Chart of the Month: May 2005

In the previous two editions of Chart of the Month, I posted charts showing the overall fuel usage of the Light-duty vehicles, and one of the reasons contributing to the increasing fuel usage, namely rising vehicle travel. I also noted that this increase in fuel usage has come about inspite of an increase in individual vehicle fuel economy being 50% more than what it was in late 1970s. This month's chart shows thirty years of Corporate Average Fuel Economy (CAFE) standards, and the corresponding new vehicle fuel economy levels.

(click on the image for a larger picture)

As I have noted repeatedly here, debate over CAFE standards is one of the most heated debates in the energy policy domain. I will leave the technical details about CAFE out of this post, but it should be noted that CAFE standards pose a real constraint to the automobile manufactures. It is anybody's guess if fuel economy of new light-duty vehicle would have decreased if CAFE standards were withdrawn after 1985. In short, CAFE standards create a floor for fuel economy of new light-duty vehicles. This is important because much of the technology improvements in the past 25 years have been used up in improving vehicle performance rather than fuel economy. I would post a chart about this next month.

May Madness® is over!

I officially declare that this edition of May Madness® is over. Regular programming is scheduled to begin soon, along with a chart of the month.

GM! GM!!

I love the comments on GM FastLane Blog.

May Madness® is back!

May Madness® is here. So, I will go silent for a few days, unless something really exciting comes up, and I can not keep shut. The current version of May Madness® is projected to last until May 27th.

The Ugly Road Ahead

Business week has performed a biopsy on GM. I think that between this article and Knowledge@Wharton piece, much of the relevant ground has been covered as far as GM is concerned. I don't have much time to talk about the BW article, but it is highly recommended.

Daniel Yergin comes clean on Oil Prices

Here is an interview with Daniel Yergin, which originally appeared in the TIME magazine. Excerpts:

Q: Will oil prices remain this high?

A: We've entered a new era of oil prices. It sneaked up on people, but now it's all too evident. There is a new floor under the price of oil of around $40 a barrel. I'm struck that the oil market today is tighter than it was on the eve of the 1973 crisis. And with markets this tight, you'll see a lot more volatility, and you could see prices spike up as high as $65 to $80. How high they go depends on geopolitics and market psychology.

Q: To what extent is the U.S. economy at risk from higher oil prices?

A: Right now there's this accommodationist view of high oil prices. People are looking at global and U.S. growth and saying, 'Well, these high prices are having less impact than might have been anticipated.' And it's true that oil does not have as much leverage on our economy as it did in the '70s. We use half as much oil per unit of GDP as we did then. But when you have sustained prices of more than $50 a barrel, the economic impact will be larger than people have anticipated.

Considering that CERA is generally on the conservative side when making predictions about price for oil, Yergin's statement that 40 dollar a barrel is a floor should be, IMHO, underlined.