Going Nowhere: The Price Consumers Pay for Stalled Fuel Economy Policies

Energy Reports

Going Nowhere: The Price Consumers Pay for Stalled Fuel Economy Policies

2004-05-27

Executive Summary

Every Memorial Day weekend, families and friends pile into their cars and drive to the beach, national parks, and other popular tourist destinations. This Memorial Day, with gas prices soaring above $2 per gallon in some parts of the country, consumers will pay more for these weekend trips than in years past.

Politicians at the federal level are putting the blame for rising gas prices on everything from the Organization of Petroleum Exporting Countries (OPEC) to fuel additive requirements. While OPEC clearly plays a role in determining gas prices, this finger pointing overlooks the fundamental problem: America is too dependent on oil. As long as demand for oil continues to climb, consumers will remain vulnerable to price spikes at the gas pump—whatever their cause.

In 1975, in response to the oil embargo, Congress passed the Energy Policy and Conservation Act to increase automobile fuel economy standards, protect consumers from high gasoline prices and reduce our dependence on foreign oil. The law recognized that the only way to reduce foreign oil dependence was to reduce U.S. demand. It requires that the National Highway Traffic and Safety Administration (NHTSA) review and increase automobile fuel economy standards as technologically feasible. Although the technology does exist to safely increase automobile fuel economy standards to 40 miles per gallon (mpg) in the next 10 years, NHTSA has not enacted a meaningful increase in fuel economy in almost three decades.

As a result, this holiday weekend, Americans will be paying more at the gas pump and using more foreign oil than they should be, given technology available today. Specifically:

• Americans will pay almost twice as much at the gas pump—$72 million more—this Memorial Day weekend than they would with a 40 mpg fuel economy standard;

• Americans will use 35.7 million more gallons of gas than they would under a 40 mpg fuel economy standard; and

• Americans will consume 1.8 million more barrels of foreign oil this Memorial Day weekend than they would with a 40 mpg fuel economy standard.

The Bush administration should be looking for ways to save consumers money at the pump and wean us from oil—foreign or domestic—in the long term. Instead of taking advantage of automobile technology to achieve a 40 mpg standard, the administration is pushing an energy policy that emphasizes the technologies of yesterday and has opposed all meaningful increases in fuel economy. In fact, the administration has proposed new fuel economy standards that would make it easier for gas-guzzling SUVs to get even fewer miles per gallon.

While consumers continue to pay more at the pump, oil companies are recording huge profits. In 2003, the top five oil companies enjoyed net profits of $60 billion. Meanwhile, the Bush administration has done nothing to protect consumers from oil company mergers and instead has pushed an energy policy that rewards the oil industry with taxpayer-funded subsidies and tax breaks.