In the past when gasoline got cheap, U.S. consumers became energy hogs, snapping up Hummers and other big, less efficient cars and trucks.
With gas prices at their lowest in five years, there are signs that could happen again. In November, SUVs logged big sales gains while a fuel-efficient car like the Toyota Prius suffered a downturn.
But there also are signs that gas consumption, though up from last year, might not repeat past surges.
Consider the case of Julie Bartlett of Kansas City. She drives a thirsty V-8 Ford Expedition that tips the scales at two tons.
Next year, she is trading in the SUV at the Thoroughbred Ford dealership.
“Fuel economy is one of our priorities,” said Bartlett, who figures cheaper fuel won’t last forever.
She is getting … another Ford Expedition. It will have a turbocharged six-cylinder motor that will deliver plenty of power.
But it will also offer a bonus: Thanks to tougher federal fuel standards now beginning to bite, the new Expedition will sport more than 10 percent better gas mileage.
Despite lower gas prices, analysts point out, higher fuel standards should help prevent the worst of the fuel-guzzling days of the past — like in the mid-1980s through 1990s, when gas prices fell to $1 a gallon and SUVs such as the Hummer and other vehicles that gulped fuel became best sellers.
Today’s “new vehicles are almost 100 percent certain to have better fuel economy,” said Jim Cain, a spokesman for General Motors.
The tougher federal fuel efficiency standards haven’t gotten the same notice as dropping gasoline prices — or the surge in U.S. oil production, which has helped drive those prices down and made the country more energy independent. Next year, output is expected to reach 9.3 million barrels a day, the highest since the 1980s. Net imports of oil and petroleum products are now at 33 percent of U.S. demand, roughly a third of what they were in 2006.
But the fuel economy standards will help hold down U.S. gasoline consumption, even if buyers swing back to bigger vehicles. As the standards have toughened, and will get even tighter the next few years, automakers have been making even their lowest-mileage vehicles more efficient.
Since 2010, light trucks — like SUVs and pickups — have already earned an overall 5 percent improvement in gas mileage and by 2025 are expected to have boosted their efficiency by about half.
The mandates are eventually expected to eliminate the need for 3 million barrels of oil per day.
Automakers appear to have embraced the standards and in some cases are ahead of schedule in meeting them.
The Ford Expedition, for example, no longer offers a V-8 engine, and the Chevrolet Silverado has an engine that deactivates cylinders when more power isn’t needed. The Ram pickup offers a diesel engine, making it the most efficient full-size pickup available.
Ford made a major investment in its new F-150 pickup by replacing steel with aluminum to make a lighter body. The company insists it has no second thoughts about spending the money, even with cheap gas greeting the rollout.
“If you go back 20 years, the No. 1 unmet need of light-duty pickup owners has been better fuel economy, no matter if there is $1.20-a-gallon gas or it’s $4.40 a gallon,” said Doug Scott, marketing manager for Ford trucks.
Whether Ford’s bet on the F-150 pays off remains to be seen. But one thing for sure is that the dramatic drop in gas prices — they have gone down almost daily for the past six weeks — is rippling through the country.
In the Kansas City area, gas at $2.30 a gallon on the Missouri side and a few cents higher on the Kansas side has given average households an extra $50 a month compared with a year ago.
What was a pipe dream a few months ago, $2 gas, is no longer out of the question, although oil prices need to drop another $10 or so to make it happen.
“Crude oil prices are still under pressure, and it’s entirely possible your gas prices could drop to $2,” said James Williams, an analyst with WTRG Economics.
While the lower gas prices are giving a boost to the overall U.S. economy, some oil states such as Texas, Oklahoma and North Dakota are facing a financial pinch. OPEC countries and other oil nations like Russia are taking an economic hit too. Oil companies are set for a financial slump, and some are already making moves to curb the drilling of new wells in the U.S.
Current gas prices are already boosting fuel consumption by encouraging more driving and unleashing a pent-up demand for travel. AAA said the recent Thanksgiving holiday saw the most trips taken since 2007. And demand for gasoline over the last month, according to the Energy Information Administration, was up more than 3 percent compared with a year ago.
“There are behavioral changes with lower gasoline prices, and people use more of it,” said Williams.
That’s why, analysts said, the tougher fuel economy standards will be key in helping hold down the increased use, even if there is a shift to larger vehicles.
Jay Hakes, former head of the Energy Information Administration, said fuel efficiency is the most economical way to curb oil imports. He is optimistic that the new standards will prove their worth, even with lower gas prices.
“I think they will withstand the situation,” he said. “A big piece (of energy independence) is the contribution of the fuel economy standard.”
The first federal fuel economy standard emerged after the Arab oil embargo in the 1970s. The idea was to have a 50 percent jump in fuel efficiency for cars from model year 1978 to 1985, along with a more modest goal for light trucks.
Automakers met the goals, but mainly with small underpowered vehicles that tainted the idea of fuel economy for decades.
Then, with gas prices declining, the fuel standards were left to stagnate with only some minor tweaks over the next couple of decades. But in 2007, Congress passed legislation that would eventually usher in higher mileage requirements.
The Obama administration further toughened them, with different standards for cars and light trucks to be phased in through 2025. The overall average fuel efficiency for the fleet of small and large light trucks sold in in 2010 was 20 miles per gallon and is expected to reach 31 mpg by 2025. Cars, which averaged 26 mpg in 2010, are supposed to rise to 44 mpg by 2025.
Most cars will continue to be more fuel efficient than SUVs and pickup trucks. But the improvement in standards for light trucks will have a big impact.
Their fuel efficiency is relatively so low that even a small improvement can produce big savings. For example, a truck that goes from 15 to 20 miles per gallon will save 250 gallons over 15,000 miles. A car that goes from 30 to 35 mpg saves only 72 gallons.
“The way the standards are, even if there is another shift toward SUVs, it’s still going to be more beneficial for the country,” said Dave Cooke, vehicle analyst for the Union of Concerned Scientists.
That shift to larger vehicles may already be underway.
In November, large SUV sales were up by double-digit percentages while the Toyota Prius was down more than 10 percent. Subcompacts such as the Honda Fit and Nissan Versa were down 7.5 percent.
The University of Michigan, in a monthly index that calculates the average fuel economy of new cars and light trucks sold in the U.S., shows fuel efficiency has improved 15 percent since 2011. But the effect of more large vehicles being sold now is begining to affect the index, which has been flat for the last three months.
“Consumers are very sensitive to the price of gas,” said Michael Sivak, director of the university’s sustainable transportation department.
Larry Carl, CEO of the Automobile Dealers Association of Greater Kansas City, said attributing an increase in truck sales to lower gas prices was overdone. Full-size pickups were the top three sellers in November, but they have always been good sellers.
“The F-150 has been the best-selling vehicle for 38 years,” he said.
But Scott Adams, president of Adams Toyota, said lower gas prices are having an effect, with fewer sales of smaller, more efficient cars such as the Scion and Prius.
“Lower prices don’t make people buy a vehicle, but it does change what they are buying,” he said.
The federal government has set ambitious goals for cars and light trucks to boost their fleet average for miles per gallon by 2025.
Source: Union of Concerned Scientists