How cheap oil is undermining Obama’s fuel-economy rules

How cheap oil is undermining Obama's fuel-economy rules

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(Vox) One of the central planks in President Obama’s climate plan is a rule to ratchet up fuel economy standards through 2025. New US cars and light trucks are supposed to get better and better mileage with each passing year. At least, that was the dream. But now cheap oil is messing that up.

Recent data from the Transportation Research Institute at the University of Michigan shows that overall fuel economy for new cars, SUVs, vans, and pickup trucks sold in the United States has been stagnating ever since oil prices crashed last year: (Chart-Transportation Research Institute). This chart seems a little counterintuitive. How can fuel economy suddenly be flat if fuel economy standards are supposed to keep rising through 2025?

The crucial thing to understand here is that Obama’s fuel economy rules — known as CAFE standards — are “footprint-based.” That is, every new car sold in the US has to get steadily more efficient with each model introduced between 2011 and 2025. But bigger car models have looser mileage requirements than smaller car models.

So if consumers start shifting to larger vehicles with bigger “footprints,” then overall fuel economy will rise more slowly — even if all models are getting more efficient.

There’s evidence that this is exactly what’s now happening. During the late 2000s, when crude oil prices were high, Americans started shifting away from gas guzzlers. But ever since the oil price crash last year, gasoline has been cheap, averaging less than $2 a gallon nationally, and SUV sales have soared . In 2015 US SUV sales rose 11%, and Prius sales fell 11%. Jeep sales were up 25%, Nissan Leaf sales down 43%. Chevy Sonic subcompact down 31% — Ed Crooks (@Ed_Crooks) January 28, 2016 Under the CAFE standards, even these SUVs still have to get more efficient over time. But they’ll never have to get as good mileage as, say, Honda Accords or smaller Ford Fiestas. So if more people are buying SUVs, overall fuel economy will go up much more slowly than expected. No one expected this when […]

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