FLINT, Michigan — One of the boldest chapters in American policymaking is about to begin. It appears that the Trump administration is going to roll back President Obama’s energy and environmental agenda.
One of the first measures likely to go is Obama’s lofty fuel economy standards that call for 54.5 miles per gallon for new cars built in 2025.
Overly ambitious, unnecessary and completely out of touch with consumer preferences, the Obama Administration’s fuel economy target was a mistake to begin with and should rightfully be at the top of the regulatory chopping block.
Fuel economy standards are a legacy of the oil crises of the 1970s. While these standards have become conflated with environmental goals — namely carbon reduction — they were foremost designed to strengthen U.S. energy security in the face of growing dependence on imported oil.
Even when President George W. Bush signed into place new energy legislation that included raising fuel economy to at least 35 miles per gallon by 2035, the driving force behind the effort was energy security. The name of the legislation was, after all, the “Energy Independence and Security Act of 2007.”
But times have changed. The book on U.S. energy security has been rewritten, but we remain beholden to energy policies that reflect a different time.
Oil and natural gas are no longer scarce. The shale revolution and the corresponding surge in U.S. natural gas and oil production have transformed energy from an economic and strategic weakness into a tangible strength.
The U.S. is now the world’s largest combined oil and natural gas producer. In 2005, our nation’s dependence on foreign fuel had risen to an all-time high of more than 60 percent. By 2015, net oil imports were only 24 percent of total consumption, the lowest level since 1970.
Simply put, U.S. energy security, so long the driving force behind fuel economy standards, is not the Achilles’ heel it had once been and should not be used as justification for a federal mandate that is wildly out-of-touch with reality.
The Obama Administration’s proposed 54.5 miles per gallon standard for 2025 was based on an assumption that the automobile market would be 67 percent cars and just 33 percent trucks and SUVs in 2025.
But that doesn’t reflect the actual makeup of the fleet, which is currently 50 percent cars — and declining, and 50 percent trucks and SUVs, and growing.
With a 50/50 vehicle fleet, it may not even be technically possible to achieve a 54.5 mile per gallon standard by 2025.
American consumers already have voted with their wallets and concern for safety: They want trucks and SUVs. Thanks to low oil prices, the assumed shift in consumer preference to hybrids and electric vehicles has not materialized.
Sales of the Toyota Prius, the best-selling hybrid, have dropped significantly since peaking in 2013. While electric vehicle (EVs) are gaining competitiveness and becoming more attractive to consumers, they still meet just 1 percent of the global auto market.
Support Canada Free Press
We’ve already bailed out the U.S. auto industry once. Forcing the industry to defy consumer preferences and make cars nobody wants is a predictable recipe for trouble.
For those who are concerned that rolling back fuel economy standards will slow electric vehicle adoption with an adverse effect on energy security and the environment, the right way to spur innovation for emerging technologies is not to tilt the playing field in their favor but to force new model vehicles to hold their own in a competitive market.
Fuel economy standards aren’t the answer. With the U.S. more energy secure than it has been in generations and consumers’ preference so clear, the Trump Administration would be wise to drop the 2025 fuel economy standards.
There are far better ways to enhance U.S. energy security and achieve environmental goals than to force auto manufacturers to make and sell cars consumers don’t want.
Mark J. Perry is a professor of economics and finance in the School of Management at the University of Michigan–Flint. He holds two graduate degrees in economics from Virginia’s George Mason University and a Masters of Business Administration from the University of Minnesota. Readers may write him at 2111 Riverfront, Flint, MI 48502.
