Hidden cost of Obama fuel economy strategy could be the drivers

One would like to think that US President Barack Obama's chosen road to improved automobile fuel consumption is paved with good intentions. Indeed, nobody can fault the concept at least of reducing the amount of fossil fuels we consume or minimising the greenhouse gasses we emit.

But, it's important to be clear about the reason the United States is seeking to force automakers to conform, by 2025, to a 54.5 miles per US gallon (4.31L/100km) corporate fleet average - the average fuel economy of a company's entire range. There is no one in Washington that has the political will to do what almost everyone - both in industry and government - acknowledges is the optimum method to diminish US consumer demand for petrol, namely raising taxes on it. While there are plenty of psychographic differences between Europeans and North Americans, there's little doubt that the reason the EU's fleet averages between 33 and 50 per cent better fuel economy (depending on who's measuring and what country is being evaluated) is because petrol costs almost twice as much on the other side of the pond. It's particularly ironic that, just as the forces of free market capitalism seem poised to recapture the American government, everyone has seemingly forgotten the basic rules of supply and demand.

Instead, the United States - and by extension the rest of North America - will soon get a set of convoluted rules that will supposedly force consumers to buy more fuel-sipping econo-cars.

The sticking point is that North Americans are in no big rush to give up their petrol guzzlers. Yes, subcompact sales have grown, complaining about high fuel prices is now a national preoccupation and the mainstream media is alight with the promise of an electrified automotive future.

Unfortunately for tree-hugging devotees, truck sales are also booming (currently at 49 per cent of the market), luxury cars are still the easiest sell in an otherwise depressed automobile market and hybrids, despite more than a decade of hype from media and environmental activists alike, still account for less than 0.5 per cent of the North American fleet (and less than three per cent of annual sales).

Having seemingly acceded that we of the Boomer generation will not give up our road hogs voluntarily, no matter how much we claim to want to save the environment, the green movement has of late taken a different tact: if they can't convince people to voluntarily give up their petrol guzzlers, legislate it so there are simply no petrol guzzlers to buy. Hence, the rejoice around the Obama administration's mandate to see corporate fleet averages rise to 54.5 miles per gallon.

Little thought, of course, has been given to exactly what it will take to meet these regulations, how much it will cost to almost double the Corporate Average Fuel Economy (Cafe) and, more importantly, whether consumers will actually buy any of the cars that will be forced upon them by the stringent new standards.

The Environmental Protection Agency (EPA), for instance, says it will only cost an extra $3,000 (Dh11,020) for the new Scrooge-like automobiles. But this is the same EPA that sees North American truck sales declining to 32 per cent of the market, a drop of more than a third from the boom pickup manufacturers are currently enjoying. A boom, by the way, that marches on despite the fact that the construction industry - a huge portion of the traditional truck market - is still mired in the worst decline since the Great Depression and fuel prices are at almost record highs. Nor will more efficient engines be the simple answer to America's love of its pickups; Consumer Reports recently found that Ford's new F-150 EcoBoost V6 got the exact same real-world fuel mileage as the 5.0L V8 it was supposed to supplant, despite the turbocharged six's more frugal EPA rating.

Even hybrids aren't going to provide the easy answer many surmise. The basic issue with hybrids is that they don't pay back the higher costs they command with enough fuel savings to warrant their initial outlay. Simple economies of scale will not solve this problem. With two motors (gasoline and electric), a big battery back and myriad electronic controls, they will always be more expensive to produce than a conventional automobile, no matter how many you make. So despite all the media hype, hybrids are unlikely to be a major factor in North America's overall fleet economy simply because frugal Americans won't buy them.

But while much (actually all) of the spotlight on automotive environmentalism has focused on complicated powertrains - turbocharging, hybrids, electric vehicles, etc - it remains that the simplest and cheapest way to increase fuel economy is to make cars smaller. It's no secret to automotive engineers that weight is the primary enemy of fuel economy. A lighter car needs a smaller engine and smaller, when it comes to internal combustion, is always greener.

The problem, of course, is that few North Americans want, or are willing, to drive a smaller car. Indeed, the history of the last 25 years is that every increase in internal combustion efficiency has been offset by a corresponding increase in vehicle size, keeping average fuel consumption relatively stagnant despite the fact that the modern direct-injected engine is far greener than the Mesozoic beasts of the 1980s. And while some of that extra avoirdupois was directed at the Corinthian leather trappings of pseudo-wealth, much of it - larger crash crumple zones, airbags, etc - went into making cars safer than previously thought possible.

And all this could lead to possible social and safety ramifications with the proposed new mandate. Could the new regulations lead to the yet further division between the rich and poor? To make the vast majority of cars 54.5mpg fuel efficient at a price point the average consumer can afford, they'll have to be stripped-to-the-basics little runabouts that will make today's subcompacts look positively limousine-like.

Meanwhile, Bubba ain't givin' up his pickup (and who knows how many farmers/construction workers/delivery personnel will have to be given exemptions to penalties to avoid crippling the already moribund North American economy) while your neighbourhood banker isn't relinquishing his S-Class Benz, even if it means paying more in taxes and penalties or plunking down more greenbacks for a hybrid.

The consequences of any meeting of these two solitudes will be predictable. It doesn't matter how many airbags you put into a teensy-weensy micro-car (Toyota's micro-sized iQ has the new record - 11); when two tonnes of steel hits three-quarters of a tonne of plastic, there's only one loser. Indeed, a 2005 Insurance Institute of Highway Safety (IIHS) study noted that, in a collision between a mid-sized SUV and a passenger car, the car driver is four times as likely to be killed. Move the weight of that SUV to 2,300kg and that number escalates to nine times.

As laudable as the goal of reduced consumption and lower emissions may be, it will take more than fleet fuel economy standards to change what and how North Americans drive. The proposed new regulations will only further distort the American automotive market that might be better served if fuel were taxed as it is in Europe and elsewhere.

Cafe standards 101

The Corporate Average Fuel Economy refers to the average fuel economy of the entire line of cars of one particular automaker. The National Highway Transportation Safety Administration is the governmental organisation that manages America’s Corporate Average Fuel Economy Standards that are set to be raised to 54.5 US mpg by 2025. Cafe measures fuel economy dramatically differently than the method used by the Environmental Protection Agency, which calculates the fuel economy figures already shown on dealership window-mounted price tags and quoted universally in the press. According to Dean Drake, president of the Defour Group – a business analyst company – the Cafe’s number is generally about 20 per cent more optimistic than the EPA’s more “real world” numbers.

That 54.5mpg number is calculated using a blend of different goals for different sized vehicles. The fleet average is based on a “footprint” scale whereby the fuel economy increase required is dependent on the size of the vehicle, measured by the wheelbase multiplied by the track width. So, while a car the size of a Honda Fit may need to average 61mpg to meet the new regulations, a Ford F-150 might need to achieve but 30. Do the maths and the only way that this all averages out to 54.5mpg is if a large number of Americans trade in their pickups for subcompacts. If they don’t, either the American fleet won’t meet its 54.5mpg target or else econo-cars will have to average much more than 61mpg.