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Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

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Trump Looks To Undo Fuel Efficiency Standards

Pruitt & Trump

The Trump administration is laying the groundwork to gut fuel efficiency standards for U.S. cars and light trucks, one of the signature achievements of the Obama era.

The EPA has readied a final determination that calls for the rolling back of corporate average fuel economy (CAFE) standards, according to the Wall Street Journal. The current standards would require automakers to sell vehicles that average 54.5 miles per gallon by 2025.

This move by the White House will likely be subjected to litigation. Putting regulations in place requires a lot of legwork and several years of procedure. Undoing them is not all that much easier.

The CAFE standards are a fleet-wide average, which means that a company, such as Ford, can still sell vehicles that do not meet the fuel efficiency standard so long as their entire fleet averages out to that level. So, for every inefficient SUV that the company sells, it will need to also sell a lighter car, a hybrid, an EV, or simply a more efficient SUV, to raise the fleet average.

However, carmakers are now trying to argue that it will be difficult to achieve the tighter fuel efficiency standards because cheap gasoline has led to a resurgence of interest in SUVs and pick-up trucks.

To complicate matters further, California has long held a waiver from the EPA to set its own standards, a quirk that dates back to the state’s smoggy days from decades ago. California, unlike other states, can set tighter standards than federal law dictates. As a result, California has the ability to lead the nation in tightening fuel efficiency, dragging the rest of the country along. Related: U.S. Rig Count Continues To Rise As Canadian Rig Count Plunges

If the EPA roles back federal standards, but California doesn’t, that would leave a mess on the hands of the auto industry. Carmakers aren’t going to produce certain cars for California, and certain cars for the rest of the country. The patchwork would be a headache, which is exactly why auto companies were content with the Obama-era rules, even if it meant a ratcheting up of fuel efficiency requirements.

Indeed, 13 big automakers signed off on these fuel efficiency standards years ago, way back in 2011 (the rule was finalized in 2012). It was a landmark agreement that promised to dramatically reduce oil consumption in the United States. There was little to no dissent on these standards from the auto industry.

But that changed after Donald Trump was elected. Big auto companies spotted an opportunity that seemed to be all but impossible until he came to office.

The EPA is expected to publish its determination by April 1.

For the EPA to truly be successful at undoing the fuel requirements, it might need to neuter California’s authority at setting its own fuel standards. That has California officials readying to do battle with Washington. “California paved the way for a single national program and is fully committed to maintaining it. However, we feel that this rumored finding—if official—places that program in jeopardy,” a spokesman for the California Air Resources Board (CARB), which regulates air quality, told the WSJ.

The auto industry says that the cost of complying with the standards would reach $200 billion and lead to job losses. It should be noted that the industry titans have often predicted doom and gloom over regulations in the past, warning of the imminent and swift collapse of the American auto industry, only to quietly comply without so much as a hiccup once the rules are in place. In fact, earlier CAFE standards have proven wildly successful, raising fuel efficiency and innovation while not significantly raising the cost of production. Related: China's Oil Futures Launch With A Bang

More to the point, automakers were supportive of these specific regulations before Trump came into office.

The CAFE standards are some of most effective at bending the oil demand curve, especially since there are few other measures of such scale targeting oil consumption. Rolling back the current CAFE standards would be particularly notable because of the timing. Requiring automakers to up their game to 54.5 mpg would erase about 2 million barrels of oil demand per day by 2025. This comes against a backdrop in which oil market analysts such as the IEA are raising the alarm about a potential supply crunch in the 2020s as U.S. shale output plateaus.

The supply shortage will be a lot more painful if the U.S. government undercuts one of its most effective tools by undoing fuel efficiency standards.

By Nick Cunningham of Oilprice.com

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  • Greg Devlin on March 26 2018 said:
    As a full-time mechanic I can tell you that raising fuel efficiency is destroying the engines in vehicles prematurely. The fuel systems are burdened by extremely high injection pressures that fail causing very expensive repairs. Many engines are destroyed when there are malfunctions in the delicate systems and the vehicles pile up in salvage yards to cause other environmental problems. There are fewer and fewer reliable used cars on the market for people of lower incomes to acquire to increase their net worth. Vehicle manufacturers are all in on this destruction because used cars are out of the system earlier and desperate people will have no choice but to get loans they can barely afford to have access to the transportation available. This is all planned obsolescence to change the transportation paradigm by control freaks with a sketchy understanding of the earth's climate capacity. Passive aggressive thermodynamics to strand the population and dis-empower voices. When the population prospers leaders are made to be accountable. When the population falters they must obey orders.
  • Randy Verret on March 27 2018 said:
    Rather than "gutting" the CAFE standards, perhaps a better approach would be to collaborate between government & industry and come up with more sensible mileage figures. I have NEVER believed that 54.5 MPG average for an automakers fleet by 2025. If you "tier" the standard & perhaps reset that higher average to 2035, you'd give the industry an opportunity to continue to innovate and increase efficiency with EV's, hydrogen fuel cells, higher efficiency internal combustion engines, etc. So, I see this as an opportunity to do something sensible rather than just trying to "unravel" the whole thing & then fight it out (like usual) in court...
  • Sean on March 27 2018 said:
    Undoing fuel standards could lead to much higher gas prices which is even worse for the economy. Remember over $4 a gallons a few years ago.
  • Tad Usher on March 27 2018 said:
    Thanks for moderating these boards tightly. A day without Nick Cunningham’s op Ed’s is like a day without sunshine.
  • snoopyloopy on March 27 2018 said:
    As the saying goes, "innovate or die". Looks like we see where US automakers intend to end up and that outcome kills even more jobs than complying with the rules, which as noted in the piece, they agreed to previously and which have a lot of leeway.
  • Bill Simpson on March 28 2018 said:
    Bring back our small two cycle outboard motors, and kill the refrigerant 22 ban coming in 2020.
  • Nonplused on March 31 2018 said:
    54 mpg was never going to be achievable anyway. A Prius can barely do that. About the only thing that can is a KLX 250 and that is not a car.

    A gallon of gasoline is a wonderful thing but it only has so much energy, of which only 50% can be extracted as work under ideal circumstances, which a car is not.

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