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July 6th, 2011

Apparently, all of my blog posts since February of this year have involved me complaining about someone else for getting it wrong.  From the media’s promulgation of inaccurate information, to Saab’s inability to correctly mount tires, it seems all I’ve done recently is look for ways to point fingers and criticize.  And that’s just not healthy.  In the midst of it, ThatCarBlog‘s second anniversary came and went (my Inaugural post was June 26, 2009) without so much as a self-congratulatory pat-on-the-back.

So as I begin my third year of randomly typing words about cars whenever I get a few spare moments, I’m going to be more positive.  And that means looking for opportunities to point out when other folks get it right.

Roland Hwang got it right.  In his June 29 post on the National Resources Defense Council Staff Blog, Mr. Hwang describes the auto industry push-back as a result of the Obama administration’s suggestion that the CAFE regulations for light-duty passenger cars and trucks in 2025 should be 56.2 mpg (which is eerily similar to the push-back at every past attempt by the feds to regulate the auto industry, whether it be seat-belts, air-bags, catalytic converters, or the removal of lead from our gasoline).  There’s really nothing I can add here – Roland beat me to it.  Click the link and read it for yourself!  (The irony isn’t lost on me that, in my attempt to commend another for a job-well-done, it is to some degree Mr. Hwang’s criticism of the auto-industry that I am commending…)

But why do we use miles-per-gallon (mpg) as the metric to measure fuel efficiency?  It’s the amount of fuel we use that is of primary concern – not how many miles we drive. Since the dependent variable (gallons) is in the denominator of the mpg metric, we get a skewed sense of actual fuel efficiency.  As cars get more fuel efficient, people overestimate the benefit of additional mpg improvements. [Richard Larrick and Jack Soll, of Duke University’s Fuqua School of Business, wrote about this “MPG Illusion” a couple of years ago, and it’s worth a read.  For example, most people tend to think that improving a vehicle from 34 mpg to 50 mpg (a 16 mpg improvement) would result in greater fuel savings than an improvement from 18 mpg to 28 mpg (a difference of 10 mpg).  In actuality, it is the latter case that provides more benefit – more than double the fuel savings of the 16 mpg improvement in the already-efficient 34 mpg vehicle.]

The reason for this can be seen in the graph below.  The big-red-line illustrates how mpg (on the x-axis) relates to fuel-consumption (in gallons per 100 miles, on the y-axis).  On the left (steep) side of the curve, small mpg gains result in large reductions in fuel consumption.  However, as cars become more efficient (and we move to the right side of the curve), it takes quite a large mpg improvement to result in any significant fuel reduction benefits.


So, what does this mean in the context of CAFE regulations?  When NHTSA implemented the first regulations (of 18 mpg) for model year 1978, it meant passenger cars would use about 5.5 gallons of gasoline to go 100 miles.  Seven years later, the CAFE regs were 27.5 mpg – a nearly 10 mpg improvement, resulting in a fuel consumption benefit of nearly 2 gallons per 100 miles.  The regulations stagnated here (and actually went down slightly) until 2011, when they started rising further, to 39 mpg for 2016.  This 14.2 mpg improvement over the 1985 regulation saves just under 1.5 gallons of gasoline per 100 miles.  (Notice that?  The 14.2 mpg improvement between 1985 and 2016 actually saved less fuel than the 10 mpg improvement between 1978 and 1985.)

For 2025, the administration is proposing a 56.2 mpg standard.  (This is the combined target, for both passenger cars and light trucks, unlike the previous numbers that I cited, which are just for passenger cars.  Sorry for the inconsistency.)  While this may seem like an insurmountable increase – cars must improve by 17.2 mpg in just 9 years! – it represents only a 0.8 gallon reduction in fuel consumption per 100 miles of driving.  Relative to the other CAFE regulations, that doesn’t seem so bad.

CAFE is a complicated – and dry – subject.  Which means “Part 2” of my dissertation on it will have to wait until later.  Stay tuned!

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