As the price of a product goes up, so does the propensity of politicians to want to do something. Gasoline prices are up, and here come the politicians. The Senate Energy Committee has announced it will be holding hearings in September. And now comes the Bush administration with a proposal to revise and enhance fuel economy standards for “SUVs, Pick-ups, and Mini-Vans.” Yes, that Bush administration, the one that opposed changes to CAFE standards in the monstrous energy bill signed into law just a few weeks ago.
The Washington Post report on the proposal is sub-titled, “Critics Call Bush’s Plan Inadequate.” Let me join the critics.
According to the above-linked U.S. Department of Transportation press release:
This plan is good news for American consumers because it will ensure the vehicles they buy get more miles to the gallon, requiring fewer stops at the gas station, and ultimately saving them money at the pump, Secretary Mineta said.
Of course, American consumers can already purchase vehicles that “get more miles to the gallon, requiring fewer stops at the gas station, and ultimately saving them money at the pump,” and I suspect recent price increases are increasingly leading consumers to make such selections. If gasoline prices stay high, the proposal will be easy for manufacturers of SUVs, pickup trucks, and minivans to meet, largely because it will be irrelevant. If gasoline prices drop back to more typical levels, then manufacturers will have to become creative. In any case, the effects of CAFE on overall fuel consumption are likely to be miniscule.
However, just because the effects on fuel consumption are likely to be small, doesn’t mean that CAFE standards have no effects. Think “unintended consequences.”
I am amused that social critics of “gas-guzzling SUVs and minivans” are so often supporters of CAFE standards, since it seems to me that CAFE standards drove auto manufacturers to produce such vehicles in the first place. Is it any suprise that Chrysler Corporation developed the minivan in the early 1980s? As gasoline prices declined from their 1979/1980 highs, consumers were buying bigger cars again. Good news for Chrysler, but for the CAFE standards which began to be a serious constraint for the company.
Offering minivans (regulated under the lower ‘light truck’ standard) moved consumers out of the largest station wagons (regulated as ‘passenger vehicles’). Since the minivans often got better mileage than other light trucks, the shift improved Chrysler’s corporate average for both categories of vehicle. Other manufacturers were not so constrained by CAFE standards, but soon they too phased out full-size station wagons and introduced minivans.
You won’t get many single consumers buying minivans, and some people resist minivans as un-stylish. (Not me, by the way, I drive a 1995 Honda Odyssey. Quite stylish in my view.) Fortunately, SUVs, too, provided manufactures a way to shift consumers out of the passenger car category into the light truck category. Perhaps not the intention of CAFE standards, but there you have it.
Of course the proposed new-and-improved CAFE standards for light trucks are intended to fix some of this incentive for category shifting. Now we are going to have six different categories for light trucks, each with its own CAFE standard. Sure there may be some ‘bracket creep’, as the Post article mentions, but I’m sure that any problems can be fixed by the next new new-and-improved CAFE standard. It will probably have twelve different categories….
I will lead it to readers more qualified than I to comment on whether this is evidence for or against a “Smithian” Bush.
(In the way of a disclaimer and warning to the reader, please note that some of the above conclusions of mine are purely speculation. I have done only the slightest amount of library digging in an effort to support these conclusions, and that digging was done some time ago.)