With the Obama administration yesterday releasing final fuel economy standards which set an average 54.5 mpg for 2025, and with a hurricane in the Gulf, and with Middle East tensions exacting a heavy premium in current oil prices, consider a few longer term trends.
The U.S. is in the midst of an energy boom. When we say we want to reduce U.S. energy consumption, are we referring to that stuff in the ground that has made North Dakota one of the fastest growing states and given it an unemployment rate of 3.0%?
Are gas prices “really” high? With the Federal Reserve contemplating another round of easing, consider one of the impacts from the unprecedented actions following the 2008 financial collapse. Ever since that monetary response an ounce of gold has consistently bought 400 to 500 gallons of gasoline. Prior to that an ounce of gold only bought 200 to 300 gallons of gasoline.
Will the dog eat the dog food? In this instance the poor fella might not have choice. With increased U.S. production and reduced U.S. demand, the natural course for “real” gasoline prices is down. So the regulations will be pushing consumer choice in the opposite direction that economics would. That’s never a pretty thing. But, rest assured, the fuel standards are a regulation worthy of Washington – full of loopholes, exemptions, and goodies for special people and projects (e.g., electric cars).
The end result. New vehicle purchases, which have become increasingly skewed to high-income households, will move further in that direction. Thank goodness for used vehicles!