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Obama imposes fuel efficiency on Detroit

By MARTIN SIEFF   |   May 19, 2009 at 2:41 PM   |   Comments

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WASHINGTON, May 19 (UPI) -- U.S. President Barack Obama has announced his long-projected new guidelines to cut fuel costs and increase U.S. auto efficiency. But his program looks certain to dramatically boost the costs of purchasing new cars for American consumers, putting a heavy new burden on the Detroit automakers who are already struggling to survive or staring bankruptcy in the face.

Calculations of the cost of the Obama plan vary. Administration officials admit the new standards will impose an increased cost of at least $1,300 on new cars by 2016. But the Environmental Protection Agency, which will enforce them, says that the savings in fuel efficiency will be so great that individual car purchasers will save that money back within 3.2 years of buying their new vehicles.

However, these projections seem to have included a significant amount of wishful thinking and blind guesswork. The projections were made without factoring in any serious inflation, but the huge increase in U.S. federal spending already approved by Obama and his Democrat-controlled 111th Congress guarantees that at the very least significant inflation will come, the worst in almost 30 years. And if the Chinese, Japanese and other state banks holding U.S. treasury bonds lose confidence in Obama's management of the U.S. economy, it could trigger hyperinflation the likes of which have been seen in no major industrialized nation since the catastrophic hyperinflation of the Weimar Republic in Germany in 1923. Inflation could send car prices spiraling far higher than the extra $1,300 projected by the administration.

Obama unveiled the new plan, which was worked out in conjunction with the major U.S. automakers, Tuesday in a Rose Garden announcement. The new program is designed to greatly strengthen vehicle fuel efficiencies and establish limits on emissions from those vehicles. The White House outlined the rules it wants in effect in 2012 in a Monday briefing.

Obama is creating a nationwide standard for cars and light trucks, a move the auto industry likes because it doesn't need to deal with a myriad of state regulations. The plan is to have an automaker's lineup of cars and light trucks average 35.5 mpg by 2016 in their Corporate Average Fuel Economic standards, four years ahead of the previously projected deadline. The current CAFE standards aim to reach a fleet average of 35 mpg by 2020.

The new CAFE standards also mandate a reduction in the emission of greenhouse gases -- mainly carbon dioxide -- by 25 percent, in order to fight global warming. An unnamed administration official told various media outlets that this would be the equivalent to saving 900 million metric tons of greenhouse-gas emissions over the projected lifetime of the vehicles -- the equivalent of taking 177 million vehicles off the road.

However, the projected and much-quoted anticipated savings from the plan cannot factor in fluctuations in the global price of oil, which over the past year have been wildly unstable. Prices soared to a historic high of more than $147 a barrel in July 2008 before plummeting to a remarkable and unanticipated low of less than $40. Now they are climbing significantly again to more than $60 a barrel, apparently on fears that Israeli Prime Minister Binyamin Netanyahu, who met Obama in the White House this week, will defy the United States and order Israeli airstrikes against Iran's nuclear weapons-capable facilities.

Also, on Monday the Energy Department cut $100 million in research toward hydrogen-powered cars. That program had been a pet of the Bush administration, but the new White House says such a program is too far from providing fruit to fund at current levels.

Unlike the projected savings for the new CAFE standards, these cuts mandated by Energy Secretary Steven Chu are based on hard science, practical engineering and financial considerations. Hydrogen-fueled car technology is nowhere near maturity, won't be for decades and may never be.

However, the mature technology that could most effectively replace oil in generating energy cost-effectively is loathed by environmentalists. That is building far more coal-fired power stations, as India and China are both already doing.

The Democratic left and the Republican right both have their fantasies of how to unilaterally solve the United States' century-plus reliance on cheap oil on demand. In the nearly 36 years since the 1973-74 energy crisis, that reliance has steadily and remorselessly grown despite endless public promises to reduce it. Whether Obama can meet the ambitious goals he has set and prove more effective than his predecessors remains to be seen.

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