The Corporate Average Fuel Economy Standards
Image source: https-//one.nhtsa.gov/cafe_pic/CAFE_PIC_fleet_LIVE.html
The CAFE standards were bought into being under the republican Nixon and Ford administrations. At the height of the Arab Oil Embargo there was such interest in imported oil that Nixon commissioned the study “Project Independence” - performed by the FEA (precursor to the DOE) and the federal reserve. It was an economic and technical analysis of how the US might become energy independent and eliminate the risky and expensive problem of high dependence on foreign oil. The report concluded that it was both technically and economically feasible to achieve this independence for the US.
For the last 10 years Oil imports are responsible for approximately half of the US trade deficit.
Oil imports are now around 15% of all our energy consumption - even higher than when Nixon became concerned about its effect on the economy. For the last 10 years Oil imports are responsible for approximately half of the US trade deficit. The USA has consistently run a trade deficit with a large oil component since 1970. Both the high federal debt and deficit are manifestations of these imports.
The current administration's plan to eliminate the CAFE standards without a larger plan for American energy independence will not have desirable effects for America. It will increase energy costs for the average consumer, and because we keep cars for about 15 years it will lock us into higher energy costs for a long time to come. This will disadvantage American car companies against European and Asian counterparts who see the future more clearly.
There is an alternate pathway for America to win big here.
There is an alternate pathway for America to win big here. America could easily achieve the oil independence it aspired to in the 1970’s while lowering deficit and debt, creating jobs, cleaning the air, and lowering cost of transportation to the US consumer. This would look like policies that encouraged massive electrification of the US transportation sector with cars like the Chevy Bolt, and TESLA. This would look like the US taking a stronger and more pro-active approach to autonomous cars, preferably small and electric ones, and integrating them sensibly into mass transit in dense urban areas. This would look like pioneering and deploying domestically produced natural gas as a fuel for trucking - the hardest piece of the transportation sector to electrify. Incidentally, this would probably allow America to be an exporter of oil. America would feel less need to militarily engage in the oil conflicts of the world.
Fewer government regulations, and simpler ones, is probably a good thing. Merely scrapping the CAFE fuel standards without an alternative plan is going to disadvantage America and cost it dearly, whereas this was (and might still be) an opportunity for America to lead the world with greatness.
We can hope that California goes against the federal grain here and implements even stronger incentives for efficient cars and transportation, and that by their example we’ll eventually get to the future.