The Obama administration’s fuel economy rules could backfire in a world dominated by cheap oil and gasoline, according to the Energy Department’s independent analysis wing.
The problem arises from a dramatic change in consumer behavior, an analysis by the Energy Information Administration said Tuesday. With low gasoline prices, driven by cheap prices for crude oil, the automakers are selling record numbers of pickup trucks, sport utility vehicles, vans and other larger passenger vehicles.
That means the fuel economy of vehicles being driven will become lower and more gasoline consumed.
If the trend persists, which many analysts say it will, it would move President Obama’s light-duty vehicle regulations in the opposite direction of their intended goal, according to the analysis.
“Even though fuel efficiency for light-duty trucks and passenger cars has increased because of fuel economy regulations, light-duty trucks have lower fuel efficiency on average than passenger cars,” the Energy Information Administration analysis says. “Over a longer period, the differences in fuel economy can increase gasoline consumption as trucks make up a higher percentage of the nation’s [light-duty vehicle] fleet.”
The Environmental Protection Agency developed the rules at the direction of President Obama to improve fuel efficiency and reduce the use of fossil fuels by 1.8 billion barrels of oil, while driving down greenhouse gas emissions from cars and trucks. Many scientists say the emissions are causing the Earth’s climate to warm, resulting in more droughts, wildfires and other calamities.
“The rules will simultaneously reduce greenhouse gas emissions, improve energy security, increase fuel savings and provide clarity and predictability for manufacturers,” the EPA says. Brian Deese told reporters Monday that the rules are a key part of the U.S. reducing its emissions to meet the goals of a global climate change agreement world leaders hope to sign in Paris in December.
The EPA program is in a critical year in which the average fuel economy for 2016 model-year vehicles must meet a goal of 35.5 miles per gallon. The second phase of the program kicks in for model-year 2017-2025 vehicles, with a goal of 54.5 miles per gallon. That target could be in jeopardy if consumers continue to buy vehicles with lower fuel economy.
The Energy Information Administration reported that since the beginning of the year purchases of trucks and SUVs and other “gas guzzlers” have reached levels not seen for more than a decade.
A review of data from the Commerce Department shows that sales of “pickup trucks, sport utility vehicles, and vans … outpaced those of passenger cars by a seasonally adjusted 28 percent, the highest difference on record,” according to the Energy Information Administration.
“Light-duty truck sales, on an absolute basis, have been increasing steadily since 2009 and, from January to August 2015, averaged a record 9.57 million at a seasonally adjusted annual rate,” the agency said.
Lower gasoline prices are being driven by a global oil glut that has many analysts predicting the price could fall as low as $20 per barrel, which haven’t been seen since the late 1990s. Although the price of oil ebbs and flows with ongoing changes in demand from Asia, the agency suggests the price will remain low for years to come.
The U.S. has become a leading producer of oil produced from shale, which has led to a drop in oil imports while driving up the amount of supply available on the global market. But the drop in oil prices is making it less economic for shale producers to stay in business.
The Organization of the Petroleum Exporting Countries said in a report Monday that the low prices will continue to take a toll on shale producers. “In North America, there are signs that U.S. production has started to respond to reduced investment and activity,” it reads. “Indeed, all eyes are on how quickly U.S. production falls.”
The International Energy Association said last week that “the Saudi-led OPEC strategy to defend market share regardless of price appears to be having the intended effect of driving out costly, ‘inefficient’ production.” It says the U.S. is bearing the brunt of the strategy, but didn’t predict if the U.S. would be able to recover.
Shale exporters had said that drilling could remain economically viable at between $50-60 per barrel. The price per barrel on Tuesday closed at about $44.
