As the price of gasoline hovers around $3.50 a gallon, it’s hard to imagine who wouldn’t be intrigued by the idea of cars so efficient they get an estimated 56 mpg.
That’s the populist hook that comes with the Obama administration’s proposal to substantially raise Corporate Average Fuel Economy (CAFE) standards by 2025.
We like the idea of requiring improved mileage for the nation’s cars and trucks, and always have. Such a move reduces our dependency on foreign oil and cuts down on harmful auto emissions.
However, given the delicate state of the economy and the auto manufacturing business, we think the idea has to be carefully considered.
Requiring fleetwide averages to be 56.2 mpg would increase the cost of each vehicle by about $2,375.
Those who support the tougher standards, however, counter that the owner of a significantly more efficient car would save somewhere between $5,500 and $7,000 in fuel costs over the life of the vehicle.
Sounds like a pretty good deal, right?
These are, however, soft estimates that could be changed by factors beyond the control of the Obama administration.
What if OPEC, which is dedicated to stability in petroleum income, were to clamp down on the oil supply in an effort to keep revenues up in the face of decreasing demand?
The point is, volatility in gasoline prices could make those back-of-the-envelope “savings” either grow or shrink.
We’re not trying to deep-six the idea of requiring greater fuel efficiency, but we do think a thorough debate ought to encompass the potential for fluctuating fuel costs.
In addition, the fragility of auto manufacturers ought to be a part of the equation. In late 2008, President Bush stepped in to prevent a collapse of the American auto industry, announcing a $17.4 billion bailout of Chrysler and General Motors.
By the time it was over, the Bush and Obama administrations would spend a combined $80 billion in rescuing the auto industry.
The automakers have paid back some of that and are showing signs of life, but they are hardly sturdy economic engines. Do they have the wherewithal to create such efficient vehicles?
Perhaps they do. That certainly was the plan when billions in taxpayer money were funneled into the industry: They would retool, reorganize and make more efficient cars.
Since the Obama administration broached the idea of increased CAFE standards, the industry has been raising concerns about being able to develop these fuel-efficient vehicles, and at a point that consumers would accept.
But the truth is, the industry has always reacted this way whenever the topic of increased CAFE standards has been raised.
Nevertheless, the question is a valid one, particularly given that taxpayers still have a significant financial stake in the success of American automakers.
Discussions between the administration and automakers about changes in CAFE standards have only just begun.
As they continue, we hope the debate will be guided by a pragmatic view of this nation’s economic reality.
