By Sam Ori
The biggest news in energy policy circles this week was the release by federal regulators of a mid-term report on U.S. fuel-economy standards. As has been covered well here and here, the report delivered a bit of bad news: Instead of achieving the original, headline-grabbing efficiency target of 54.5 miles per gallon (mpg), the fleet of new vehicles sold in 2025 is likely to clock-in at more like 50 mpg. And even that target depends on fuel prices over the next decade—with oil prices needing to approach $100 per barrel by 2025 to keep efficiency above 50 mpg.
The shortfall came as a shock to many analysts and observers who had long operated under the assumption that U.S. vehicle efficiency targets were effectively written in stone. But those watching recent trends closely were not surprised. In fact, I explained why vehicles might not meet their targets in an earlier post, citing a nearly 30% gap between the levels of efficiency achieved and the target in 2016.
Rightly so, administration officials underscored this week that the projected 54.5 mpg was just that, a projection. As one official said, “54.5 isn’t a standard, never was a standard, and isn’t a standard now. 54.5 is what we predicted, in 2012, the fleet-wide average could get to, based on assumptions that were live back then about the mix of the fleet.”
This underscores an important reason why the target won’t be met, and why achieving future emissions reductions in transportation could be exceedingly difficult: The standards are tied to consumer preferences. As preferences deviate from the forecasts, the target falls short. That’s what has happened over the last few years as consumers went out and bought more pick-ups and SUVs than predicted….