revhappy

http://story.news.yahoo.com/news?tmp.../energy_bill_2

RomanoM

If you really want more fuel efficient cars then you must use the market to your advantage.

Forcing automakers isn't the best or most feasible way, the turn around by CARB on ZEV cars has shown that.

Raise fuel prices. Sorry but in the end it's the only thing that will work. Since then people will accept either smaller or more expensive vehicles (like hybrids) to offset the fuel costs. Otherwise people will just hold on longer to their SUVs and buy them on the used car market. Making things worse not better.

For instance DaimlerChrysler has developed a hybrid Dodge Durango that gets 20% better MPG with better performance. But, it would cost $3000-$4000 more. To high a premium given current gas prices. So, DC won't sell it because no one will buy it.

Fuel cost is the key.

revhappy

Absolutely agree there. However, that being said, the amount of fuel tax to cause elasticity in the demand for fuel in the US is supposed to be quite high. In other words, a tax of that magnitude is not feasable in the current political world. I think a good idea would be to increase that tax by that amount and then reduce another sales tax by the same amount. Thus, there would be no net tax increase and the market would have a sign to work on.

Still, this is too logical proposal to work in the US. Thus, the less ideal CAFE standards are better than nothing. They do provide some incentive or should I say coercion to produce more fuel efficient cars. I think at a minimum the "light truck" standards should be made equal to the car standards, since the overwhelming majority of them are used as passenger vehicles.

RomanoM

True there is no political will given the strong energy industry lobby and public apathy.

However, I think it's an issue that if handled with reason can gain mass acceptance from both the left and right.

From the left is the environmental issues and the right security issues. I believe people will accept higher fuel costs if they understand the overall benefits.

Depending on other nations for oil and gas is like depending on others for oxygen. And even as basically a conservative, I still understand the natural environment is important (despite the stereotype). A lost resource is of no benefit to anyone. I think I'm turning into John McCain.:p That's right, I voted for him.

The idea of tax breaks to the auto industry, aerospace industry, transportation industry and others hurt by a high gas tax makes good sense. Plus a cut of sales taxes and excise taxes (like on airline tickets) would also be a good idea. At least in the beginning while the economy adjusts to the "new normal" and new technology.


Will it happen? Probably not. Because the price of a gallon of gas would need to more than double and we would need to limit or put high tariffs on imported oil.

$4.00 a gallon for premium in their RX-8 anyone?!

wakeech

on your first point, i believe you mean to say that the elasticity for demand of gas is very very low, meaning a large increase in price (through taxation of some kind) will have a small change on consumption, is fairly correct. this doesn't mean people are stupid: if you can raise the fuel costs enough, say to a "normal" level as they are in Europe (or even up here in Canada), along with some additional "double incentive" tax on big, heavy, high consumption vehicles (with maybe a credit on big, heavy, low consumption vehicles ), there will be more than enough incentive to move the market from big bore to hybrid, even at the additional cost (which isn't a big deal for most buyers of Escalades anyways).

the big problem from the industry's POV is marketability: who thinks it's macho and sexy to drive a concientous vehicle?? no one; sports cars, SUVs, big-*** bling bling luxo-sedans... needless excess is sexy, it's marketable, it's a symbol of status: in short, it's something easy to generate demand for by image alone.

the big problem from the oil baron's POV is easy to see: a loss of profit.

the big problem for you and me is that the industry's needs, and the politics within politics (especially in your country) are such that they aren't inline with what is really the most socially beneficial situation; as the economy adjusts through the frictions which would obviously arise from such huge changes, would the hit on GDP be so big that it wouldn't be beneficial?? certainly not in the long run... i just wish politicians could see past the end of their term.

RomanoM

The one thing you must also take into account is the psychology of the market.

If someone for instance fills the tank on their Expolerer and the cost is $90 this will have a strong effect on the buyer. While some will pay $50,000 for an SUV, those same people will be outraged at a $5 candy bar.

The tax would have to be high and the supply limited (which can be done by limitations on importation and restrictions on drilling domestically).

In the end this would be the only market force strong enough to change societal behavior and spur on new technologies in a meaningful way.

And though I understand you point on price versus consumption, this would be true in the short run, but in the long term it will change buying habits. I was kid during the oil embargo of the 70's, but I do know that at least for awhile it gave the more fuel efficient imports a big boost.

But, like wakeech said politicians only look as far as the next election.

In the end, energy is the blood and oxygen of a nation. A logical and sustainable energy policy is needed for national security, the environment and the economy.

And hey, a hybrid rotary engine would solve the low-end torque issue with the RX-8 and even at $30,000 for base 6MT the car would still be well priced.

And a well done hybrid like the Dodge can be quite good. The V6 hybrid has more power and torque than the V8 with a better torque curve and 20% better MPG than the base V6.

Superfan

I would agree to higher fuel costs only if the following condition is met. If you drive a rotary powered vehicle, you're exempt from paying the high fuel price or you get a tax break at the end of the year. :D

Driving an SUV = Lemming
Driving an RX* = Unique

revhappy

Its amazing how worshipers of the free-market (many of whom are economists or cite economic text books like they are scripture) seem to forget about the concept of external costs and the differency between market and economic efficiency. The external costs not borne directly by the manufacturer and the consumer for that matter (i.e. environmental, national security, etc.) are pretty substantial and not recognized very well by the auto/gas markets.

QUOTE]Originally posted by wakeech
the big problem from the industry's POV is marketability: who thinks it's macho and sexy to drive a concientous vehicle?? no one; sports cars, SUVs, big-*** bling bling luxo-sedans... needless excess is sexy, it's marketable, it's a symbol of status: in short, it's something easy to generate demand for by image alone.

Sigh..I wish americans would relaize the benefits of "adding lightness" to their sports cars, but it seems to just fall on deaf ears. Maybe when a ~ 190 HP, 1700 lb. (30 MPG average maybe??) annihlate their heavy. monster engined domestic on the track, maybe they will change their minds. [/QUOTE]

QUOTE]Originally posted by wakeech
the big problem from the oil baron's POV is easy to see: a loss of profit.

the big problem for you and me is that the industry's needs, and the politics within politics (especially in your country) are such that they aren't inline with what is really the most socially beneficial situation; as the economy adjusts through the frictions which would obviously arise from such huge changes, would the hit on GDP be so big that it wouldn't be beneficial?? certainly not in the long run... i just wish politicians could see past the end of their term. [/QUOTE]

Who even knows if there would even be a big hit to GDP? Perhaps, with an increase in the gas sales tax with a corresponding decrease to some other sales tax could prove to be a boon to the economy. Perhaps, technology to spurn better fuel efficiency could yleld some valuable technology that could prove to benefit future economic growth (wild guess here..but technology applied to electric generation plants reducing fuel costs and everyones, including industrial electricity bills). If the oil barons were smart, they'd see future growth potential through new or improved energy sources, but I guess they would just to like to milk their current cash cow.

wakeech

i really don't understand what you're saying here...

well, it's true that on the macro level, one can't say that with proper planning you can negate the impact of changing the way Americans get where they're going in the long run; in the short run, and within the analysed confines of the market and the impacts it has on society itself, altering the consuming habits so drastically at once will certianly have a detrimental effect on GDP, given this train of thought:

so, while we can't really predict the future as a whole, we can take a good guess at a more specific "what if" condition.

yeah, well, i like to hound on petroleum peddlers as much as the next guy as environment-destroying evil doers, only a wrung above Big Tabacco (or however you spell it... two b's or two c' or something), but in reality they do give some heed toward new energy ideas they can try and monopolize...

revhappy

LOL..I'm the one usually confused when reading your posts, not the other way around. What I mean is that if you follow US politics, you will have noticed quite a few republicans have been economists (Dick Armey former Majority Leader and Phil Gramm come to mind immediately) and others continually lecture about economics literally straight from your Macro 101 textbook. However, they never seem to address or aknowledge the concept of external costs (clearly detailed in any Environmental Economics book). What I am saying is that the markets in question here (autos and gasoline) don't truly reflect the true total cost of the product.



QUOTE]Originally posted by wakeech

well, it's true that on the macro level, one can't say that with proper planning you can negate the impact of changing the way Americans get where they're going in the long run; in the short run, and within the analysed confines of the market and the impacts it has on society itself, altering the consuming habits so drastically at once will certianly have a detrimental effect on GDP, given this train of thought:

so, while we can't really predict the future as a whole, we can take a good guess at a more specific "what if" condition. [/QUOTE]

Well, if this was a tax for economic efficiency and not for governmental revenues, there would be no net tax increase (presumably a sales tax on another industry would be decreased), thus an increase in demand could be spurned for those products that yields economic growth perhaps partially or completely offsetting the decrease in GDP from the auto/gas industries in the short-term. With the average american so highly leveraged, I would tend to think the tendency would be to spend as opposed to hiding the cash they would have spent on a hummer under the bed. In the long-run, the coerced market could yield more efficient products (i.e. an engine X amount of torque, HP, etc. yields X% better fuel economy), which could be applicable in many industries and yielding more economic growth.



I hope so, but they do have to weigh the cost of that (i.e. R&D costs to yield a future benefit - different scenarios would have to be probability rated and the net benefit would have to be discounted by a pretty high cost of capital)with a very profitable current business. When you factor that these are pretty conservative business cultures, it might take quite some time to do that without some incentive or coercion from the government. BP seems to be more adventerous and willing to take a risk than others, so perhaps we can see something from them.

zoom44

check the rx-8 book. they have(are still?) tested hybrid, hydrogen burning and hydrogen burning hybrid rotaries already in the last 10 years:D