Friday, June 06, 2008

The Power of $4 Gas: It's A World Transformed

At $3 a gallon, Americans just grin and bear it, suck it up, and, while complaining profusely, keep driving like crazy. At $4, it is a world transformed. Americans become rational creatures. Mass transit ridership is at a 50-year high. Driving is down 4%. (Any U.S. decline is something close to a miracle.) Hybrids and compacts are flying off the lots. SUV sales are in free fall.

The wholesale flight from gas guzzlers is stunning in its swiftness, but utterly predictable. Everything has a price point. Remember that "love affair" with SUVs? Love, it seems, has its price too.

America's sudden change in car-buying habits makes suitable mockery of that absurd debate Congress put on last December on fuel efficiency standards. At stake was precisely what miles-per-gallon average would every car company's fleet have to meet by precisely what date.

It was one out-of-a-hat number (35 mpg) compounded by another (by 2020). It involved, as always, dozens of regulations, loopholes and throws at a dartboard. And we already knew from past history what the fleet average number does. When oil is cheap and everybody wants a gas guzzler, fuel efficiency standards force manufacturers to make cars that nobody wants to buy. When gas prices go through the roof, this agent of inefficiency becomes an utter redundancy.

At $4 a gallon, the fleet composition is changing spontaneously and overnight, not over the 13 years mandated by Congress. (Even Stalin had the modesty to restrict himself to five-year plans.) Just Tuesday, GM announced that it would shutter four SUV and truck plants, add a third shift to its compact and midsize sedan plants in Ohio and Michigan, and green light for 2010 the Chevy Volt, an electric hybrid.

Some things, like renal physiology, are difficult. Some things, like Arab-Israeli peace, are impossible. And some things are preternaturally simple. You want more fuel-efficient cars? Don't regulate. Don't mandate. Don't scold. Don't appeal to the better angels of our nature. Do one thing: Hike the cost of gas until you find the price point.

Charles Krauthammer

6 Comments:

At 6/06/2008 9:01 AM, Anonymous E. Harokopos said...

"You want more fuel-efficient cars? Don't regulate. Don't mandate. Don't scold. Don't appeal to the better angels of our nature. Do one thing: Hike the cost of gas until you find the price point."

I other words, if the shoe does not fit, cut the foot.

Of course it works, it's one way of doing things.

The author should keep in mind though that Arabs and Big Oil Men will continue driving the expensive and luxury sports cars.

 
At 6/06/2008 10:39 AM, Blogger Walt G. said...

Isn’t a mandated floor on the price of gasoline just another price control by the government? Either you have a free market or you don’t. Just let the market work; it will sort itself out.

 
At 6/06/2008 10:55 AM, Anonymous Anonymous said...

Sounds like he is suggesting a tax that would guarantee the price always stay above $4 per gallon?

 
At 6/06/2008 11:03 AM, Anonymous Anonymous said...

"In other words, if the shoe does not fit, cut the foot"

Perhaps, you could explain why the onerous fuel efficiency legislation is any different. Isn't it also a case of cutting off the foot of American car companies faced with dire financial problems and declining sales. How does it actually create customer acceptance?

People like large cars for several reasons: added crash protection, extra space to accommodate tall or overweight passengers, additional cargo space, smoother ride and extra comfort for long trips. For years, small cars have made up a small proportion of total sales for Ford & GM. Customer preferences in the last 10 years have been for mini vans & SUVs. Comfort and safety have been more important to the customer than fuel efficiency or emissions. Rising gas prices started moving these customers to the more compact cross-overs vehicles and smaller fuel efficient cars. Hummer sales were down 60% last month.

This is exactly what happened during the last oil crisis. It isn't concern for the planet but concern for the pocket book that has changed the customer's attitude toward the Cooper Mini. When the car of Mr. Bean is suddenly cool, a paradym shift has occurred.

With regard to what kind of car is driven by Arabs & Big Oil Men. Isn't it more important what is being driven in the largest car market in the world? When one considers the relevant size of the 2 groups, which is more material?

 
At 6/07/2008 5:38 AM, Blogger OBloodyHell said...

As Carl over at No Oil For Pacifists noted, Krauthammer points out how perfectly the market is working to do exactly what is desirable and wanted... then turns around and advocates government coercion???!?

There's a well-known term for this:

WTF???

 
At 6/07/2008 5:42 AM, Blogger OBloodyHell said...

> extra space to accommodate tall or overweight passengers,

Why, then, is it so cliche for the biggest, ahhhh, "roundest" people to have Yugos and their automotive offspring?

Never quite got that one.

Krauthammer's gone wonky on this one for some wierd reason. The market is doing exactly what it should do. And it's doing it faster than the government "mandates" would have it happening.

So it's clearly obvious, though it will never happen -- the gummint and the politicos should just STFU and stay out of the way. Go find some homeless people to yammer about.

 

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