Oiling Our Progress [Archive.org URL]

Several months ago, Steven Chu, currently the head of the U.S. Department of Energy, told The Wall Street Journal, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” This was the voice of the rational scientist, correctly positing that higher gas prices will lead to less driving, and thus fewer tailpipe emissions. By the time of his confirmation hearing in January, he was forced to modulate his tune: “What the American family,” he said, using that great signifier of required political pandering, “does not want is to pay an increasing fraction of their budget, their precious dollars, for energy costs, both in transportation and keeping their homes warm and lit.” Politics, of course, is hardly as elegant as physics, but Chu articulated a sort of third way: -efficiency.

“Efficiency” is a soothing, lovely word that means little on its own: efficient as compared to what? Take the American car (please). As veteran transportation and energy specialists Daniel Sperling and Deborah Gordon write in Two Billion Cars—their authoritatively prescriptive challenge to the “transportation monoculture” that plagues the United States and Europe and looms in China and India—automakers have been making their cars more fuel efficient on the order of two percent annually. And yet the actual “corporate average fuel economy” of cars has made less commendable gains: “The bottom line is that although technologically the modern U.S. car is more efficient than ever before, gaining more work from a gallon of gasoline, those efficiency gains don’t show up as fuel economy gains.”

What happened? All the efficiency gains were consumed, by size and horsepower (not to mention increased driving). In 1976, the Honda Accord, which captured the wallets, if not the hearts, of Americans reeling in the wake of high fuel prices, weighed 2,000 pounds and got a reported 46 miles per gallon in highway driving. “Ten million Accords later, the car had ballooned,” write Sperling and Gordon. “The 2008 model is 78 percent heavier, equipped with an engine nearly four times as powerful and loaded with power options.” It also gets 17 miles per gallon less on the highway than its predecessor. This example is not atypical: “Today’s granny car would have qualified as a performance car 25 years ago.” Neither increased weight nor greater horsepower provides any real societal good. Heavy vehicles are safer for their occupants (with certain exceptions, such as the SUV), but increase the risks to everyone driving a lighter vehicle. Increased speed increases crash risk and crash damage. What these traits appeal to is individual consumerist desire.

Mixed Signals may as well be the title of the book, for that is what U.S. consumers have been receiving from Detroit and federal policymakers over the last several decades. Rather than lock in and build upon the fuel efficiency gains made in the 1970s, automakers seized upon the emissions loophole for “light trucks” (a questionable label for vehicles that weigh several thousand pounds) and began building minivans, SUVs, and pickups—vehicles that Japan and Europe initially (and for good reason) had little interest in producing. And thus these vehicles, which occupied, as the authors note, a marginal 15 percent share of the market in 1971, made up more than half of sales in 2004.

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U.S. car companies, amid recent difficulties, were chastised in some quarters for not building the fuel-efficient cars that people wanted. In fact, apart from loyal drivers of the EV-1 (the first mainstream production electric vehicle) and its ilk, consumers were voting with their dollars for larger, less fuel-efficient vehicles. And why shouldn’t they? Gas was cheap, the federal gas tax hadn’t been raised—not even to adjust for inflation—since 1993, and the government even gave tax credits for the purchase of “light trucks,” heavier vehicles once used for “work” but now becoming personal cars. Perversely, tax breaks on hybrid vehicles were curtailed as their sales increased.

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Many propose higher gas and carbon taxes as a way to curb driving, encourage fuel efficiency, and keep fewer dollars from flowing to corrupt oil-producing regimes. These taxes might also go some small distance toward compensating for negative impacts of driving—including road damage, air pollution, noise, congestion, and higher crash risk for other drivers—for which motorists are currently given a free pass. But Sperling and Gordon caution against raising taxes as a silver-bullet policy instrument. “Producers and consumers would barely respond to even a $50-a-ton [carbon] tax, well above what U.S. politicians have been considering,” they write.

One problem is consumers’ dependency on (some would say addiction to) gasoline, which means, as the authors note, that demand (at least in the short term) is extremely price inelastic. The price has to rise a lot—the recent $4 per gallon level was a new psychic benchmark—before consumption drops. (Gasoline is much more price inelastic than addictive substances such as cocaine and heroin, though most of us don’t need those to go to work in the morning.) A gas–price floor is thus one of a basket of proposals laid out in the book, most of which center on two themes: innovation and incentives.