Marketplace Scratch Pad


Scott Jagow May 19, 2009

There’s a group hug today about the President’s announcement of new fuel economy standards. The carmakers like it because they don’t have to worry about 50 state regulations. Environmentalists like it because it means getting the equivalent of 177 million cars off the road or shutting down 194 coal-fired power plants. That reduces the dependence on foreign oil, which the government likes. As for drivers…

I imagine most people support the idea because they’ll save on gas, even though the price of cars will go up an average of $1300 by 2016, when the industry average must hit 35.5 mpg. US News and World Report looks at some of the ways this may affect car buyers.

Light trucks (SUVs) will have to get 30 mpg. So, will carmakers produce fewer SUVs and large vehicles, which so many Americans have desired in the past? Maybe we’ll see a small reduction, but the technology already exists to make SUVs more fuel efficient. It’ll be interesting to see, though, how buyers react and how carmakers attain the average. Do they try to skew it by selling a small number of ultra-high mpg electric cars?

One of the few dissenting voices I’ve read comes, not surprisingly, from Myron Ebell at the Competitive Enterprise Institute, an oil and automotive lobby:

“We think these new mandatory fuel standards are most unfortunate. They will price people out of larger vehicles and force them into smaller vehicles. Smaller cars may use less fuel, but they don’t meet the needs of many people and studies show they are less safe.”

That argument is old and suspect. I don’t see how it’s safer to have bigger cars on the roads. I couldn’t see around one of them the other day and almost paid dearly for it.

Besides, the oil companies will probably get out of the retail gas business anyway. From Bnet:

Now, with a new national tailpipe emissions standard on the horizon, Big Oil’s divestiture of its retail fuel locations will go into overdrive. Exxon is already convinced that fuel-efficiency will drive down gasoline consumption in developed countries. The rest of Big Oil will be close behind.

As a result, the number of franchises will rise; discounters Sam’s Club and Costco will add to its retail gas inventory; and the Big Three convenience store operators will take advantage of the coming glut and buy locations at a bargain.

Seems like, for once, this is change with a consensus behind it. You on board?

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