Pat Dollard | Young Americans

Market trumps Congress when it comes to fuel economy

by Daniel Howes

News flash: Skyrocketing gas prices are driving historic shifts in the habits of car buyers, pushing them away from thirsty pickups and full-size SUVs and into four-cylinder compacts.

What a surprise.

Might all the smart people behind tougher federal Corporate Average Fuel Economy rules be watching? If they are, do they understand what we are witnessing? Namely, this: It’s not arbitrary mileage goals, mostly unhinged from engineering reality and focused on a handful of companies, that are dramatically changing the behavior of the driving public. It’s the price of fuel, stupid.

Cars outsold trucks in April for the first time in a generation, according to industry figures compiled by Autodata Corp., and four-cylinder powered cars outsold those with six cylinders under the hood. The shift, clearly a blow to truck-dependent Detroit automakers scrambling to dig out of their deep hole, is confirmation that market forces are a swifter disciplinarian than the collective wisdom of Congress, career bureaucrats and the environmental lobby.

“It’s easily the most dramatic segment shift I have witnessed in the market in my 31 years here,” George Pipas, Ford Motor Co.’s chief sales analyst, told the New York Times.

Politics pursues easy path
Which ought to say something to the lemmings — including presidential contenders John McCain, Barack Obama and Hillary Clinton — who think the answer to America’s shifting fuel-economy goals is a complex web of national and state rules that tells automakers what to build, whatever the market dynamics now and in the future.

If the presumed national goal is to reduce consumption by getting more Americans behind the wheel of smaller, more fuel-efficient vehicles, don’t the past few months pretty much show that higher gas prices are the fastest way to get there? Um, yeah.

And couldn’t higher gas prices be kept aloft by raising the 18.4-cents-per gallon federal tax on fuel so that gas regularly sold for $4 a gallon or more? Possibly. Instead, we’ve got presidential candidates pandering to voters with a call to suspend the tax for the summer driving months in a craven campaign ploy. Big deal.

Keeping prices high to reduce demand and steer folks into more fuel-efficient vehicles, as economically untenable as it may be, isn’t the goal of federal fuel rules. Appearing to do something, getting credit for it and sticking someone else with the bill — i.e., full-line automakers — is the goal. It’s safer politically, proving the adage that environmental policy is all about getting someone else to pay for your bad behavior.

Gas price trumps policy
Why would, say, the California congressional delegation back a new slug of draconian taxes that would hit their driving constituents equally when the path of lesser resistance runs over Detroit’s automakers and chief rivals like Toyota? They wouldn’t, which is why California led the push for tougher fuel economy rules and is leading the fight to allow states to separately regulate greenhouse gas emissions.

For decades, Detroit’s automakers have waged an increasingly unsuccessful rear-guard action against advancing political sentiment that holds the best way to improve the fuel efficiency of cars and trucks sold in the United States is by mandating fuel-economy standards. Raise the standards, the theory holds, and more Americans would buy more fuel-efficient cars.

Except that they didn’t feel compelled to obey when gas was cheap. It’s not part of the American “bigger is better” psyche, no matter how much the Sierra Club thinks it ought to be. But as gas breaches $3.50 a gallon on its way to $4, the ostensible goals of stiffened fuel economy rules are, like magic, in closer reach without government meddling.

The market did it, and the market will keep working its rational magic. Ford Focuses, Honda Fits and Chevy Aveos will roll out of showrooms at record rates so long as gas prices hover at historic highs and achieve what years of posturing and bruising battles in Washington have mostly failed to deliver.

(DetNews)