger cars. Domestic companies have the bulk of light truck sales — which would bear the brunt of more CAFE.
In the first four months of 2007, Ford sold 570,000 light trucks, but only 300,000 passenger cars. Each F-Series truck makes about $8,000 in profits for the company, whereas Ford loses money on passenger cars.
Higher standards would discourage the production of new, potentially profitable high-performance sedans, such as a proposed 2009 line of rear-wheel drive GM sedans.
In contrast, foreign auto manufacturers would benefit from higher standards because most of their sales come from more fuel efficient vehicles made overseas. They would not have to change production to meet the new standards.
Their American assembly plants primarily make larger vehicles, such as Nissan Titans in Mississippi and Toyota Tundras in Texas.
President and CEO of the Association of International Automobile Manufacturers, Inc., Michael Stanton, testified before the Senate Commerce Committee on May 3 that "Nine of the top ten models on the EPA's Fuel Economy Leaders list for 2007 are manufactured by AIAM members." Quite predictably, Mr. Stanton went on to say that "AIAM supports increasing CAFE standards."
The only rational reason for consumers to ignore the price of gasoline in choosing a car is that there is something wrong with the price of gasoline. That is the implicit message every politician who advocates CAFE standards is telling America: energy markets are unreliable and wrong. President Bush, who once worked in Texas's oil industry, should know better.
It's ironic that many politicians who accuse Americans of using too much gasoline want to hold hearings on price gouging when prices rise to reflect hurricanes in the Gulf of Mexico or turbulence in the Middle East. Price increases will eventually lead to less consumption.
If energy security is the rationale for CAFE standards, America needs to increase domestic coal and natural gas production, find out whether potential supplies of oil exist in Alaska, invest in more refinery capacity, and build nuclear power plants. We've done none of these.
But if politicians want higher MPG standards so that Americans can retard global warming by reducing consumption of fossil fuels, Americans need to lower consumption of all fossil fuels, not just pick on cars.
Rather than regulating automobile size, a switch from income to energy taxes might be the most efficient and least intrusive way to reduce consumption and encourage new technology, thereby allowing consumers who want large vehicles and warm houses to have them.
Given the nature of our political system, income taxes will never get replaced by energy taxes. Just as politicians are now set to raise taxes in 2010, they will always be tempted to layer new taxes on top of old, increasing inefficiency and slowing economic growth.
If markets really are unreliable — which is yet unproven — then regulating cars' fuel efficiency is the wrong way to go. Neither global warming nor energy security require increased CAFE standards, which are both anti-economic and anti-intellectual. They are made for a political system where appearance trumps substance.
Automotive fuel efficiency is rising without government regulation, even as engine power increases. As Americans replace older cars with newer ones, fuel efficiency improves.
Over past decades, gasoline mileage has been rising steadily and voluntarily, and this process is continuing. The new GM direct injection 3.6 liter V6 engine, starting in the Cadillac STS this year, gets both more fuel efficiency and power than the previous V6. Every time GM brings out another Escalade it gets better fuel efficiency — and more power.
Politicians need to reflect on which national problem would be best solved by higher CAFE standards — other than how to bankrupt the American automobile industry.
This Op-Ed was featured in The New York Sun issue of May 25, 2007.