Autoline on Autoblog with John McElroy
by John McElroy on Apr 10th 2009 at 3:57PM 
IT'S A FUEL PROBLEM, NOT A FUEL ECONOMY PROBLEM
Every single day, the United States ships $600,000,000 out of the country. That's what it costs us to pay for the oil we buy from other countries at $50 a barrel. It is the single biggest cause of our massive trade deficit.
The U.S. uses roughly 20 million barrels of oil every single day, and about 60% of that is imported. About 10 million of those barrels are used in transportation, including the kinds of cars and trucks you and I drive, plus all the planes, trains, heavy trucks and off-road vehicles in the country.
Yet, our entire effort to reduce our dependence on oil is based on Corporate Average Fuel Economy regulations (CAFE). And that only impacts passenger cars and light trucks. In other words, the industry that causes less than 50% of the problem is bearing 100% of the effort to fix it. No other industry is being regulated to reduce our dependence on oil, and that doesn't look like a very effective approach to me.
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John McElroy is host of the TV program "Autoline Detroit" and daily web video "Autoline Daily". Every week he brings his unique insights as an auto industry insider to Autoblog readers.
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While the government says it wants to reduce our dependence on oil, it does everything in its power to keep oil as cheap as possible. We won't even contemplate a tax on imported oil. Instead, we only enact fuel economy rules for cars.
Let's get something straight. Oil is a poison. It poisons our atmosphere when we burn it. It poisons our economy when we import it. So why is our solution to try to and use this poison more efficiently? If something is poisoning you, you stop taking the poison!
If we're going to solve our oil addiction, and solve it soon, we need to take other actions. It's not only unfair to force the auto industry to bear the entire burden, it's not effective. The root cause of the problem is not the cars we drive, it's the fuel we burn. When are we going to address the root cause of the problem?
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Every single day, the United States ships $600,000,000 out of the country. That's what it costs us to pay for the oil we buy from other countries at $50 a barrel. It is the single biggest cause of our massive trade deficit.The U.S. uses roughly 20 million barrels of oil every single day, and about 60% of that is imported. About 10 million of those barrels are used in transportation, including the kinds of cars and trucks you and I drive, plus all the planes, trains, heavy trucks and off-road vehicles in the country.
Yet, our entire effort to reduce our dependence on oil is based on Corporate Average Fuel Economy regulations (CAFE). And that only impacts passenger cars and light trucks. In other words, the industry that causes less than 50% of the problem is bearing 100% of the effort to fix it. No other industry is being regulated to reduce our dependence on oil, and that doesn't look like a very effective approach to me.
____________________________________________________________________________________
John McElroy is host of the TV program "Autoline Detroit" and daily web video "Autoline Daily". Every week he brings his unique insights as an auto industry insider to Autoblog readers.
____________________________________________________________________________________
Let's get something straight. Oil is a poison.
Worse yet, it takes 20 years to turn over the fleet of vehicles in this country. In other words, the last of the 2009 models being sold today will not be out of circulation until 2029. So, for example, when CAFE mandates that new vehicles average 35 miles per gallon by 2020, the full fleet of vehicles in the United States will not reach that until 2040. This is absolutely the slowest solution we could ever think up to try and fix the problem.While the government says it wants to reduce our dependence on oil, it does everything in its power to keep oil as cheap as possible. We won't even contemplate a tax on imported oil. Instead, we only enact fuel economy rules for cars.
Let's get something straight. Oil is a poison. It poisons our atmosphere when we burn it. It poisons our economy when we import it. So why is our solution to try to and use this poison more efficiently? If something is poisoning you, you stop taking the poison!
If we're going to solve our oil addiction, and solve it soon, we need to take other actions. It's not only unfair to force the auto industry to bear the entire burden, it's not effective. The root cause of the problem is not the cars we drive, it's the fuel we burn. When are we going to address the root cause of the problem?
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Reader Comments (Page 1 of 4)
Dan 4:09PM (4/10/2009)
I've said this all along, gas mileage doesn't matter gas matters.
How few or many miles you travel in the process of burning it doesn't make the slightest difference to the environment or the trade deficit.
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cheezwiz 4:22PM (4/10/2009)
Your statement is far too bold.
What if you reduced consumption by 60%? Then, by John's facts, you would eliminate the oil trade deficit.
adam 4:14PM (4/10/2009)
I wouldnt go as far as saying that oil is poison... its only the fuel that fuels ours and others economies... but if you really want to slow or stop oil importation why is drilling in the US off the table? why are the same CAFE standards the ones that make it impossible to get diesel fuel in the masses in the US?
Government Mandate is never the answer... the free market is always the answer...
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bvz 5:00PM (4/10/2009)
Adam,
The free market, by itself, is also extremely inefficient when the desired outcomes are based on factors that it doesn't value, or values too late.
Because we typically don't place a monetary value on clean air, water, or species extinction, those factors don't carry much weight in the free market. Financial bottom line is all that matters.
Government mandates, which in our country could be seen as the will of the people (albeit run through some pretty heavy filters), can introduce these factors into the equation. Frequently, and I believe this may be what you are opposed to, government mandates are too process specific and not enough outcome specific. I.e. industry X will use technology Y vs. industry X can do whatever it pleases as long as outcome Z is achieved.
But a completely free market, by definition, is reactive... not proactive. The role of society (and government as the only "physical" face of society) is to change the playing field so that free enterprise can do what it does best - react in the most efficient way humans know.
Kappy 12:11AM (4/11/2009)
What bvz is essentially saying is that there is an external cost of using oil that a free market does not take into account. Therefore, we use more than the allocatively efficient amount of oil. For this reason, a regulatory body (aka the government) should in some way account for this external cost, and take action so that we use the allocatively efficient amount of oil. However, the problem is that our government is not necessarily good at this due to oversight, the dedicated work of oil lobbyists, and the difficulty of passing legislation with short-term costs and long-term benefits.
bvz 4:30AM (4/11/2009)
Yeah. What he (she?) said.
adam 10:06AM (4/11/2009)
I hear you but that really has nothing to do with my original comment?
all you did there was attack the free market? well all you did is attack yourself.. so I dont get the point?
bvz 5:15PM (4/11/2009)
I'm not really attacking myself... just saying that it is a complicated issue. The free market is not some magic genie that somehow manages to to everything perfectly. Government intervention can also be very heavy handed, inefficient, and counter productive.
Basically what we have are two (among several) players which are both deeply flawed... but then that's the nature of being human.
I do not believe that the free market will solve many of the issues we are facing today unless it is guided somewhat by society. Alas, the "best" method we have at the moment to do that is government and that is a really really crappy way to do it. It sucks, but the best we can hope for is to keep vigilant and make sure that neither player manages to spin too far out of control (they will never actually be "in control")
adam 5:35PM (4/11/2009)
I agree on your basis but not on your conclusion... the free market is not a magical genie that will make everything right and better according to anyone... neither is the government... I agree that humans are imperfect and the systems they set up are bound to be imperfect. but where I differ in the conclusion is that I believe that if you are going to leave it up to one imperfect system it should be the free market governed by a civil society not a government. when the free market makes a bad decisions there are less that are effected by that decision and it can turn around faster. when the Government makes a bad decision it effects everyone and is not easily overturned. enviromental issues are a touchy subject but when you see that the government really cares less about the enviroment than the mass of the individuals that make up the free market then it becomes clear who has the answer...
J.Crew 4:18PM (4/10/2009)
Try selling this idea to the greenies in California...
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zamafir 5:12PM (4/10/2009)
He doesn't need to. I think the bigger challenge would be trying to make Michigan a more powerful buying force and legislative force than California. Until you do that, none of these editorials will matter. Though they are helpful, having read all of them to date, It would appear the big three are now completely un-responsible for their predicaments, all the profitable automakers have no clue, and all the greenies are the devil. I’m all for alternative viewpoints, I’m just curious how many perspectives are left to absolve the big 3 from their responsibilities to run a viable business.
elprogramer 5:46PM (4/10/2009)
^What are you talking about?
SUVs were in demand, people were paying hand over fist for them. Why is it General Motors fault that speculators drove up the oil bubble? When you're low on cash, you don't waste money on a Hail Mary, like the Prius, you go with a money-maker.
It's easy to look back and say what people should've done, but nobody knew oil was going to rise that far, that fast. I'm still not convinced it'll go back that high, but that's only contingent if we can get the speculators out of the market (and by all indicators, they're still there waiting).
J.Crew 6:38PM (4/10/2009)
Well put zamafir,
Having read "Why GM Matters" it was interesting that the initial stated goal of the Volt was to answer the question of how to "build a car that will displace petroleum". The Volt will not do that, but it seems it will work on a limited scale. Its technology, if spread across multiple sizes and segments has the potential to be one answer if purchased on a massive scale. I don't think we need to back off creating more efficient vehicles, however the government needs to be more realistic towards the auto industry and more firm towards other industries that use more oil and create more pollution. It is as if the auto industry has taken a long term beating so others can skate by while not getting noticed. Now that the Feds have control they need to avoid costing themselves more by regulating the auto sector to death which is the path they have been on for a long time. Safety, emissions, and fuel economy have all been forced upon the auto sector. I think a lot of good has come from this, but it needs to be reasonable and measured and not a forever moving target as it has been recently. Unfortunately this is where the State of California and its gun aimed at the domestic auto industry/Michigan makes little sense. Raising CAFE standards is not the way to go as it has not worked well in the past. The government should not dictate to the manufacturers which cars to build based on a stated goal that consumers do not want or are not willing to pay for just to satisfy one state, or a couple states. Supply and demand from consumers should dictate what gets built. I still say raising the gas tax will promote consumers buying smaller or more fuel efficient automobiles. Let the consumer decide what works for them based on their own budget. I hope that message is understood in Washington regardless of where it comes from, but I fear that message is too simple and does not fit anyone’s popular agenda.
Rob 4:19PM (4/10/2009)
John, you are half right. Yes, oil is used for products, transportation, power, heat, all sorts of things.... but the efficiency of a vehicle is the single biggest impact a CONSUMER has on the environment. For a lot of people, a vehicle is the biggest, most expensive product they own. Consuming disposables, eating meat, hell, everything else about our lives has an impact, but our choice of transportation has the largest overall impact, according to this book:
http://www.amazon.com/Consumers-Guide-Effective-Environmental-Choices/dp/060980281X
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tekd 4:21PM (4/10/2009)
Well other industries should try to become less oil dependent, but while you can regulate cars to make them more efficient and burn less oil it's much more difficult to demand that a hunk of plastic use less oil when being manufactured. But of course where possible we should try to improve efficiency for economic and also environmental reasons.
I think though that new energy initiatives (new power plants using nuclear, wind, water, solar power) will automatically make a lot of industries more efficient in terms of oil consumption as energy use is shifted. This doesn't really apply to cars so it does make some sense that cars are regulated directly at the fuel burning level.
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adam 4:38PM (4/10/2009)
wind, water and solar will not be fesable power sources in the near future.. and nuclear and coal are being attacked as much as oil....
rodan32 4:47PM (4/10/2009)
Agreed. It's time we took perhaps the only European idea that really works and invested heavily in nuclear power. It's time we stopped wasting our nuclear by-products by burying them and recycled them like the French do. This answers so many questions, and I'm appalled none of our leaders connects the dots.
Jake 4:22PM (4/10/2009)
Oil is not a poisen. It is stored energy. Part of our success as a nation has been cheap, reliable, and abundant energy. If we are going to continue to have a strong economy we are going to continue to need cheap, reliable, and abundant energy.
It is silly to artificially restrict and throttle our economy and freedom because of political notions based in religious environmentalism and ethnic hatred.
So we have a trade deficit buying cheap energy. So what? We need and love energy. Why pay more just to get it out of the ground here? Just so we can say that we don't have a trade deficit. Silliness!!!!
When oil truely becomes scarce and not economical, the free market will find something to replace it. Because there will be money in it for them. We didn't start driving cars because horses went extinct.
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John Kurmann 5:06PM (4/12/2009)
I don't want to make time to get involved in a long and involved discussion online, but anyone who thinks oil isn't dirty, poisonous, and dangerous from the point it is mined through transportation, refining, and combustion needs to read Terry Tamminen's book Lives Per Gallon: The True Cost of Our Oil Addiction (LivesPerGallon.org). And then there are the foreign policy consequences of our dependence on oil, as explained by Michael Klare in his book Rising Powers, Shrinking Planet: The New Geopolitics of Energy (us.macmillan.com/risingpowersshrinkingplanet). Online, you can also check out Oil Change International's website at PriceofOil.org.
Those who doubt the threat of climate disruption due to global warming need to understand that the folks with relevant expertise--the world's climate scientists--don't doubt it (except for a tiny few). Check out the Wikipedia entry for "Scientific opinion on climate change" for a collection of statements on this subject from the preeminent scientific organizations in the world.
Then there's the slight problem that global oil production may have already reached its all-time peak; if so, and if the economy ever recovers, prices will spike as production begins to decline. Even if global oil production hasn't peaked, we would need to start a crash program years in advance of the peak to make a smooth transition to clean energy replacements for oil (ACUS.org/docs/051007-Hirsch_World_Oil_Production.pdf) and we have nothing like that in place right now.
Rev Junkie 4:32PM (4/10/2009)
Well, cars USED to have a severe environmental impact, what with the tetraethyl lead in fuel and all, but now the engines are quite clean-burning, minimizing the environmental impact. Metals and plastics used to make the body panels, interiors, and wheels can now be recycled, except for carbon fiber, I think, and I don't really buy into the whole global warming thing, so cars don't really do much environmental damage. But as for fuels, I am a strong proponent of alcohol fuels. Methanol can allow for ultra-high compression ratios, 19.5:1 in one experimental engine, and can be made fairly easily from carbon rich waste. Certain algae have been farmed to produce biodiesel, and bacteria have been genetically modified to excrete ethanol. I think we should go with whichever alcohol provides the best balance between ease of production and octane rating, so we can extract more power from less displacement, allowing engines to burn less fuel, because fuel economy does matter. Better fuel efficiency means having a decent range on a smaller tank, and a smaller tank means less weight, and less weight is good for almost every aspect of a car's performance. But I believe in keeping the good 'ole internal combustion engine around for hundereds of years to come. We've gone from 1hp 1.0L engines in Karl Benz's Motorwagen to 500hp supercharged 2.5L V8s like in the Caterham RS Levante and the Ariel Atom 500 V8, and the Otto-cycle engine has yet to reach its full potential. Camless engines with electronically actuated valves, variable compression ratio pistons, and six valves per cylinder may soon be on the horizon. Whether burning gasoline, alcohols, hydrogen, or even running on compressed air, the Otto-cycle engine is the best combination of reliability, cost, and durability of any automotive propulsion system out there.
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