In recent years, the federal government required passenger
cars and trucks to become much more fuel-efficient, with a goal to more than
double average miles per gallon by 2025. More than a dozen states ordered auto
makers to boost sales of electric vehicles, helped by billions of dollars in
federal spending. And President Barack Obama’s administration increased
spending on intercity passenger rail, joining states like California in
planning for Asian- and European-style bullet trains.
Those policies now face a changed landscape: a steep slide
in oil prices since June that has sent the average price of gasoline to around
$2.40 a gallon, according to the U.S. Energy Information Administration. Americans
are again favoring sport-utility vehicles and trucks, which made up 52% of all
auto sales in October, up from 49% a year earlier and 44% in October 2008 after
gas prices took an abrupt increase, according to Kelley Blue Book.
The developments highlight the difficulty of designing
long-term policies around volatile crude-oil and gasoline prices. They also
point to a long-standing reality in American energy policy: Even before the
latest price drop, gasoline has long been far cheaper than in advanced
economies in Europe and Asia, making it tough to promote alternatives.
Many economists expect oil to eventually climb back to
previous highs based in part on expectations that growth in Asian economies
will pick back up. But prices are projected to remain low throughout 2015. And
government officials, environmental groups and other supporters say the
policies passed in recent years are needed to conserve energy and combat
climate change, among other things, regardless of oil prices.
But there are early signs of a return to old habits among
consumers, many of whom had ditched larger cars and trucks when gasoline prices
shot up in 2008. The average fuel economy of vehicles sold in the U.S., which
had risen 26% over the past seven years, dipped in September to 25.3 miles per
gallon from 25.8 a month earlier, according to industry data compiled by the
University of Michigan’s Transportation Research Institute.
Average fuel economy held flat in October and November,
despite the rollout of model-year 2015 vehicles that on average get higher
mileage than prior model years, said Michal Sivak, the institute’s director of
sustainable world-wide transportation.
For the auto industry, the low gas prices and consumer
car-buying trends make it more difficult to meet tough new fuel-economy
standards due in coming years; they face government fines if they don’t.
The Obama administration, under a law enacted under the Bush
administration in 2007, required the average fuel economy of cars and light
trucks sold in the U.S. to rise annually starting with the 2012 model year and
hit 34.1 mpg by 2016. Obama officials estimated the rules would increase
passenger-vehicle prices by an average $926 by 2016 but that consumers would
save almost $3,000 in fuel costs over five years. Those projections were based
on oil prices of an average $90 a barrel in 2015; it currently is trading under
$54 a barrel.
The standards won’t get any easier to reach as federal rules
require average fuel economy to reach 54.5 mpg in 2025. But the Obama
administration built in a “midterm review” before the 2017 model year to
determine whether to ease the standards based on consumer habits, gasoline
prices and other factors.
Industry officials are already discussing whether to push
for lighter miles-per-gallon standards during that review in light of the
recent gas-price decline.
Noting that global oil prices fluctuate, a White House
official said the administration was committed to higher fuel-economy standards
to both reduce dependence on oil and combat climate change. In the first couple
of years of his administration, Mr. Obama prioritized incentivizing electric
cars, including extending a federal tax rebate of up to $7,500 that buyers of
electric cars can receive and putting $2.4 billion in 2009 stimulus funding
toward battery and electric-drive component manufacturing.
Low gas prices likely have counteracted some of the success
of Mr. Obama’s policies. Overall sales of electric cars, including conventional
hybrids, through November of this year are down by about 20,400 cars, or 3.7%,
compared to the same time period last year, according to the association.
On a more local level, several Northeastern states have
adopted a California policy requiring a certain amount of cars sold to be
zero-emitting vehicles and officials remain optimistic that there will be
minimal or only temporary impact on consumer habits.
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