Yes, I know that CAFE standards (Corporate Average Fuel Economy) aren’t the sexiest thing to hit the news in an election season such as this, but it’s an important topic which has very real (and generally negative) consequences for most Americans. It didn’t draw a lot of headlines, but at the end of August the Obama administration issued new CAFE standards which will require all American automobile manufacturers to achieve an average fleet gas mileage of 54 miles per gallon by 2025. That sounds great if you’re looking to save money on travel costs, but the mandate comes with a number of caveats, all of which result in driving up the cost of all cars (not just hybrids) and they don’t change fuel consumption all that much.
This can be a dry topic at best so it’s hard to get the public engaged, but that’s because the very human element of the story rarely gets told. The American Energy Alliance has produced a video which highlights that aspect of the subject. They depict the tale of Nelcy Grande, an immigrant from Columbia (a legal immigrant, by the way) who struggled to afford a car but was finally able to get one and used it to build her own cleaning business and find success in America. Each time the government drives up the cost of cars through these spiraling regulatory demands, more people like Nelcy are shoved out of the market.
Today the American Energy Alliance released a new video highlighting the consequences of the Obama administration’s Corporate Average Fuel Economy (CAFE) standards. This mandate requires that America’s fleet of new cars and trucks get on average 54 miles per gallon by 2025—if EPA’s assumptions are correct.
AEA’s video, which also features an interview with Congressman Mike Kelly, tells the story of Nelcy Grande, whose ability to buy a car allowed her to start and grow her own cleaning business and send her daughters to college. Nelcy was able to achieve her dream, but the CAFE standards could prevent millions of people from purchasing a vehicle and achieving theirs.
I hope you take a moment to watch this video. (It’s only a few minutes long.) It really drives home the difference which these government mandates can make and how they negatively impact working class Americans.
The main takeaway from this is that the CAFE standards have already driven up the average cost of a new vehicle by $6,000 and that trickles down to jack up the cost of used cars as well. The main problem is that the mandated mileage standards are not achievable for all cars – particularly the larger ones which people really want – under current technology. But the standard applies to a fleet average, not each vehicle, so the major auto manufacturers are forced to produce more hybrids and economy cars (many of which they can’t even sell) to balance out the trucks and SUVs that people are largely buying. That cost has to be worked out of the equation somewhere, so the cost of all the vehicles goes up.
And when cars cost more, that drives marginal consumers out of the market. As Nelcy Grande describes in her own story, she never could have started her business if she was still taking the bus and the subway as she had been doing since she arrived. It was only through being able to purchase her own vehicle that she made her start. And every time Uncle Sam drives up the cost of all vehicles, another person like Ms. Grande is driven out of the market.