NCPA - National Center for Policy Analysis


February 20, 2008

With gasoline over $3 a gallon, the effort for fuel efficiency is gaining new urgency.  In this atmosphere, it's useful to glean some lessons from a half century of efforts to revolutionize the automobile, says Paul Ingrassia, former Dow Jones executive and former Detroit bureau chief of the Wall Street Journal.

For instance, incremental progress shouldn't be dismissed:

  • Today's version of incremental progress is diesel engines, as opposed to the revolutionary but still-unproven hydrogen fuel cells and lithium-ion batteries that grab all the attention.
  • Diesels have a lousy reputation, thanks to decades of sooty, smoke-belching trucks and to the clunky car diesels from GM in the 1970s.
  • But the latest high-tech diesels from Europe are a different story; the new Jetta diesel that Volkswagen will introduce to the United States later this year could get more than 40 mpg in combined city-highway driving, and meet air-pollution standards in all 50 states, including California.

Market forces, not government regulation, provide the most effective impetus for higher gas mileage:

  • America's Corporate Average Fuel Economy (CAFE) law first became law in 1975, but didn't prevent the SUV boom in the 1990s, where consumers and car companies were reacting to market forces, not CAFE.
  • For consumers, the market force was cheap gasoline, for auto makers it was profits, which are more substantial on SUVs than they are on fuel-efficient small cars.
  • This sorry situation might change now; thanks to the new contracts with the United Auto Workers union the Detroit Three finally might find profits in the smaller, fuel-efficient vehicles that more Americans now want.

Likewise, market forces are spurring research on alternative engine technologies that could produce a breakthrough in five to 15 years.  CAFE is unnecessary at best and damaging at worst.  Further, the regulatory costs might wipe out much of Detroit's savings from the new labor agreements.

Source: Paul Ingrassia, "Detroit's (Long) Quest for Fuel Efficiency," Wall Street Journal, February 19, 2008.

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