Pumps and Pocketbooks

Pietro S. Nivola
Pietro Nivola
Pietro S. Nivola Former Brookings Expert

April 24, 2000

One good way to reduce this country’s emissions of carbon dioxide as well as our dependence on foreign oil, suggests an April 17 editorial [“Saving Gas, and the Planet”] is to set tougher standards for the fuel efficiency of motor vehicles.

Sorry, but Congress has entertained this notion for almost a quarter-century with disappointing results. Since 1978 the United States has been attempting to do what no other industrial country has tried: reduce the consumption of oil just by imposing regulations—fuel-economy requirements—on new fleets of automobiles. At least two difficulties bedevil this command-and-control approach to energy conservation.

For one, the policy reaches only new vehicles. This means that it takes decades, not just a year or two, to raise the efficiency of the on-road fleet. If, tomorrow morning, federal regulators were to ratchet up the standards for SUVs, minivans and light trucks, most of the existing ones would remain in use, guzzling fuel and spewing greenhouse gases for years to come.

Worse, though the vehicular fleet gradually can be forced to record better gas mileage, doing so scarcely dissuades motorists from driving the “improved” vehicles more than ever. The unrelenting increase in vehicle miles traveled vitiates the fuel savings from improvements in mileage per gallon. Indeed, during periods of stable or declining gasoline prices, greater fuel economy of vehicles lowers the marginal cost of driving, actually encouraging motorists to log more miles.

The recent surge in nominal gasoline prices has slowed this boomerang, though not for long. Prices will begin to sag in the months ahead. Moreover, adjusting for inflation, even the current price of self-service regular is barely above where it stood in 1996 and well below its peak 18 years ago.

By 1997 Americans were motoring some 2.6 trillion miles a year—the equivalent of 10,715,511 trips to the moon. The federal government’s fuel-efficiency rules did nothing to moderate this astronomical amount of motion, at least some of which is extravagant and wasteful.

Naturally, this failure has implications for the nation’s thirst for oil and its environmental side effects. Transportation in the United States burns most of the petroleum we buy. It accounts for most of our rising volume of imported oil (which is now up to half our consumption), and for more than half of the damaging chemicals we emit into the atmosphere. While the use of oil dropped in virtually every other sector of the economy between 1973 and 1998, transportation’s was up 36 percent. If the aim of government policy is to reverse this trend, reduce the level of oil imports and improve air quality, something other than automotive fuel-economy mandates is necessary.

Like it or not, that something is a higher price at the pump. In an election year, politicians wince at the thought, but if the current spike were permanent, it would likely conserve energy more efficiently over the long haul than does the flawed fuel-economy law. A few years ago, a joint study by the Century Foundation and the Brookings Institution estimated that a 25-cent increase in the federal gasoline tax would have saved more oil than the fuel-economy scheme did from its inception. The reason: economics. Steeper fuel costs affect driving habits, not just the vehicle design, and have an effect on the use of all vehicles, not just new models.

Rather than waste time tweaking the anachronistic 1978 regulatory regime, policymakers might consider these facts: Each year Americans chalk up approximately twice as many vehicle miles per capita as Germans and more than three times as many as the Japanese. This is not because Japanese and Germany consumers cannot afford cars. Nor is it because Germany and Japan regulate their automobile industries more stringently. Instead, much of the explanation for why people in those countries drive less, ride public transit, walk more and consume far less oil per person is simply that gasoline costs a lot more than it does here.