Will Cheap Gas, Soaring SUV Sales Sink Fuel-Economy Goals?


U.S. emissions regulations are forcing carmakers to make their products more efficient over the next decade.

Corporate Average Fuel Economy (CAFE) standards require carmakers to achieve a fleet average of 54.5 mpg by 2025.

That's equivalent to roughly 40 mpg on the window sticker.

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But while manufacturers seek efficiency gains, it's possible consumers are no longer as interested in increased fuel economy as they once were.

Low gas prices are rekindling consumer interest in SUVs and other less-efficient vehicles, which could weaken carmakers' resolve to push the most efficient cars, says the Financial Times (subscription required).

Gas prices have stayed down for about the past 18 months, removing some of the financial incentive for car buyers to choose fuel-efficient models.

2016 Honda CR-V

2016 Honda CR-V

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SUV sales have increased in that same period, as consumers take advantage of cheap fuel.

The average fuel economy of new vehicles sold in the U.S. was 25 mpg, according to the University of Michigan Transportation Research Institute (UMTRI), which monitors new-car fuel economy.

That's down 3 percent from a peak of 25.8 mpg recorded in August 2014.

ALSO SEE: Average New-Car Fuel Economy Falls As SUV Sales Rise, Gas Stays Cheap

Shifts in new-car average fuel economy related to gas prices have led some analysts to question whether CAFE alone will produce the real-world emissions reductions needed.

The U.S. doesn't tax transportation fuel as heavily as other countries. That makes retail prices somewhat more volatile, as they are tied to underlying commodity prices.

One option could be pricing fuel to more accurately reflect the impact of carbon emissions, said Charles Komanoff, director of the Carbon Tax Center, a non-governmental organization.

2015 BMW i3

2015 BMW i3

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Right now, gas taxes don't even cover the costs of maintaining roads cars drive on.

A spike in SUV sales also doesn't automatically mean carmakers will abandon their long-term efficiency goals.

BMW still expects a global trend toward dense urbanization to place emphasis on more-efficient cars--and to possibly remove many cars from the roads.

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"Personal mobility" could shift towards heavier use of car sharing and public transportation, said Jose Guerrero, North American product manager for BMW i.

Toyota hopes to cut carbon emissions from its vehicles 90 percent by 2050.

Meanwhile, no matter what types of vehicles people are buying, CAFE standards ensure that they will get increasingly efficient.

Whether it's an SUV or a subcompact hatchback, new versions of cars are at least somewhat more efficient than the ones they replace--so some efficiency gains are still being realized.

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