I read today that president Obama announced the new CAFE (Corporate Average Fuel Economy) standards entered into by the Department of Transportation and the automakers. The 54.5 mpg target is the largest mandatory fuel economy increase in history, and officials claim that the plan will save Americans $1.7 trillion in fuel costs by 20251. It is also expected to lower petroleum consumption by a total of 12 billion barrels and curtail the daily requirement by 2.2 million barrels a day (b/d) by 2025 (11% of current demand). Apparently, there is no downside to the new rules:
However, the new technology to get to that standard will add an additional $6000 to the price of an automobile not to mention the fact the resulting cars are lighter and therefore not as safe.
The effects of higher fuel efficiency standards are more complex than generally proclaimed. There is a lack of historical evidence to conclude that the 54.5 mpg CAFE will reduce oil demand in the absolute sense being assumed. Much more likely, oil and oil imports will stay an essential component of the energy portfolio for decades to come. Over the next 20 years, the EIA expects the U.S. to add more than two Japans to its Gross Domestic Product ($9.5 trillion) and expand its population by the size of France (65 million people). To that end, not even the widening focus on wind and solar power will alter our fundamental need for more crude because oil-based electricity accounts for only 3% of our total oil demand. Pre-recession growth trends are beginning to reemerge. In the International Energy Outlook 2011, the EIA’s NEMS has domestic oil demand rising by as much as 21% by 2030. Considering that 80% of the world’s proven oil reserves are controlled by a single cartel, OPEC, we need policies to enhance, not impede, the domestic suppliers of this irreplaceable liquid fuel.
However, the new technology to get to that standard will add an additional $6000 to the price of an automobile not to mention the fact the resulting cars are lighter and therefore not as safe.
The effects of higher fuel efficiency standards are more complex than generally proclaimed. There is a lack of historical evidence to conclude that the 54.5 mpg CAFE will reduce oil demand in the absolute sense being assumed. Much more likely, oil and oil imports will stay an essential component of the energy portfolio for decades to come. Over the next 20 years, the EIA expects the U.S. to add more than two Japans to its Gross Domestic Product ($9.5 trillion) and expand its population by the size of France (65 million people). To that end, not even the widening focus on wind and solar power will alter our fundamental need for more crude because oil-based electricity accounts for only 3% of our total oil demand. Pre-recession growth trends are beginning to reemerge. In the International Energy Outlook 2011, the EIA’s NEMS has domestic oil demand rising by as much as 21% by 2030. Considering that 80% of the world’s proven oil reserves are controlled by a single cartel, OPEC, we need policies to enhance, not impede, the domestic suppliers of this irreplaceable liquid fuel.
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