Uncle Sam Has Spoken: The Death of The Gas Guzzler Economy

By Ross Kenneth Urken and Michael Zak, AOL Autos

The 54.5 mpg CAFE standard has been divisive even as it becomes more concrete (Flickr: Matthew Oliphant)

(AOL Autos)

This week the Obama Administration delineated its plan for the new 54.5 mpg fleet fuel economy standard by 2025, and though automotive industry professionals widely rejoiced, those who claim highway deaths will increase as a result spoke out against the measure.

If the rule is implemented, cars in 2025 will go twice as far on a gallon of gas as they do today. Of course, some of that calculation is based on the fact that more cars won’t be running on gasoline at all. An influx of electric and natural gas fueled cars will be off-setting vehicles that will still be running on gas. And cars running on gas today will be getting more and more fuel efficient as automakers make better, higher performing three and four cylinder engines and create lighter-weight vehicles.

The aim, of course, is to spew less carbon dioxide into to the atmosphere, and to become less dependent on foreign oil and fossil fuels in general.

The advocates

Auto-dealers, who have struggled in a down economy to sell low-mpg cars, rejoiced.

“As a third-generation auto dealer, all I can say is-It’s about time!” said Adam Lee, Chairman of Lee Auto Malls in Portland, Maine.

Low fuel-economy cars have become the bane of an auto-dealer’s existence.

“In 2008, when gas prices skyrocketed to historic highs, I couldn’t give away some of the gas-guzzling vehicles on my lots,” Lee said. He said this standard will help the industry avoid that “gut punch.”

The auto industry is now in lock-step with what consumers demand.

Of course the geo-political angle of weaning America off oil is part and parcel of the standards. “Gas-guzzling is not an American value,” said Vice Admiral Dennis McGinn, a member of the CNA Military Advisory Board, a panel of top retired admirals and generals.

“Cutting our oil use, increasing efficiency and diversifying our energy resources will protect our economy and our ability to move around the country freely.”

“Delivering much cleaner, more-efficient cars to the market can guarantee the best possible outcome for American workers, our communities, the economy, and the environment,” said David Foster, the executive director of the BlueGreen Alliance.

If implemented in the right fashion, the CAFE (Corporate Average Fuel Economy) standards plan could create as many as 190,000 jobs through 2020 and save some 12 billion barrels of oil–the equivalent of the fuel to power about four years of light vehicles, according to the BlueGreen Alliance.

The detractors

But not everyone is enthused by the fuel economy hikes.

Yesterday in response to the announcement, The National Automobile Dealers Association (NADA) vented its concerns that this measure could price more Americans out of car purchases.

“We are concerned that adding about $3,000 to the average cost of a car will price millions of Americans out of the market, which could reduce fleet turnover and delay environmental gains,” NADA said in its statement. “We need fuel economy policies that encourage the sales of fuel efficient vehicles, instead of risky mandates that frustrate consumer demand.”

Congressman Darrell Issa (R-CA) also issued a statement for similar cost-to-consumer reasons and cited White House estimations that this rule would cost $157 billion to bring to fruition. He also saw this implementation as heavy-handed.

“Beyond jobs that would be lost as a result of this rule, there are concerns that these new regulations were crafted in a manner inconsistent with laws and basic standards of transparency that had the effect of hiding special interest agendas,” Issa said.

Some opponents to the 54.5 mpg CAFE standard have more aggressive dislike for small cars they view as unsafe.

“In a free society, government shouldn’t force families of four to travel in the equivalent of hybrid Yugos merely to reduce consumption of an abundant commodity such as oil,” said James M. Taylor, Senior Fellow, Environment Policy at The Heartland Institute. “If the federal government is worried about oil supply, it should take the shackles off domestic oil production…rather than dramatically raising the production costs of standard-sized vehicles or forcing Americans into unsafe clown cars.”

The consumers

While they may not be advocates or detractors just yet, consumers are the ones that stand to be affected the most by the standards. Mark Cooper, Research Director at the Consumer Federation of America, says this is a big win for them.

Though adding more to the cost of the vehicle at purchase, Cooper says the fuel economy standard will end up being cash flow positive after 2 or 3 years, factoring in the savings in fuel costs consumers will experience over the life of the vehicle.

“People spend an average of $2,900 per year on gas,” Cooper told AOL Autos. “Higher MPG vehicles will allow people to budget much more easily, as they won’t be paying for gas nearly as much.”

Big fluctuations in gas prices are very bad for the economy as a whole, he said. When people have to forfeit a larger percentage of their take home income to gasoline purchases, they are less inclined to go out and spend elsewhere, hurting all kinds of other business, from restaurants and coffee shops to sports teams and shopping malls.

The standard will also make fuel efficient cars more visible and readily available, which the current system does not do.

“When people go to the car dealer, they just buy what’s there, and often what’s there are big, gas guzzling vehicles,” Cooper said. “They aren’t aware that they have other [fuel-efficient] options because often they are desperate for a car and the salesman wants to make a sale right then.”

This translates into a higher cost of ownership in the long term and can severely impact their personal or household budget. The new mandate, he said, will mean many more fuel efficient cars on dealer lots and, thus, many more in consumers’ garages.

AOL Autos Correspondent Michael Zak contributed to this report.

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