Gasoline prices having dropped below $3 a gallon nationally, the future of automobile efficiency programs should be considered critically. For those of tender years, we have been here before: the price drop after 1986 saw the rise of minivans and SUVs, which meant that fuel efficiency for the fleet stabilized after a decade of declines.
Price is the best motivator of efficiency, and despite all the breast beating about advertising and consumer brainwashing, they essentially respond rationally: prices rise, people choose higher fuel efficiency, prices fall, people de-emphasize it.
This is not addiction, its economics.
Unfortunately, many have been motivated by the neo-Malthusian view of resources which leads them to think that fossil fuel prices should inexorably rise, which is simply not true. Combined with a belief in the need to reduce greenhouse gas emissions from vehicles, it becomes easy to think that the future of automobiles is more efficient or vehicles that don’t require fossil fuels (at least on-board ones).
Of course, the government regulations that require new cars to become twice as efficient (in total) by 2025 are a strong motivation for firms to try new materials and methods, most recently evident in Ford’s new F-150 pickup that sheds 700 pounds of weight by increased use of aluminum. But companies like Tesla have cashed in big time: up to $35,000 a vehicle in credits for helping other automakers meet California’s (typically unrealistic) vehicle emission mandates.
Nothing is certain but death and taxes, opined Benjamin Franklin; regulations are much less so. Chrysler downsized its New Yorker line of large autos (how large? Drive it and you would constantly fear hearing a voice calling out “Iceberg! Dead ahead!) only to see the Reagan Administration relax the standards significantly, to the benefit of GM and Ford.
This time, lower gasoline prices are a serious threat to two subfields: compressed natural gas (CNG) vehicles and electric vehicles. CNG vehicles are attractive in markets where gasoline prices are much higher than natural gas prices, which includes the US–before the gasoline price decline. Now, expect a sharp decline in interest for either CNG cars or large trucks.
Electric vehicles are a different matter, as they are far from competitive with gasoline vehicles aside from niche markets. Those who buy Tesla’s Model S are not looking to save money but to acquire an expensive toy and will not think twice about $3 gas. However, the potential for a modestly price sedan that would sell tens of thousands of cars would seem to be greatly diminished, as consumers recognize that the future of gasoline prices is not necessarily sky-high.
Read the original story in Forbes.
