THE DOWNSIDE OF CORPORATE AVERAGE FUEL ECONOMY STANDARDS

 

THE DOWNSIDE OF

CORPORATE AVERAGE FUEL ECONOMY STANDARDS

 

Bob Fahnestock

 

During the Obama administration there have been two increases in the Corporate Average Fuel Economy Standards (CAFES). In the first instance auto manufacturers were required to meet a fleet average of 35.5 mpg by 2016. More recently this was upped to 54.4 mpg by 2025. Additionally, in President Obama’s State of the Union Address he touted the race to have “green energy” in place by 2035.

The Department of Energy was created in the mid ‘70s for the purpose of developing a national energy policy including the development of alternative sources of energy. Unfortunately it has accomplished nothing with regard to energy while becoming a bottomless pit for taxpayer dollars. Congress’s idea of a solution has been to prohibit exploration and development of existing energy reserves, subsidize the conversion of food into fuel (ethanol), and to enact CAFES. CAFES were a good as a first step with regard to the energy problem because it got the public and automakers to think about fuel economy and energy resources. However, the initial CAFES should have been replaced by a sound long-term energy policy--not continually increased over the years.

In response to the CAFES for the automobile fleet manufacturers had to build cars lighter and smaller to achieve the stipulated mileage requirements within the time frame allotted. The first unintended consequence of CAFES meant the end of the station wagon. But it did not mean the end of consumer demand for the station wagon. The market place has a way of satisfying demand with supply and consumers replaced the station wagon with the SUV. Prior to CAFES each of the Big 3 U.S. automakers built 20,000 to 30,000 SUVs a year, which, were primarily sold to sportsman. After CAFES were in full swing, automakers were building hundreds of thousands of them. Yes it was government regulation that spurned the SUV explosion and not the Have’s showing off to the Have-Not’s as the class warfare crowd would like you to believe.

The problem with all regulation is that it begins with good intentions but eventually becomes an entity onto itself. Regulation eventually exists for the regulators and not for its intended purpose. In fact, CAFES have morphed into a set of regulations that resemble the Internal Revenue Code. This situation opens the door for manipulation. Chrysler engineers actually designed the PT Cruiser to meet the definition of a truck as defined in CAFES. This permitted Chrysler to continue to market the less fuel efficient Hemi powered trucks while still meeting the mileage requirements for its truck fleet.

CAFES force auto manufacturers to build smaller and lighter vehicles in order to meet the fuel mileage requirements. Recent data suggests that this has resulted in an upward spiral in the number of automobile fatalities. It seems that vehicles can be made smaller and lighter but cannot be built to avoid the laws of physics. Vehicles may have gotten smaller but trees, power poles, bridge abutments, and retaining walls are still the same.

Electric vehicles do not meet the demand of most drivers in the U.S. Electric cars have limited range, require the use of fossil fuels to recharge the batteries, and there is the unknown factor regarding the long-term effects of battery disposal. Additionally, the production of fuel efficient vehicles requires the use of fossil fuel. Some engineers argue that the production of a Prius requires twice as much energy as it will save over its life. Battery vehicles are supposed to run about 100,000 miles. But if they don’t, replacing the batteries in an electric vehicle can run up to $7,000. It is cheaper to junk the vehicle and buy another one.

Both smaller gas-powered, hybrid powered, and electric powered vehicles lack towing and payload capability. People with boats and campers must still rely on the more traditional full size tow vehicle. Without these vehicles there would be massive layoffs in the boat and travel trailer industry.

We also have to consider the cost of CAFES to the taxpayer. Law enforcement agencies utilize vehicles in a way that most of us never dream of. As a result, heavier vehicles hold up better, last longer, and have lower maintenance cost. Agencies such as the Fish and Wildlife Commission must tow vessels and require full size trucks or SUVs. We are seeing an increase in the number of trucks and SUVs utilized by sheriff departments and by state police. The problem is that trucks and SUVs are more expensive than the cars that these agencies used in the past.

Hydrogen vehicles are often touted as a solution to the energy problem but present different problems. One report that I read stated that to drive a hydrogen powered vehicle from Mobile to Montgomery would require a vehicle the size of a Hummer towing a 3,000 pound fuel tank. Then there is the issue of refueling hydrogen vehicles. Refueling stations are not only scarce; refueling itself can be a tricky process.

So, if CAFES are the future of our energy policy, the country is in trouble. Basic economics indicates that countries utilize their natural resources to their benefit, either as consumable goods or to trade for resources that the country needs. In the U.S. we have a bounty of natural gas, coal, and oil. In fact, estimates indicate that we have enough of these three resources to meet all of our energy needs for the next 200-300 years.

According to T. Boone Pickens, if all of the 18-wheelers in the U.S. were converted to natural gas, there would be no need to import oil from the middle-east. Already we have cities and counties converting school buses, garbage trucks, and fleet cars to natural gas. Yes there are limited refueling locations, but if we can put a man on the moon this does not appear to be a serious issue.

So-called Green Energy calls for great technological strides. It is basically the development of an energy source starting from scratch. We already have the technology to utilize natural gas, coal, and oil. It is much easier to develop technology to make the use of fossil fuels cleaner and more efficient than it is to invent some entirely new energy source. Plus, in Europe, data suggests that for every Green Job created, two non-Green Jobs were lost. Something we don’t need given the present economy.

Last, the issue of global warming or climate change supposedly caused by fossil fuels. It is doubtful that climate change is a real phenomenon because the climate change models tend to lack validity. Models should be developed from past data. The validity of models is usually tested on a sample of past data and the higher the level of prediction, the better the model. But this is not so with climate change models which have nowhere near acceptable levels of validity. There is actually more evidence to indicate that climate change is nothing more than natural cyclical patterns in the weather that are not influenced by man. If by some remote chance climate change is real, technology will defeat the problem as it has defeated some many others.

The U.S. needs to develop a comprehensive energy policy using the resources that we have available to us. CAFES are a dead end.

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