Formulated in the 1970s as a response to the OPEC oil embargo, fuel economy standards have served the country well. Last week, the Environmental Protection Agency kick-started its 45-day comment period for its ongoing review of the standards and that included the review of the previously finalized 2021 standards.
The current rules under review set a goal of overall efficiency improvements of 3.6 percent per year through 2025. Yet as the U.S. remains exposed to price volatility and our military is burdened by the need to patrol oil supply lines and stabilize oil exporting countries, the nation’s interest could be much better served by modernizing, strengthening and extending these rules through 2035, even if that requires some flexibility from 2022 to 2025.
As the world’s largest consumer of this critical commodity with a transportation system that is 92 percent powered by oil, the United States is particularly vulnerable to the economic stress of price spikes and volatility. A technical review of existing fuel economy standards is underway, creating an opportunity for regulators in the federal government and California to cooperate and serve America’s national interests while ensuring the auto industry remains vibrant into the future.
In 2007, Congress and the Bush administration passed the Energy Independence and Security Act, landmark legislation that increased fuel efficiency rules for the first time since the 1970s, boosting their target to 35 miles per gallon by 2020. In 2012, these standards increased to 54.5 mpg by 2025. These rules are laudable, with the ever-changing oil market and transportation technology we need to be more nimble to maximize their real achievement.
The Trump administration chose to go back to the original schedule to assess the rules and has reopened rules from 2021 through 2025, that decision has created a tremendous opportunity.
Now is a moment to employ the creativity of the possible. As the reality of ride-sharing services and the promise of self-driving vehicles transform how we get around, future fuel economy standards can significantly reduce our oil consumption while still supporting a thriving automotive industry. Automakers are investing their finite resources where there are incentives to do so.
New fuel economy regulations should incentivize car makers to invest in efficiency—in part through self-driving technology and ride sharing. As the industry goes through one of the greatest transformations in its history, regulators should work with car makers to maximize the oil-reduction benefits of that transformation. Doing so will offer the industry longer-term regulatory clarity, and allow for much greater reductions in fuel use over time.
To reach a workable agreement, we suggest the following principles.
First, we should continue the commitment to a unified national program on fuel economy avoiding conflicts at the state and federal levels.
Second, if necessary, the government should offer the industry some relief that is commensurate with that need between 2022 and 2025.
Third, to the extent possible, the standards should strive to account for new technology, such as autonomous vehicles, and the new ridesharing business models used by companies such as Uber and Lyft.
Fourth, given the rapid pace of change and the long-term fuel efficiency target, the new framework should incorporate five-year reviews to assess progress and ensure that regulations still reflect economic and behavioral realities.
By following these steps our country’s national and economic security will benefit. Automakers will have the flexibility and regulatory certainty they need to thrive, rather than navigating political uncertainty and either incremental rulemaking or bans on certain types of cars.
And more importantly, our national interests will be served by breaking our dependence on the unfree and anticompetitive oil market.
Robbie Diamond is president and CEO of Securing America’s Future Energy.
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