The Nation's Thirst For Oil And the CAFE Standards

by Paul R. Portney

February 11, 2002 - The events of September 11 and their aftermath are a vivid reminder of the consequences of U.S. dependence on oil. More than half the petroleum we use is imported, and a quarter of that comes from Saudi Arabia, Iraq, and other countries in a very dangerous part of the world. Even before the terrorist attacks, Congress had begun considering the first changes in more than a decade to the Corporate Average Fuel Economy (CAFE) standards for new passenger cars, minivans, pickup trucks, and the now-ubiquitous sport utility vehicles (SUVs). Combined, these vehicles account for more than a third of all the oil consumed annually in the United States.

A dramatic shift in car-buying habits has sparked renewed interest in tightening fuel economy standards for new cars. In the midst of the energy disruptions of the 1970s, Congress required automakers to improve the fuel economy of both passenger cars and what are known as light-duty trucks -- SUVs, minivans, and pickup trucks. Back then, these light-duty vehicles constituted only 20 percent of all new vehicle purchases, and they were given the less ambitious standard of 20.7 miles per gallon (mpg), versus the 27.5 mpg assigned to cars.

How times have changed. This year it appears that light-duty truck purchases will exceed those for passenger cars for the first time in the nation's history -- with expected sales of about 3 million each of SUVs and pickup trucks and 2 million minivans. Moreover, the buyers of these vehicles are not just farmers, ranchers, plumbers, electricians, or florists. A great many of them, in fact, are folks who have purchased an SUV or minivan for the same reasons many of us used to buy station wagons -- to lug around kids, dogs, golf clubs, and camping equipment.

Though these vehicles are wildly popular, the downside to "light truck mania" is that the overall fuel economy of the combined new vehicle fleet has declined about 8 percent since 1987. Moreover, since vehicular emissions of carbon dioxide -- a greenhouse gas -- move in lockstep with gasoline use, our growing thirst for petroleum also increases the risks of global warming. Finally, there is concern that while SUVs and other light-duty trucks are safer for their occupants in crashes, they pose greater risks to the drivers of smaller cars.

Can we afford our SUVs and other large vehicles, but fuel them up less frequently? I recently chaired a committee of the National Research Council that examined the fuel efficiency standards in detail, and our answer was a cautious "Yes, as long as this is done in the right way." But changes will most certainly involve a difficult balancing act among driver satisfaction, passenger safety, environmental quality, imported oil, and the affordability of new vehicles.

To illustrate, suppose all vehicles -- large and small -- were required to meet much more stringent fuel economy standards in a short period of time, say, five years. This is like saying "tomorrow" to the auto industry, given its planning and manufacturing cycles. Such a goal probably could be met, but largely by making cars smaller and lighter -- as it was when the CAFE program was first implemented. Most members of our committee believe that an unfortunate but inevitable consequence of a rushed "downsizing" would be additional highway fatalities.

If, however, tighter fuel economy standards were phased in gradually over 10 to 15 years, automakers could use existing technologies to significantly improve the fuel economy of both passenger cars and light-duty trucks without reducing the size and weight of vehicles. For instance, our committee found that the fuel economy of midsize SUVs, which currently stands at 21 mpg, could be boosted to 28 mpg -- an increase of 34 percent -- over the next 10 to 15 years. This would add about $1,250 to the purchase price of the car, but the additional cost would be more than offset by the fuel savings the owner would enjoy over the 15-year life of the vehicle. The dilemma is this: If new-car buyers balk at such higher purchase prices, carmakers might well choose to improve fuel economy through a combination of new technologies and some weight reduction to keep costs down. Should this occur, passenger safety would become a concern once again.

Though it runs contrary to our natural instincts, we simply cannot have vehicles that simultaneously set world standards for fuel economy, acceleration, emissions control, passenger safety, affordability, and towing capacity. The trick to setting both future fuel economy standards and the schedule for meeting them is striking a balance among these perfectly reasonable yet conflicting desires. That requires a national decision, and ultimately Congress will have to make it.

Paul R. Portney, president of Resources for the Future, Washington, D.C., recently chaired a committee of the National Research Council that wrote the report Effectiveness and Impact of Corporate Average Fuel Economy Standards.

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