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New Energy Economics: Challenges to Increasing American Vehicle Fuel Mileage

Cole Gustafson, NDSU Biofuels Economist Cole Gustafson, NDSU Biofuels Economist
A rebound effect occurs as a result of vehicles getting better fuel economy, so they are driven more.

By Cole Gustafson, Biofuels Economist

NDSU Extension Service

As we enter the summer driving season and national gasoline prices approach $4 per gallon, Americans again are placing more emphasis on mileage when considering a new car purchase.

In this column, we will discuss the impact the growth of renewable energy has had on national fuel mileage calculations. You may be surprised to learn that the increased consumption of ethanol could present a challenge to manufacturers.

In our next column, an even more surprising change that is occurring will be discussed. Car manufacturers are going to be installing very expensive air conditioning systems to avoid having to increase fuel efficiency.

Motor vehicles use two-thirds of all U.S. oil consumption. This consumption affects every American in direct, as well as indirect, ways. Higher fuel costs mean higher costs to transport people, as well as commodities, which lead to higher prices at stores. In most cases, rising fuel costs are passed directly on to consumers in the form of higher prices for goods and services.

Oil production peaked in the U.S. during the early ’70s. Until very recently, oil production has continued to decline and imports of oil have increased steadily. There were a few significant downturns in oil imports in the ’70s and early ’80s. In 1972, the Arab members of the Organization of Petroleum Exporting Countries (OPEC) decided to place an embargo on oil deliveries to the U.S. as punishment for Middle East policy decisions.

As a result, President Nixon instituted a series of actions through “project independence.” The goal was to use America’s strength in science, technology and industry to achieve energy self-sufficiency by 1980 using conservation and alternative energy sources. The embargo was lifted, so the focus on reducing our dependence on foreign sources of oil diminished. As a result, project independence was only moderately successful.

In 1979, there was another energy crisis because of the unrest in Iran. These two crises led to America again looking at ways to improve fuel economy or miles per gallon (mpg) to reduce our dependence on foreign oil.

At the beginning of the ’70s, passenger cars averaged 13 mpg, vans and light-duty trucks 10 mpg and heavy-duty trucks averaged just more than 5 mpg. While the mpg for heavy-duty trucks has remained relatively static at around 5 mpg, passenger cars and pickup mileage has increased.

Congress enacted the Energy Policy Conservation Act in 1975. It included Corporate Average Fuel Economy (CAFE) standards. The goal was to double (13 mpg to 27.5 mpg) the fuel economy for passenger cars by 1985. The mpg for new vehicles reached the CAFE standard of 27.5 in 1985 and remained there until 2005, when it began increasing. The average mpg reached 32.5 in 2009.

In 2007, President Bush signed the Energy Independence and Security Act (EISA). It set a new CAFE standard of 35 mpg for cars and light trucks by 2020.

By increasing fuel economy, there eventually should be a reduction in the total energy used for vehicle transportation. This should translate into less environmental impacts and emissions, as well as reduced costs for everything consumers buy containing energy or transportation charges.

However, a number of secondary consequences or consumer reactions may lessen this impact. First is the “rebound effect.” A rebound effect occurs as a result of vehicles getting better fuel economy, so they are driven more. This results in lower than expected net energy savings. Cost savings only can be realized for the average consumer if the total miles driven does not increase as fuel prices fall.

Moreover, emission profiles change. The U.S. Department of Transportation estimates that carbon monoxide increases may result from the more miles traveled by the vehicles with higher fuel economy. Reductions in other pollutants, such as sulfur dioxide, particulate matter and carbon dioxide levels, generally fall as expected.

The 2007 EISA bill also contains a renewable fuel standard (RFSII) use of 36 billion gallons by 2022, with 21 billion gallons coming from nonstarch sources such as cellulose or sugar.

There is quite a debate within the renewable fuels industry whether fuel mileage declines with the greater use of ethanol and next-generation fuels. Initially, fuel economy suffered in gasoline- burning vehicles because ethanol has lower energy content than petroleum-based fuels.

However, new flex-fuel vehicles are optimized for renewable energy use, and several tests have found that the mileage is equivalent to gasoline. Nevertheless, the American car fleet still is dominated by older gasoline models. So, while the EISA attempts to improve CAFE car mileage, greater consumption of renewable energy works against this national goal.

NDSU Agriculture Communication – May 31, 2011

Source:Cole Gustafson, (701) 231-7096,
Editor:Rich Mattern, (701) 231-6136,
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