Wednesday, September 16, 2009

New mileage standards

Today's green headlines talk a lot about new aggressive mileage standards for vehicles in the US, and California.

We have had mileage standards for many years yet we are far behind the rest of the world on this front. In addition:

Our car makers are on life support.

We import a huge amount of oil.

The city of Dallas regularly exceeds its air pollution standards.

The question is...are all those things caused by the vagaries of the market or is it in fact the problem with government rule making? Is the government able to implement and manage complex market changing regulation when large scale business is involved?

The answer is no.

Our car makers are a huge industry with a lot of political clout. They are union labor which has huge political clout. The foreign car makers doing business in our markets have clout. The oil companies who depend on the car business have huge clout. All the tertiary businesses connected to cars represent a large amount of voters.

With all of that monetary and voter pressure to "do whats right " for the auto industry, what politician could do anything different than be highly sensitive to their wishes?

We now have a 650 page initial document on new vehicle mileage standards and it will surely grow as it goes through the public comment stage. Why 650 pages? Its all the "considerations" of the industry as described.

We all know that the SUV craze was caused by the government exempting this group from the lower car mileage standards. The regulation caused Detroit to focus on big cars and trucks and make more money with them because they had little foreign competition. They became dependent on that revenue stream that dried up with the $4.00 gas price. This crippled the US Auto industry.

So looking back now, what should we have done? In my view it's simple. Let the market work.

When we had an energy crisis in the Carter era we should have responded with real change...many countries did. But instead we worked really hard to get OPEC in line and get things back to "normal". We sold our independence and stability for cheap foreign oil. Why, because we could. We were huge customers that could bomb them off the map. We have been meddling in Middle East affairs ever since.

So we have artificially supported cheap oil. We spend a huge amount of money (and lives) making sure we get our cheap oil. This is a government distortion of the market...they enact the diplomacy and the wars.

Oil comes from risky places, is an environmental mess, is price volatile, pollution generating and politically and religiously charged. But does $2.00 a gallon gas reflect that? Of course not, it's an artificially low price matched only by the big oil producing countries themselves.

So a $5.00 a gallon price might be more accurate and you could throw away that 650 page document. American consumers have already shown they will eschew big cars and trucks at $4.00 a gallon and so has the rest of the world.

A pollution fee for the air we foul and a military fee on gasoline would do the trick, and be a lot less pages. Or we could just make an amendment to the constitution that we would never use military might to secure goods and services outside our borders.

Bottom Line - Cheap oil is bad because it's artificially cheap. To enact laws and complex regulations to artificially make us all use less of an artificially cheap product is silly. To spend more money bailing out Detroit because of our own artificial market distortions is sillier yet.

There is some new sabre rattling about reducing the huge incentives and supports for the oil industry. Can you imagine? We artificially support our oil companies? Just like our farmers and our auto industry? Does any of this artificial support work in the long run?

We have to artificially support renewable energy so it can compete with the artificially supported oil and coal industries?

I get the feeling that good lobbyists are way more valuable than a good product aimed at a healthy market.


  1. Good luck changing any thing BigCorp wants. I think we're seeing how BigInsurance and BigPharma deals with that with the CongressCritters it owns.

    But I do agree that expensive gasoline would work. I am not sure how you temporarily, at least, decouple it from heating oil so people in the cold states don't freeze over winter. And there should be some transient fix for low income people who have no way to get to work except driving.

  2. The proposals I have seen do it at the pump and include tax rebates for the poor to offset the price hike.

    As an aside, I would think, at today's Natural gas prices, that replacing home heating oil furnaces would be easy to cost justify if you have a gas connection.

    It's no wonder our administration has shifted to healthcare, their lobbyists and contributors want change. The oil, coal and electric people don't.

  3. What? :-) Not to wander too far off topic, but most people I know in my den of flaming liberals want a public option (side by side with private insurance is fine), as the only way to really have patient-oriented healthcare vs. profit making/CEO mega-salary, recision, etc.

    (I've been on Medicare+Medigap for almost two years now, and it is so much better than fighting with United Healthcare, although I know the problem of Medicare reimbursements to doctors and hospitals being too low has to be fixed. So I don't keel over at the idea of a government run program. And I think the humongous savings from letting Medicare negotiate prescription prices like private companies can and cleaning up MedicareAdvantage will go a long way towards helping money be available for a public option.)

    My impression is that BigInsurance and BigPharma and all the Congresspeople they own are fighting tooth and nail against that.

    I don't know of any lobbying for good changes in healthcare, just for the part that would make insurance mandatory but require that it be bought from private companies. Rolls eyes, gnashes teeth at the thought of all the new people they'll be able to rip off.

  4. I know very little about the healthcare debate (and it's about to show). I think most practitioners think the system need a lot of work. But I agree the big corps are less inclined to change.

    I have always felt that real competition would do the trick. If a doctor mis-diagnosis get your money back. Discounts for first time patients. Keep our own electronic records so moving to another doc isn't so hard. Unisured patients should get discounts and payment terms. Returns on medications that don't work or have bad side effects. Further discounts if your doc is late to another appointment. (Wave the copay if you have to wait for more than a half hour?)

    The more we let the medical profession get paid no matter what...the worse our care and costs will be.

    Artificially lowering the price paid for services for everyone still rewards bad doctors and discourages good doctors.

  5. Is everything okay? It's been kind of quiet on your blog, that's why I ask.

  6. Hi KA,

    I havent been blogging much for a number of reasons...

    Probably mostly it's because all my projects havent been germain to the blog. The ones that are are all in in their infancy.

    There's a new green lawn mowing service that I want to try (all electric), my roof goes on next week...lotsa green features. I bought the new Energy Detective but haven't installed it yet. I have been asked to represent one of our Dallas council people in a Commission on Environmental Health. That's going to be very interesting.

    So, all is well but just not interesting....yet.

    Thanks for asking, hope all is well with you...

  7. KA - you might like this article, forwarded from a friend on health care...