Market trumps Congress when it comes to fuel economy

gunnut · 05-05-2008, 13:54 PM

Quote:

Monday, May 5, 2008
Daniel Howes

Market trumps Congress when it comes to fuel economy

News flash: Skyrocketing gas prices are driving historic shifts in the habits of car buyers, pushing them away from thirsty pickups and full-size SUVs and into four-cylinder compacts.

What a surprise.

Might all the smart people behind tougher federal Corporate Average Fuel Economy rules be watching? If they are, do they understand what we are witnessing? Namely, this: It's not arbitrary mileage goals, mostly unhinged from engineering reality and focused on a handful of companies, that are dramatically changing the behavior of the driving public. It's the price of fuel, stupid.

Cars outsold trucks in April for the first time in a generation, according to industry figures compiled by Autodata Corp., and four-cylinder powered cars outsold those with six cylinders under the hood. The shift, clearly a blow to truck-dependent Detroit automakers scrambling to dig out of their deep hole, is confirmation that market forces are a swifter disciplinarian than the collective wisdom of Congress, career bureaucrats and the environmental lobby.

"It's easily the most dramatic segment shift I have witnessed in the market in my 31 years here," George Pipas, Ford Motor Co.'s chief sales analyst, told the New York Times.

Politics pursues easy path

Which ought to say something to the lemmings -- including presidential contenders John McCain, Barack Obama and Hillary Clinton -- who think the answer to America's shifting fuel-economy goals is a complex web of national and state rules that tells automakers what to build, whatever the market dynamics now and in the future.

If the presumed national goal is to reduce consumption by getting more Americans behind the wheel of smaller, more fuel-efficient vehicles, don't the past few months pretty much show that higher gas prices are the fastest way to get there? Um, yeah.

And couldn't higher gas prices be kept aloft by raising the 18.4-cents-per gallon federal tax on fuel so that gas regularly sold for $4 a gallon or more? Possibly. Instead, we've got presidential candidates pandering to voters with a call to suspend the tax for the summer driving months in a craven campaign ploy. Big deal.

Keeping prices high to reduce demand and steer folks into more fuel-efficient vehicles, as economically untenable as it may be, isn't the goal of federal fuel rules. Appearing to do something, getting credit for it and sticking someone else with the bill -- i.e., full-line automakers -- is the goal. It's safer politically, proving the adage that environmental policy is all about getting someone else to pay for your bad behavior.

Gas price trumps policy

Why would, say, the California congressional delegation back a new slug of draconian taxes that would hit their driving constituents equally when the path of lesser resistance runs over Detroit's automakers and chief rivals like Toyota? They wouldn't, which is why California led the push for tougher fuel economy rules and is leading the fight to allow states to separately regulate greenhouse gas emissions.

For decades, Detroit's automakers have waged an increasingly unsuccessful rear-guard action against advancing political sentiment that holds the best way to improve the fuel efficiency of cars and trucks sold in the United States is by mandating fuel-economy standards. Raise the standards, the theory holds, and more Americans would buy more fuel-efficient cars.

Except that they didn't feel compelled to obey when gas was cheap. It's not part of the American "bigger is better" psyche, no matter how much the Sierra Club thinks it ought to be. But as gas breaches $3.50 a gallon on its way to $4, the ostensible goals of stiffened fuel economy rules are, like magic, in closer reach without government meddling.

The market did it, and the market will keep working its rational magic. Ford Focuses, Honda Fits and Chevy Aveos will roll out of showrooms at record rates so long as gas prices hover at historic highs and achieve what years of posturing and bruising battles in Washington have mostly failed to deliver.

Daniel Howes' column runs Mondays, Wednesdays and Fridays. You can reach him at (313) 222-2106, dchowes@detnews.com or detnews.com/howes.

Howes: Market trumps Congress when it comes to fuel economy

I've been saying this for years. Hit the people where it hurts and they'll change their habits. Let the price of gasoline go up and we'll see a shift in car preferences and driving patterns.

However, I don't believe in using taxes to artificially increase the price of gasoline. Putting more money in the hands of politicians is a bad idea.

**TopHatter** · 05-05-2008, 22:31 PM

What cracks me up is what the American consumer has been doing since 9-11, the immediate aftereffects having told anybody with half a brain what the price of gasoline was going to do for the forseeable future?: Buying SUV's and trucks (that they really don't need, but their egos definitely want) that gulp gasoline by the station-full.

And what did Detroit do? Naturally feed the market demand, probably knowing full well that the price of gasoline would steadily rise (it has) instead of decreasing.

Which brilliantly placed them where they are now: Stuck with full inventories of increasingly unpopular vehicles.

So with apologies to old Ben: Who is the more foolish? The fool or the fool who follows him?

Blademaster · 05-05-2008, 22:43 PM

Well if GM and Ford had any brains, they could have reoutfitted them with hybrid engines.

Cowman88 · 05-05-2008, 23:37 PM

Ford has the escape and GM has a hybrid coming out soon but they both made a lot of mid size sedans people just didnt buy as many

**TopHatter** · 05-06-2008, 00:28 AM

Quote:

Originally Posted by Cowman88

Ford has the escape and GM has a hybrid coming out soon but they both made a lot of mid size sedans people just didnt buy as many

Granted, but the point brought out in article was the fact that Detroit is and has been truck-heavy...and the handwriting has been on the wall since Fall 2001...and here we are in the Spring of 2008.

Ryan Bailey · 05-06-2008, 13:26 PM

Indeed, there is no regulating the old supply & demand curve.

Appetites of the individuals drive the beautiful free markets where they are permitted.

In my detestation of waste I marvel at the driving habits of my countrymen who seem to drive as though fuel were free.

gunnut · 05-06-2008, 13:56 PM

Quote:

Originally Posted by Ryan Bailey

Indeed, there is no regulating the old supply & demand curve.

Appetites of the individuals drive the beautiful free markets where they are permitted.

In my detestation of waste I marvel at the driving habits of my countrymen who seem to drive as though fuel were free.

And then they complain about it when the price goes up.

I have a friend who drives everywhere as if gas is free. He rarely carpools because it's inconvenient. He drives an older V6 that probably gets 20/26 MPG. Then he complains that the oil companies are fleecing us.

antimony · 05-06-2008, 14:10 PM

I commute from Redmond to Seattle using public transit. Lately there has been a noticeable increase in the bus-riding population. Predictably, a lot of the time spent on the bus is spent b*tching about the high gas prices.

However I still notice a large population willing to make their way to work in their cars, alone (therefore without the benefit of being able to use the transit lanes) and stuck in high traffic. This is dumb, given the fact that the Seattle area has very decent pubic transit that can be made proper use of.

And this is supposed to be a Red State, so elsewhere in the US this is probably worse

**Shek** · 05-06-2008, 15:11 PM

Quote:

Originally Posted by antimony

I commute from Redmond to Seattle using public transit. Lately there has been a noticeable increase in the bus-riding population. Predictably, a lot of the time spent on the bus is spent b*tching about the high gas prices.

However I still notice a large population willing to make their way to work in their cars, alone (therefore without the benefit of being able to use the transit lanes) and stuck in high traffic. This is dumb, given the fact that the Seattle area has very decent pubic transit that can be made proper use of.

And this is supposed to be a Red State, so elsewhere in the US this is probably worse

I thought Puget Sound had a poor public transit system. Too many tax initiatives killed resulting in little to no light rail/subway. I used to laugh just as you observe when they would complain about lack of this or that and then go vote down any and every tax increase.

antimony · 05-06-2008, 15:49 PM

Quote:

Originally Posted by Shek

I thought Puget Sound had a poor public transit system. Too many tax initiatives killed resulting in little to no light rail/subway. I used to laugh just as you observe when they would complain about lack of this or that and then go vote down any and every tax increase.

I am not an expert in how things happen, public transit wise in other cities, but the Puget Sound Area seems to be doing not too bad. It is, of course, not NYC or Chicago, but there does seem to be a failry reliable bus transit system.

The main area, King County (Seattle/ Redmond/ Bellevue) is served by 2 bus companies; while other adjacent counties have bus services into Seattle downtown. For those who complain that they do not live on bus routes, there is actually a fairly decent sprinkling of Park & Ride facilities. There is also a commuter rail system, serving north and south bound commuters from Seattle downtown. On top of that, Microsoft has started a bus service for its employees, so there realy are a lot of options here.

You are right about the lack of Light Rail/ subway though; they are trying to do something about that but have not made any progress so far.

troung · 05-06-2008, 15:52 PM

Quote:

Buying SUV's and trucks (that they really don't need, but their egos definitely want) that gulp gasoline by the station-full.

Don't be jealous some of us can afford to put sixty dollars into our tank weekly.

Southie · 05-06-2008, 17:43 PM

In Tampa there is a transit system, but unfortunately it is more for the city. In the suburbs where I live there aren't enough bus stops to make it convenient for people to get around. Luckily my Hyundai Accent gets about 27/33 MPG's and I can fill the tank up for around $33.00 which lasts about two weeks! Of course I only live about 2 miles from the school.

And most of the shopping centers are convenient for me!

mweber24 · 05-07-2008, 18:44 PM

Let the free market work. This means more economical cars will sell better when fuel prices go up. It also mean that people have every right to buy WHAT THEY WANT with their own money. If they WANT an SUV, they have just as much right to get it with their own money as someone who WANTS a Prius. If people wanted SUVs, they get to live with the consequences, but we are adults and should be allowed to make our own free market decisions. As for the car companies, they don't make much profit on small cars, so of course they encouraged the purchase of high profit light trucks? Complaining about businesses trying to make a profit is like complaining that sharks are mean for eating fish. It is just what they do. American automakers will adjust to market realities when they ARE market realities, politicians should not make their business decisions for them.

LetsTalk · 05-07-2008, 21:16 PM

Quote:

Originally Posted by gunnut

And then they complain about it when the price goes up.

I have a friend who drives everywhere as if gas is free. He rarely carpools because it's inconvenient. He drives an older V6 that probably gets 20/26 MPG. Then he complains that the oil companies are fleecing us.

I know, have friends like that to.

Supply and demand, such a hard concept

LetsTalk · 05-07-2008, 21:19 PM

Read the Chicago Tribune

Sleep

Read News Week or Sleep

Talk to a friend

Play with my lap top

05-06-2008, 13:26 PM	#6 (permalink)
Ryan Bailey *Military Professional* Join Date: 09-25-07 Location: Megalopolis, US Posts: 135 Country:	Indeed, there is no regulating the old supply & demand curve. Appetites of the individuals drive the beautiful free markets where they are permitted. In my detestation of waste I marvel at the driving habits of my countrymen who seem to drive as though fuel were free. __________________ "If we will not be governed by God then we will be ruled by tyrants" -William Penn

05-06-2008, 14:10 PM	#8 (permalink)
antimony Patron Join Date: 02-21-08 Posts: 200	Rise in usage of public transit I commute from Redmond to Seattle using public transit. Lately there has been a noticeable increase in the bus-riding population. Predictably, a lot of the time spent on the bus is spent b*tching about the high gas prices. However I still notice a large population willing to make their way to work in their cars, alone (therefore without the benefit of being able to use the transit lanes) and stuck in high traffic. This is dumb, given the fact that the Seattle area has very decent pubic transit that can be made proper use of. And this is supposed to be a Red State, so elsewhere in the US this is probably worse

05-06-2008, 17:43 PM	#12 (permalink)
Southie USAF Retired TSgt *Military Professional* Join Date: 04-09-07 Location: Tampa FL Posts: 1,303 Country:	In Tampa there is a transit system, but unfortunately it is more for the city. In the suburbs where I live there aren't enough bus stops to make it convenient for people to get around. Luckily my Hyundai Accent gets about 27/33 MPG's and I can fill the tank up for around $33.00 which lasts about two weeks! Of course I only live about 2 miles from the school. And most of the shopping centers are convenient for me! __________________ “When the power of love overcomes the love of power, the world will know peace.” - Jimi Hendrix

05-07-2008, 18:44 PM	#13 (permalink)
mweber24 *Military Professional* Join Date: 03-18-08 Location: Colorado Springs Posts: 55 Country:	Let the free market work. This means more economical cars will sell better when fuel prices go up. It also mean that people have every right to buy WHAT THEY WANT with their own money. If they WANT an SUV, they have just as much right to get it with their own money as someone who WANTS a Prius. If people wanted SUVs, they get to live with the consequences, but we are adults and should be allowed to make our own free market decisions. As for the car companies, they don't make much profit on small cars, so of course they encouraged the purchase of high profit light trucks? Complaining about businesses trying to make a profit is like complaining that sharks are mean for eating fish. It is just what they do. American automakers will adjust to market realities when they ARE market realities, politicians should not make their business decisions for them. __________________ The SWO

05-07-2008, 21:19 PM	#15 (permalink)
LetsTalk Patron Join Date: 03-15-08 Location: Naperville, IL Posts: 274 Country:	Things I do on my 33 minute train ride. Read the Chicago Tribune Sleep Read News Week or Sleep Talk to a friend Play with my lap top

05-05-2008, 22:31 PM	#2 (permalink)
TopHatter Administrator Join Date: 09-03-03 Location: Fort Myers FL Posts: 9,510 Country:	What cracks me up is what the American consumer has been doing since 9-11, the immediate aftereffects having told anybody with half a brain what the price of gasoline was going to do for the forseeable future?: Buying SUV's and trucks (that they really don't need, but their egos definitely want) that gulp gasoline by the station-full. And what did Detroit do? Naturally feed the market demand, probably knowing full well that the price of gasoline would steadily rise (it has) instead of decreasing. Which brilliantly placed them where they are now: Stuck with full inventories of increasingly unpopular vehicles. So with apologies to old Ben: Who is the more foolish? The fool or the fool who follows him?

05-05-2008, 22:43 PM	#3 (permalink)
Blademaster Military Enthusiast *Senior Contributor* Join Date: 08-15-03 Posts: 2,777	Well if GM and Ford had any brains, they could have reoutfitted them with hybrid engines.

05-05-2008, 23:37 PM	#4 (permalink)
Cowman88 New Member Join Date: 02-12-08 Location: Fort Worth, Texas Posts: 15 Country:	Ford has the escape and GM has a hybrid coming out soon but they both made a lot of mid size sedans people just didnt buy as many

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