Last week, Americans paid an average $2.08 a gallon to fill up their cars and trucks at the gas pump. That’s a far cry from the $3.52 a gallon paid this time in 2014, or the $3.87 a gallon paid back in 2012.
The drop in prices has largely been good news for American consumers, pumping an extra $95 billion into their pockets in 2015 compared to 2014. To put that in context, the 2011 payroll tax cut netted consumers a total of about $109 billion.
But $2 gas is also having some less beneficial effects, as others have noted. For U.S. policymakers seeking to reduce oil consumption and carbon emissions, plunging fuel prices have created a real challenge as Americans pile back into relatively inefficient pick-up trucks and sport-utility vehicles in record numbers.
This, in turn, has undermined the effectiveness of the federal government’s signature policy for regulating vehicle efficiency: fuel economy standards.
New federal fuel standards finalized in 2010 and 2011 were projected to nearly double the efficiency of the cars and trucks sold in the United States between 2012 and 2025, cutting U.S. gasoline demand by 3.2 million barrels per day by 2030—a roughly 33% reduction from today’s levels.
This reduction has become a kind of dogma in oil and transportation discussions. It underpins everything from ideas about peak U.S. oil demand to bearish oil price forecasts from major investment banks. It is also an important part of U.S. climate policy.
As regulators kick-off their mid-term review of the standards this year, we now have enough data to evaluate their real-world impact during their initial phase, from model years 2012 to 2016. The good news is that the standards will save 40 billion gallons of gasoline and 400 million tons of carbon dioxide (CO2) over the lifetime of vehicles sold in this period.
So, clearly the rules are an important part of U.S. climate policy. But there is also room for improvement: when the federal government first released the rules back in 2010, they projected that the standards would save 61 billion gallons of gasoline and 655 million tons of CO2 over the lifetime of vehicles sold from 2012 to 2016.
Why are the standards falling short of projections? The current standards are designed to require different levels of annual improvements from vehicles of different sizes—their footprint—and performance is determined annually based on sales. Therefore, the makeup of annual sales has a big impact on performance. A fleet weighted more heavily toward cars will be more efficient than one weighted more heavily toward trucks.
Read more of the original article in Forbes.
