Detroit's Delimma: Low Pump Prices Increase Demand for Bigger Cars
THE debate over energy policy between Congress, the White House, auto manufacturers, and conservationists is growing louder. But there is one equation that all sides agree upon: Cheap gas = big cars.Skip to next paragraph
Subscribe Today to the Monitor
Despite burning wells in Kuwait and chaos in Iraq, gasoline prices have tumbled to one of the lowest levels in 20 years. In the United States, consumers respond by buying bigger, heavier cars like Lincolns, Mercedes, and Cadillacs.
This penchant for power and size has Detroit in a Catch-22 predicament.
If Detroit fulfills consumer demands for larger cars, it may violate federal standards, the so-called CAFE rules, that require every automakers' products to average 27.5 miles per gallon. But if Detroit focuses on smaller cars, profits could vanish.
The situation may get worse. Congress may impose sharply higher mileage requirements by the year 1996, and even higher standards for 2001. Meanwhile, gasoline prices show no signs of moving up.
That has some Detroit automakers calling for a stiff gasoline tax to push prices up and to improve sales for energy-efficient autos.
``CAFE improvements are difficult to achieve when gasoline is cheap,'' says Ronald Boltz, vice president of Chrysler Corporation. ``We believe a gasoline tax or carbon-fee policy should accompany any revisions to CAFE standards.''
Meanwhile, Public Citizen, an advocacy group, charges that in the 1991 model year, 103 of 440 car models became less fuel-efficient, while 109 gained in fuel efficiency.
Overall, the average mileage of new cars sold in the US peaked in 1988, and has dropped ever since as people bought more high-performance and luxury cars.
At one time, imported cars held an 8 m.p.g. advantage over US makes. But that is dropping. In 1990, domestic cars averaged 26.9 m.p.g., while imports averaged 29.9 m.p.g.
When the final figures are compiled for 1991 model cars, the averages are expected to be no better than those in 1986, Public Citizen estimates.