Obama’s new fuel standards to add $2,000 to car prices
The Obama administration’s new proposal to double the fuel efficiency of cars by 2025 may cost up to $157 billion and add $2,000 to the price of passenger automobiles, according to two federal agencies.
In the proposed rule posted on their websites, the National Highway Traffic Safety Administration and the Environmental Protection Agency predict the administration’s new Corporate Average Fuel Economy (CAFE) standards would add an average of $2,000 to the price of each new passenger vehicle sold by 2025.
The NHTSA attributes the increased consumer costs to the price of developing new fuel-saving technology. However, the highway agency predicts the costs of the new standards would be offset by benefits of $419 billion to $515 billion.
President Obama said the rule, negotiated by the administration and a number of automakers in July, was a successful effort to reduce U.S. dependence on foreign oil.
The proposed rule would go into effect in 2017 and requires annual fuel-economy increases of five percent for cars. Ultimately, the rule would require automakers to reach an average of 55.4 miles per gallon for passenger cars by 2025. The current CAFE standard for 2011 is 30.2 mpg.
Light trucks like pickups and sport utility vehicles would only be required to raise fuel economy by 3.5 percent the first five years the rule would be in effect. After that, trucks would also be required to increase fuel economy by five percent a year.
Semi-trucks from model years 2014-2018 would have to achieve an approximate 20 percent reduction in fuel consumption and greenhouse gas emissions, saving up to four gallons of fuel for every 100 miles traveled.
The White House says the fuel standards will save 12 billion barrels of oil, reduce oil consumption by 2.2 million barrels a day — about one-fourth of the oil the country imports — and save consumers more than $8,000 a vehicle in fuel costs by 2025.
However, the rules have worried several automobile trade groups, including the National Automobile Dealers Association and Alliance of Automobile Manufacturers.
“The proposed regulations present aggressive targets, and the administration must consider that technology break-throughs will be required and consumers will need to buy our most energy-efficient technologies in very large numbers to meet the goals,” Mitch Bainwol, chief executive officer of the Alliance of Automobile Manufacturers, said in a statement to Bloomberg.
Republicans, too, have panned the proposed standards.
The House Oversight and Government Reform Committee has launched an investigation into how the standards were crafted. California Republican Rep. Darrell Issa, who chairs the oversight committee, has questioned whether the rules were rushed and could jeopardize safety by reducing the weight of cars.
“Beyond jobs that would be lost as a result of this rule, there are concerns that these new regulations were crafted in a manner inconsistent with laws and basic standards of transparency that had the effect of hiding special interest agendas,” Issa said in a statement Wednesday. “The Oversight Committee will continue to conduct its investigation into the process that developed these standards and will continue to press the administration for answers on the impact this rule will have on jobs and vehicle safety.”
In July, when the rules were first drafted, House Majority Leader Eric Cantor’s spokesman wrote on Cantor’s blog that such rules “further tie the hands of job creators and add yet another hurdle to getting the economy up and running.”
“The result of these regulations means increased costs for businesses and families, and fewer jobs for workers,” the spokesman wrote. “Rather than placing additional burdens on working families and small businesses, Washington should be focused on removing barriers to growth and fostering an environment for job creation.”