Thursday, October 23, 2003

Model Year 2004 Fuel Economy Numbers Now Available.

Meanwhile, this piece from the economist weighs in on CAFE among other issues.

The most important, and most controversial, of America's demand-side measures is the Corporate Average Fuel Economy (CAFE) law. As a result of this measure, the average fuel efficiency of new American-made cars rose by over two-fifths from 1978 to 1987. From 1977 to 1985, America's GDP rose by 27%, but its oil use dropped 17% by volume. The volume of America's net oil imports fell by nearly 50% during that time. Mr. Lovins (Amory lovins of Rocky Mountain Institute) argues that the dramatic drop in oil intensity of the American economy “broke OPEC's pricing power for a decade”. The cartel fell into disarray in the late 1980s, and the world enjoyed relatively low and stable oil prices for much of the 1990s.

Demand-side measures like CAFE did help check the cartel's power for some time. However, the automobile industry hates the law and for the past few years has managed to thwart efforts by some in Congress to raise the standards and to close a loophole that exempts trucks and sport-utility vehicles (SUVs). As a result, America has started to return to its gas-guzzling ways of the past. The average fuel efficiency of American vehicles has been near a 20-year low for the past two years.


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