Saudi Arabia may institute higher fuel economy standards; keep 45-cent/gallon gas

When it comes to global oil production, Saudi Arabia is one of the absolute leaders, producing nearly 10 million barrels of crude every day. That means it can offer its citizens gas prices of about 45 cents per gallon. Despite this remarkably low price, though, the controversial, monarchical Middle Eastern country has just announced a series of reforms for the auto industry that will see American/European/Chinese-style fleet fuel efficiency standards come into effect.

According to Green Car Reports, the Kingdom's fleet standards are more lenient than those in the US and considerably easier to meet than Chinese or European standards. Fleets will need to return an average of 12 kilometers per liter (about 28.2 miles per gallon) by 2020. In the near term, though, vehicles will need to feature fuel economy labels as early as next month, and will need to meet more stringent fleet standards by late 2015 or early 2016. The push to increase fuel efficiency of Saudi cars is so intense that the country is even considering a program like Cash for Clunkers, in a bid to get older, less fuel efficient cars off the roads.

As for the motivation behind this sea change, it's a fairly simple one to break down – Saudi energy demand is increasing at a rate that the economy can't support, with a steady four-to-five-percent increase every year, according to Green Car Reports.

While we can get behind the reasoning and the new standards, what we don't understand is why fuel prices will remain at 45 cents per gallon. As GCR points out, this is not unlike the American model, where prices are intentionally kept lower while higher standards are mandated. But with such a ridiculously low fuel price, it seems odd that there isn't a proposal for at least a small price increase to help curb demand.

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