NCPA - National Center for Policy Analysis


January 26, 2007

With a combination of alternative fuel mandates and increased fuel-economy standards, President Bush, in his State of the Union, urged Congress to reduce gasoline usage in the United States by 20 percent in the next 10 years.  The problem is this has been tried before, with little success, says the National Review Online (NRO).


  • In a similar political climate in the early 1970s, Congress enacted the regulatory regime known as CAFE (Corporate Average Fuel Economy).
  • Today passenger cars are more efficient than ever -- up 114 percent since 1974. But gasoline is so cheap -- despite perpetual Middle Eastern crises -- that on average, Americans are driving twice as many miles as before.
  • As a result, U.S. oil consumption has increased from 17 million barrels a day in 1976 to 21 million barrels today, and oil imports as a share of U.S. consumption have risen from 35 to 59 percent.

This time around it is the so-called Renewable Fuels Standard (RFS), namely ethanol, which will save America from foreign oil, says NRO.  But in reality, The RFS exists -- not due to market demand -- but to satisfy the auto and farm lobbies:

  • For the Big Three, manufacturing "flex-fuel" vehicles allows them to exploit a huge loophole in the aforementioned CAFE laws; at minimal cost, converting vehicles to flex-fuel allows automakers to skirt the fatuous fuel rules -- even though consumers only fill up the vehicles with gas.
  • For the farm lobby, to make ethanol price-competitive, the federal government subsidizes its production to the tune of 51 cents a gallon, costing U.S. taxpayers $4.1 billion a year.

Ironically, the president's call echoes a more severe proposal by his 2004 campaign opponent John Kerry -- a recommendation that a National Center for Policy Analysis study found would not "reduce future U.S. dependence on foreign oil."

Source: Henry Payne, "Bush's Alternative Fuel Folly," CBS News, January 24, 2007; and H. Sterling Burnett and Todd Gabel, "Kerry's Energy Plan: Inconsistent, Expensive, Leaving America Less Secure," Brief Analysis No. 492, October 21, 2004.


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