American car buyers are, as always, living in the present. With gas prices falling by more than $1 per gallon since this summer, consumers have responded by opting for big SUVs and light trucks instead of smaller and more fuel-efficient cars. In November, sales of the larger vehicles climbed by nearly 9 percent compared with the same month last year, while sales of the smaller ones dipped by a tenth of a percent. As the newly immortal Stephen Colbert would say, “carpe gasum.”
It’s an oversimplification to attribute the trend entirely to cheap gas—low interest rates, holiday promotions, and other incentives have all played a role—but it’s clear that fuel economy takes a backseat when consumers are paying less at the pump. That reality is a significant blow to U.S. efforts to slow man-made climate change. More than half of an average American household’s carbon emissions come from its vehicles, with each extra gallon of gasoline that’s burned creating another 20 pounds of greenhouse gases. If gas prices stay where they are or fall further still, it will also make life more difficult for automakers, which are scrambling to meet the aggressive new fuel economy standards that President Obama enacted in his first term.
But while we’re lamenting the fickleness of the American consumer, let’s step back and acknowledge something important: Obama’s auto rules are working exactly as they should.
The new rules require automakers to increase the average fuel economy of their entire fleets. With Americans putting less of a premium on fuel economy, that means companies will need to find ways to offset increased sales of less fuel-efficient trucks by selling more fuel-efficient cars. While that won’t be easy if Americans continue their love affair with the SUV, the good news for the climate—and the consumer—is that those gas-guzzling vehicles are becoming more fuel-efficient too. Thanks to the federal rules, increased fuel efficiency effectively now comes standard with each new car, truck, and SUV that rolls off the lot. That will dampen the damage cheap oil is wreaking on the climate. It also just might save the day for the auto industry when the always unpredictable price of oil inevitably does an about-face, forcing shoppers to do the same.
According to the Transportation Research Institute, the average fuel economy of newly purchased cars and trucks hit an all-time record of 25.8 miles per gallon in August. The following month that number dipped to 25.3 mpg, where it has held relatively steady as the price of gas has tumbled. In a perfect world, the average fuel economy would continue to climb independent of gas prices. But it’s clear that we’d be in much worse shape without Obama’s auto rules. Even when you factor in the recent drop, the average fuel economy of new cars is still 14 percent higher than it was five years ago. In the two decades that preceded the president’s new rules, meanwhile, fuel economy remained largely flat. It’s clear the industry wasn’t going to act on its own.
Automakers need to be forced to offer more fuel-efficient cars and trucks because manufacturers and dealers turn much larger profits by selling a hulking Chevy Tahoe SUV ($66,475; 18 mpg) than a diminutive Chevy Cruze ($22,150; 30 mpg). That’s why some in the industry are already grumbling about the new rules, which will continue to ratchet up fleetwide fuel economy to 54.5 mpg by 2025. “The regulatory structure wants to force people into vehicles that consumers don’t rationally want to buy,” Steven Szakaly, the chief economist at the National Automobile Dealer Association, lamented to Bloomberg Businessweek earlier this month. “That’s a problem.”
Despite such complaints, automakers are finding ways to meet both consumer preference and federal demands. Consider the Ford F-150, which has been America’s best-selling vehicle for the past three decades. Its latest incarnation will get an estimated 26 mpg on the highway, up 3 mpg from model year 2014 and 6 mpg above what the F-150 got in model year 2009. (Those gains are even bigger than they appear if we were to translate them into gallons consumed per mile, a more telling metric.) On a micro level, the credit for that belongs to the designers who opted for aluminum rather than steel for the body of the truck, dropping its weight by about 700 pounds. But on the macro level, it’s clear that the new federal rules are responsible for this remarkable shift.
Without the federal government forcing automakers’ hands, there’s no reason to believe that Detroit or the rest of the industry would have avoided the same mistakes it made in the 1970s and 1980s. Back then, wild swings in the price of oil and gas left automakers with whiplash as they tried to keep up with shifting consumer demand. Automakers, which think in years, aren’t agile enough to keep pace with consumers, who change their minds based on today’s gas prices. Left to their own devices, the financial incentives—and the corresponding pressure from profit-seeking stockholders—demand that the industry errs on the side of short-term profits over long-term sustainability. We have to look no further than how the industry collapsed in 2008 for proof of that.
Obama’s auto rules don’t prevent the industry from selling gas-guzzling cars and trucks, but they do force the companies to hedge their offerings. If they want to keep selling gas-hungry, profit-producing trucks, they’ll most likely need to offset them with more fuel-efficient cars—even if that means jacking up the price of those trucks or dropping the price of those cars. That may sting in the near term, but when the price of oil begins to rise again, as it inevitably will, the companies won’t be caught flat-footed as they have in the past. Instead, automakers will already have fuel-efficient vehicles to sell to fickle consumers as soon as they start grousing about prices at the pump.
American car buyers are unlikely to ever fully consider what today’s purchase means for tomorrow—either economically for them, or environmentally for all of us. But thanks to the president’s new fuel economy rules, automakers now have no other choice.