Gas and Gasbags or, the open road and its enemies

National Review, March 25, 2002 by Henry Payne, Diane Katz

Any crisis in the Middle East inevitably prompts Washington to scapegoat the automobile as a threat to national security. The dust had barely settled on lower Manhattan last fall before calls went forth -- from pundits and pols across the spectrum -- to relinquish our "gas-guzzlers" in the name of energy independence.

But just as the Cassandras will dominate media coverage of energy, so will Middle Eastern oil continue to fuel America's vehicles for the foreseeable future. Simple economics, geography, and consumer choice all demand it.

Since Sept. 11, Washington has mobilized to end our "dangerous addiction" to foreign energy sources. Sens. John Kerry and John McCain are proposing dramatic increases in federal fuel-economy standards. The energy package crafted by majority leader Tom Daschle advocates "biodiesels," and the Natural Resources Defense Council is insisting that we could cut gasoline consumption by 50 percent over ten years -- if only the feds would mandate what and where we drove.

Even the "oil men" in the Bush administration have advocated doling out millions in research subsidies for hydrogen fuel cells that supposedly would replace the internal-combustion engine. The project, Energy Secretary Spencer Abraham announced in January, is "rooted in President Bush's call to reduce American reliance on foreign oil."

In fact, the price of oil has declined since Sept. 11, as it consistently has for decades, and with producers scattered all over the world, no single nation or region can stop the flow.

But supporters of a comprehensive energy policy seem undeterred by these realities. "Logic," Robert Samuelson writes in the Washington Post, "is no defense against instability. We need to make it harder for [Middle Easterners] to use the oil weapon and take steps to protect ourselves if it is used. Even if we avoid trouble now, the threat will remain."

Past efforts to attain a petroleum-free utopia, however, have largely failed. For example, despite three decades of federal fuel-economy standards, oil imports as a share of U.S. consumption have risen from 35 to 59 percent.

A market-based solution, such as a gas tax, is the most obvious approach to cutting consumption, but even environmentalists concede that proposing one would spell political suicide. Moreover, gas taxes are an expensive solution and come with no guarantee of energy independence. The European Union, for example, taxes gas up to $4 per gallon -- and still imports over half its oil.

So instead of enraging consumers at the pump, Washington has largely relied on backdoor taxes.

The regulatory regime known as CAFE (Corporate Average Fuel Economy) was hatched in the wake of the oil-price shocks of the early 1970s, when sedans still made up most of the nation's fleet. Instead of the redesigned smaller, lighter, and less powerful vehicles, however, consumers flocked to minivans, small trucks, and sport utility vehicles, which are held to a lower CAFE standard (20.7 mpg versus the 27.5 mpg required for cars).

Today, both passenger cars and light trucks are more efficient than ever, having improved 114 percent and 56 percent, respectively, since 1974. But gasoline is so cheap, despite continuing Middle Eastern crises, that on average Americans are driving twice as many miles as in years past.

A recent study by H. Sterling Burnett of the National Center for Policy Analysis found that raising CAFE standards by 40 percent -- as Kerry and others recommend -- would not "reduce future U.S. dependence on foreign oil." CAFE's only function is to keep regulators busy calculating elaborate formulas for determining compliance in which manufacturers then look for loopholes. (CAFE requires that a manufacturer's trucks meet an average standard of 20.7 mpg. Thus DaimlerChrysler AG, for example, designates its popular PT Cruiser as a "truck" in order to offset the low mpg of its large SUVs, such as the Dodge Durango.)

Worse, stricter CAFE standards would surely undermine the very economic security that proponents vow to protect. The profits of U.S. automakers -- and tens of thousands of UAW jobs -- depend on sales of SUVs and light trucks. According to an analysis by Andrew N. Kleit, a professor at Pennsylvania State University, the Kerry CAFE proposal would reduce the profits of General Motors by $3.8 billion, of Ford by $3.4 billion, and of DaimlerChrysler by $2 billion. Foreign manufacturers, which largely specialize in smaller vehicles, would see a profit increase of $4.4 billion.

Evidently hoping to shield automakers from a CAFE assault -- and to win PR points for expanded domestic drilling -- the Bush administration has embraced the latest alternative-fuel fad: the hydrogen fuel cell.

The Bush plan replaces the Partnership for a New Generation of Vehicles, Al Gore's vain attempt to produce an affordable, emissions-free family sedan capable of 80 mpg by 2004. Over eight years, Washington pumped more than $1.5 billion into the program -- in addition to the $1.5 billion sunk into it by the Big Three. In its annual review of the project last August, the National Research Council judged the super-car goals to be inherently "unrealistic."