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  1. 1. Should more fuel efficient vehicles be required by law? By Nicholas Luebker
  2. 2. The Fuel Problem <ul><li>The U.S. is heavily reliant upon politically unstable foreign oil sources. </li></ul><ul><ul><li>56% of the U.S.’s fuel comes from foreign sources </li></ul></ul><ul><li>Low fuel efficiencies make us more vulnerable to oil price spikes </li></ul><ul><ul><li>Hurricane Katrina, over $3 a gallon </li></ul></ul><ul><li>Automobiles 2nd biggest factor after industry to contributing to global warming by producing green house gases such as: CO, CO2, NO2, CH4 (methane) </li></ul>
  3. 3. Old Fuel Economy Requirements <ul><li>Require an “average” fuel economy </li></ul><ul><ul><li>The average mpg for a company’s entire fleet of vehicles had to be 22 mpg. </li></ul></ul><ul><ul><li>Allowed companies to make lots of little, light weight cars cars and keep selling the lucrative gas guzzling SUVs. </li></ul></ul><ul><ul><li>*Vehicles over 8500 lbs not even tested </li></ul></ul><ul><ul><ul><li>Includes: Avalanche, Silverado, Dodge Ram, F-250 & 350, Hummer 1 & 2 </li></ul></ul></ul><ul><ul><ul><ul><li> </li></ul></ul></ul></ul><ul><li>Aspire vs. Explorer i n </li></ul><ul><ul><li>Average Mpg </li></ul></ul><ul><ul><ul><li>Aspire ~37 </li></ul></ul></ul><ul><ul><ul><li>4WD Explorer ~ 15 </li></ul></ul></ul><ul><ul><li>For every 1 Aspire sold, could sell 2.1 Explorers and still achieve an avg 22 mpg </li></ul></ul><ul><ul><li>Explorer also has double the CO2 emissions. </li></ul></ul>
  4. 4. Why hasn’t the government required higher efficiencies for all vehicles? <ul><li>For years, under standard vehicle designs, weight reductions were the main way to increase fuel economy. </li></ul><ul><ul><li>Every 100 lbs removed from a vehicle improves efficiency by 1-2% </li></ul></ul><ul><li>However, studies found that lighter cars were not nearly as safe. </li></ul><ul><ul><li>In 1997, mathematician Charles Kahane estimated that even 100 lbs reductions in vehicles would increase the average fatalities per year by ~300 people because they were less safe. </li></ul></ul><ul><ul><li>Makes sense in basic physics model </li></ul></ul><ul><li>Ironically, the government’s “average mpg” requirement increased the discrepancy between very small and light vehicles with high mpg (Aspire) and heavy SUVs but… </li></ul>
  5. 5. Safety Concern Not Entirely Valid <ul><li>Safety has much more to do with engineering than weight. </li></ul><ul><ul><li>Stiffer design </li></ul></ul><ul><ul><li>More crumple room </li></ul></ul><ul><ul><li>Shorter engine </li></ul></ul><ul><li>2002 Honda Civic (mpg 39) designed to be light and safe, 1st to received 5 star crash test rating in all 4 categories. </li></ul><ul><ul><ul><li>2002 Mini cooper, avg mpg ~28 </li></ul></ul></ul><ul><ul><ul><li>2002 F-150, avg mpg ~15 </li></ul></ul></ul><ul><ul><ul><ul><li>Crashing into same barrier at 40 mph. </li></ul></ul></ul></ul><ul><li> </li></ul>
  6. 6. Will making vehicles more fuel efficient cost consumers? <ul><li>Cheap Ideas: </li></ul><ul><ul><li>Use lighter materials </li></ul></ul><ul><ul><ul><li>Aluminum or high strength steel ~$1000 </li></ul></ul></ul><ul><ul><li>Reduce Drag </li></ul></ul><ul><ul><ul><li>Slippery car design, replace side mirrors with small video cameras ~$180 </li></ul></ul></ul><ul><ul><li>Redesign engines </li></ul></ul><ul><ul><ul><li>Added ability to shut off extra engine cylinders at cruising speeds ~$480 </li></ul></ul></ul><ul><ul><li>Hybrid design </li></ul></ul><ul><ul><ul><li>Use an electric motor to start car from idle ~$660 </li></ul></ul></ul><ul><ul><li>Add more gears </li></ul></ul><ul><ul><ul><li>5 speeds are more efficient than automatics, 6 speeds would be even better. </li></ul></ul></ul><ul><li>Using a combination of these ideas can increase mileage by 30% </li></ul><ul><ul><li>A 15 mpg SUV could get now get 20 mpg </li></ul></ul><ul><ul><ul><li>*Savings of only $750 per year at $3 a gallon,but </li></ul></ul></ul><ul><ul><ul><li>Business Week 9/26/2005 Issue 3952, p40-41 </li></ul></ul></ul><ul><ul><li>Saves ~ $5,000 over ten years, 17% of the original price. </li></ul></ul>
  7. 7. Will higher prices of fuel cause people to buy more fuel efficient cars? <ul><li>Ford Explorer and Expedition sales were down 25-30% earlier this year, but is it due entirely to high gas prices? </li></ul><ul><ul><li>Unlikely to think about when buying a new car </li></ul></ul><ul><ul><ul><li>Average cost of an SUV ~ $30,000 </li></ul></ul></ul><ul><ul><ul><li>Savings per year on fuel if bought a hybrid (Honda Insight) </li></ul></ul></ul><ul><ul><ul><ul><li>Considering average miles per year ~ 15,000 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>At 3 dollars a gallon, would save only $2,250 per year, less than 10% of the price </li></ul></ul></ul></ul><ul><ul><ul><ul><li>“ If you can afford a $30,000 vehicle, you can afford the gas” (Petroleum Economist. London 2005. pg 1.) </li></ul></ul></ul></ul><ul><ul><ul><li>Space, comfort, and horse power have value too, more tangible benefits than saving the environment. </li></ul></ul></ul><ul><li>Note: Yet over the 10 year life span of a car, total expenditure (purchase price plus fuel) </li></ul><ul><ul><li>Insight costs ~$30,000 </li></ul></ul><ul><ul><li>Explorer costs ~$60,000 </li></ul></ul><ul><ul><ul><li>Median income in 2004 ~$44,000 ( , multiplied by 10 years, $30K only amounts to about ~14.6% of total earnings. </li></ul></ul></ul><ul><li>It is more likely that the decrease in sales is from greater competition in the SUV market. </li></ul>
  8. 8. What about increasing the gasoline tax to get people to buy more fuel efficient cars? <ul><li>Would probably work, but with ill effects </li></ul><ul><ul><li>Gasoline is a very inelastic commodity </li></ul></ul><ul><ul><ul><li>Between -.11 in short run -.3 in long run. *numbers vary* (The Energy Journal Oct 1993, v14, n4, p99) </li></ul></ul></ul><ul><ul><ul><ul><li>i.e a 1% increase in price only decreases the amount of gasoline consumed by .11% </li></ul></ul></ul></ul><ul><ul><li>Vehicles are durable goods (i.e. they last a long time), not everyone can buy a new car immediately after prices go up and will suffer. </li></ul></ul><ul><li>Economy is heavily reliant on low gasoline prices </li></ul><ul><ul><li>Fast price increases could induce a recession. </li></ul></ul><ul><ul><li>Gradual price increases could induce inflation. </li></ul></ul><ul><li>Unlikely that a large enough price hike would pass through legislation. </li></ul><ul><ul><li>Slower to require higher vehicle fuel efficiencies, but easier to pass. </li></ul></ul>
  9. 9. New Government Standards <ul><li>National Highway Traffic Safety Association’s Corporate Average Fuel Economy (CAFE) separates vehicles into categories based on size (area between the wheels). </li></ul><ul><ul><li>6 different categories based on area. </li></ul></ul><ul><ul><ul><li>Greater the area, the less stringent the standard </li></ul></ul></ul><ul><ul><li>Decided to move away from weight categories because they felt companies would just make vehicles heavier. </li></ul></ul><ul><li>Expected to be approved in April </li></ul><ul><li>Will take into effect on new vehicles of the 2010-2011 years. </li></ul><ul><ul><ul><li>“ U.S. Secretary Mineta Unveils Plan Requiring Better Gas Mileage from SUVs, Pickups and Mini-vans” August 23, 2005. </li></ul></ul></ul>
  10. 10. How Do We Stack Up? <ul><li>The U.S. is in last place of modern countries in fuel efficiency standards. </li></ul><ul><ul><li>China’s fuel mileage goals are 22% tougher than the U.S. </li></ul></ul><ul><li>CO2 per capita </li></ul><ul><ul><li>U.S ~ 20 tons/year, was 6.6 back in 1995 ( </li></ul></ul><ul><ul><li>Germany ~ 10 tons/year </li></ul></ul><ul><ul><li>UK ~ 9 tons/year </li></ul></ul><ul><ul><li>China ~ 2.5 tons/year </li></ul></ul>
  11. 11. Too Little Too Late? <ul><li>Will increasing fuel efficiency requirements impede global warming? </li></ul><ul><ul><li>~25% of U.S. fleet is composed of SUVs </li></ul></ul><ul><ul><li>Only about 1% of U.S. fleet turned over every year. </li></ul></ul><ul><ul><li>Change to more fuel efficient vehicles will take time, vehicles last longer than ever before. ~10 year life. </li></ul></ul><ul><ul><li>Changes aren’t required until 2011. </li></ul></ul>
  12. 12. Overall Recap <ul><li>The automotive industry’s argument that improving mileage would compromise safety is untrue. </li></ul><ul><li>It is a myth that it would cost consumers significantly more to increase fuel efficiency. </li></ul><ul><li>It is unlikely that market forces will cause the average fuel efficiency to go up on their own. </li></ul><ul><li>If the government tries to manipulate the market through gasoline taxes, there could be ill economic effects. </li></ul><ul><li>The U.S. currently has one of the worst CO2 emitted per capita in the world. </li></ul><ul><li>Because there is such a large fleet, it will take some time to reach. </li></ul>
  13. 13. Bibliography <ul><li>“ Crash Course: How U.S. Shifted Gears to Find Small Cars Can Be Safe, Too”. Wall Street Journal. New York, N.Y.: Sep 26, 2005. pg. A.1 </li></ul><ul><li>“ Get Real”. Petroleum Economist. London: June 2005. pg. 1 </li></ul><ul><li>“ Getting More Miles to the Gallon -Fast” Business Week 9/26/2005. Issue 3952, p40-41. </li></ul><ul><li> </li></ul><ul><li>, click global warming link </li></ul><ul><li> (CAFE regulations) </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li>“ Another look at U.S. passenger vehicle use and the 'rebound' effect from improved fuel efficiency” The Energy Journal Oct 1993, v14, n4, p99(12) </li></ul>