While all of Washington is focused on the debt reduction talks, it does seem that there is some other work actually happening. On Friday, the President is expected to announce a compromise between automakers and environmentalists.
According to the Wall Street Journal, who first reported this on Tuesday night, the President will announce that corporate average fuel economy (CAFE) standards will see a 5% average annual increase in fuel economy for cars and a 3.5% increase for light trucks, staring in 2016 and lasting through 2021. From 2021 until 2025 both would face a 5% annual increase. This builds upon the announcement of a new rule implemented last year that raised fuel economy standards from 2012 through 2016.
The result of this is that by 2025 – not that long when we’re talking about the long lead-time necessary for designing and building cars – the average fuel economy will jump to 54.5 miles per gallon (MPG). That is approximately double what it was in 2010, the model year previous to the current one, of 27.5.
A couple of weeks ago, Kelsey wrote on this blog in favor of a target of 60 MPG by 2025, and ASP board member (and former governor of New Jersey) Christine Todd Whitman signed a letter to President Obama in support of a 60 MPG standard. Although the final compromise comes up slightly short of that, this is still important.
In fact, this is a big deal.
It is very important for American national security and foreign policy that we use less oil. Last year, ASP released a report “Ending Our Dependence on Oil,” which showed how America’s addiction to oil threatens our national security.
It is important that the United States as a whole uses less oil because the sheer volume of oil imports harms American competitiveness and drives down the value of the dollar. The United States sends hundreds of billions of dollars overseas to pay for oil. The United States consumed over $1.45 trillion worth of oil in 2010, of which $680 billion was spent on imports.
Without these imports, the U.S. trade deficit, which was $497 billion in 2010, would not have existed. That capital could be used for investment at home, and the dollar would likely have remained stronger.
Second, it is important for each American consumer that they are less vulnerable to oil price fluctuations. Oil is a volatile commodity. Over the last four years alone, the global price of oil has fluctuated from an average price per barrel of $69 in 2007 to a peak of $147 in July 2008, back down below $35 in January 2009, then back up above $120 per barrel in April 2011. This constant fluctuation harms consumers because it impairs their ability to plan for the long-term by acting as an unplanned tax.
These problems directly impact the security of the United States because every person working on foreign policy knows how vulnerable the American economy and the American consumer are to the rising price of oil. That vulnerability constrains these decision-makers when dealing with oil-producing regimes. There is a good argument to be made (for another blog post) that the United States has acted very differently to Arab countries throughout the Arab Spring, depending on how much oil they produce.
The increases in CAFE standards that the President will announce tomorrow will put the United States on track to reducing its vulnerability to oil-producing regimes. This is an important step that should be applauded.