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President Obama wants to make gas guzzling vehicles go extinct with tough new CAFE rules.

Michigan Governor Rick Snyder (R) is concerned the bill could cost American jobs.  (Source: Rick Snyder via Flickr)

The standard could also lead to more crash deaths, as automakers say such standards lead to cuts in material density and safety features to save on weight. The resulting cars are more fragile.  (Source: Car Insurance Comparison)
Plan would save on pollution, oil costs, but could increase vehicle costs, job losses, and accident deaths

The debate over the next Corporate Average Fuel Economy (CAFE) standard (set to run from 2017 to 2025) has just begun, and the political posturing appears to be in full effect.  From Department of Transportation (DOT) Secretary Ray LaHood to Senators and governors, everyone was expressing vocal thoughts about the "rough draft" of standards that United States President Barack Obama's (D) advisors unveiled on Monday.

I. 56 MPG = Lost Jobs?

Given that much of America is still recovering from recession, the topic of job loss is a sensitive one for many Americans, and is a powerful phrase to invoke in rhetoric.

Governor Rick Snyder (R-Michigan), whose state is home to America's three biggest automakers, was among 14 governors who wrote a cautionary letter to the heads of the DOT and the Environmental Protection Agency (EPA), employing this phrase to its full effect.

They write:

If fuel economy standards are increased too quickly, resulting in more expensive vehicles, many consumers can be expected to hold onto their older vehicles longer and defer buying a new car, which could put auto jobs across the country at risk.

The letter does not specify whether the proposed 56.2 mpg standard counts as increasing fuel economy "too quickly", but the timing certainly make it seem like a criticism of the plan.  Governor Snyder points to estimates that the plan will add between $2,100 USD and $2,600 USD to the cost of a vehicle, on average.  He urges the government to adopt a "sensible" standard, but stopped short at saying what such a standard would be in mpg.

The White House apparently decided to take the letter as a compliment, with spokesman Matt Lehrich writing:

We appreciate the governors' support for a national fuel economy standard that will save American families money at the pump and keep the jobs of the future here in America, and we share their commitment to preserving affordability and consumer choice.

II. Mich. Sen. Levin (D) Expresses Mixed Feelings on Bill

Sen. Carl Levin (D- Michigan) sent a separate letter to the White House demanding information on what data they used to decided on the proposed CAFE numbers.  In an interview he states, "We want to know how they arrived at that starting point. We will get that information one way or another."

The Senator admits, though, that without an agreement on the standard, the solution might be even less appealing.  If an agreement is not put in place, states like California will likely look to enact their own guidelines.  While this might please some state rights advocates, it is something automakers oppose -- they prefer a national standard.  Sen. Levin also opposes such provisions, stating, "[States] should not be given a waiver [to set their own standards]."

But without a binding national agreement, the government may have a tough time stopping states from doing so.  Technically the U.S. Environmental Protection Agency, a federal entity, has to approve of states' plans and grant them waivers from national standards.  A 2007 Supreme Court ruling in the case Massachusetts v. EPA, (No. 05-1120) found that it was illegal for the EPA to obstruct states from implementing their own standards by refusing to grant waivers.  The message seems unequivocal -- the EPA must grant waivers if states want them.

Sen. Levin adds that he is "very concerned" about the prospect of lost sales and jobs from the proposal.

III. Ray LaHood Wants Standard to be Finalized by July

Whether or not the final draft of the standard contains compromises, such as a lower mpg target, Secretary LaHood wants it to be delivered to the EPA and DOT by the end of July.

Secretary LaHood was critical in finalizing the current CAFE standard, which will require automakers to reach 34.1 mpg by 2016.  That standard, first set into motion by departing President George W. Bush (R) and finalized by President Obama, is estimated to cost automakers $51.5B USD over its course.

The tricky part about the standards is that while they cost on the vehicle side, they force savings at the pump.  The current standards are estimated to cut 1.8 billion barrels of oil by 2016.  With oil currently at $94.77 USD/barrel, that's a savings of $170.6B USD.  Further, by cutting fossil fuel combustion, the bill reduces emissions of toxic nitrogen and sulfur-containing gases that have been linked conclusively to chronic conditions such as asthma.

On the other hand, the bill may have raised other costs, as it is thought to have made the average vehicle less safe, contributing to automotive fatalities.

More extreme elements of the environmentalist movement have criticized both the previous and the pending CAFE provisions as being too weak.

The DOT Secretary offered cautious optimism that a compromise will be reached, commenting, "Our people are very professional at this. I think we proved that with the last CAFE standard. We got it right because we had every car company standing in the Rose Garden with the president. We want to get it right this time.""



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RE: Car Sales
By acer905 on 6/30/2011 10:52:19 PM , Rating: 4
........... You do realize that a) $0.184 per gallon of gas is the federal tax, with state tax added on to that, and then sales tax added at the end. For states like Connecticut or Minnesota, which have state taxes in the mid $0.20's, that can easily get to 4x your estimate.

http://www.gaspricewatch.com/usgastaxes.asp

http://www.taxfoundation.org/taxdata/show/26079.ht...

http://www.api.org/statistics/fueltaxes/upload/GAS...

b) The breakdown of US oil suppliers does not start with any OPEC member. It starts with Canada, supplying nearly twice what Saudi Arabia does. Because Canada actually uses the vast oil that can be found in the Arctic Circle, much like Russia, which happens to be another of the worlds oil suppliers.

ftp://ftp.eia.doe.gov/pub/oil_gas/petroleum/data_p...

http://www.consumerenergyreport.com/2010/01/25/top...

http://en.wikipedia.org/wiki/Petroleum_industry_in...

http://www.nytimes.com/2009/09/09/business/global/...

c) Based on the US gasoline usage, 378 million gallons a day, and the average gas tax of $0.495 per gallon, the government rakes in $187.11 million a day from gas sales, or $68.295 billion a year, pure "profit". ExxonMobil, the worlds largest oil refiner in the world, only managed $30.46 billion in net income for worldwide sales in 2010. Thats off of $383.221 billion in revenue. I'd say the Gov is getting their fair share.

http://www.eia.gov/energyexplained/index.cfm?page=...

http://en.wikipedia.org/wiki/ExxonMobil_Corporatio...

http://biz.yahoo.com/ic/10/10537.html


RE: Car Sales
By dsx724 on 7/1/2011 2:14:25 AM , Rating: 2
a) true, i am wrong on that figure
b) oil futures are global, just because our money isn't going directly to opec member nations doesn't mean opec member nations aren't getting more money because of us. canada could be selling that oil to europe and china and thus reducing the share of their oil imported from middle eastern countries.
c) the US has 4 million miles of roads and 2 million miles of oil/ng pipeline of which a significant portion has lighting, traffic lights, guard rail and sound walls. where is the pure profit when you have to build and maintain all of this and build parking space? for every dollar you spend on gas, the government pays more than a dollar to enable you to drive.
c2) 8% profit after costs are factored in. the government is running a negative balance that must be supplimented by non-gas taxes to break even.


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