Energy Bill Has Only Half a Tank

The goals are commendable, but if Washington is serious about fuel economy, it needs to better educate Americans about alternative energy

By David Kiley

The Energy Independence & Security Act, passed by the U.S. Senate last week and expected to be signed by the White House as early as this week, is a step in the right direction to reduce America's addiction to fossil fuels. But those who are suspicious of a bill green-lighted by both houses of Congress, the auto and oil industries, and an oil-patch White House are probably right to withhold applause.

The main focus of the bill is to raise the fuel-economy standards for the auto industry to 35 mpg by 2020, 10 mpg beyond where it is now. The measure is estimated to save the U.S. about 1.1 million barrels of oil per day by the time the standard is reached—13 years from now. Some experts estimate that depending on how expensive oil becomes, U.S. consumers could save $22 billion a year with 200 million fewer tons of greenhouse gas emissions.

The increase in fuel economy is no small mission. Consider that today, Ford (F) and Chrysler do not make a single vehicle for the U.S. that tops 35 mpg. But two things to keep in perspective about this new fuel-economy standard: The European vehicle fleet today already achieves more than 40 mpg. Remember the words of former Defense Secretary Donald Rumsfeld when France and Germany would not assist in the Iraq War? He called those countries "Old Europe." Which part of the world looks old now?

Vehicular Trade-offs

To achieve the higher fuel economy, General Motors (GM), Ford, and Chrysler will have to sell more fuel-efficient cars than they have been selling, to offset the trucks and SUVs they will continue to sell. But here is the wild card: Americans continue to prefer larger vehicles to small ones. True, an increasing number of people are trading away from gas-thirsty, truck-based SUVs such as the Ford Explorer and Chevy TrailBlazer, to car-based SUVs. But this is not a huge sacrifice by consumers.

If an Explorer owner, for example, switches to a Ford Edge crossover, he or she has gone from a vehicle that gets 13 mpg city/18 highway to one that gets 16 city/22 highway. That's about a 22% increase in fuel-economy performance—but pardon me if the actual numbers don't feel like a moon shot. That kind of trade-off won't get automakers to 35 mpg.

But consider the transformation of the fleet when you consider a switch to clean diesel and full hybrids. A Dodge minivan gets about 18-19 mpg in combined city/highway fuel economy. General Motors sells a smaller minivan in Europe, the Zafira, whose fuel economy with a gas engine is about 27 mpg. The diesel version, though, gets 41 mpg. While most Americans still get anxious about the idea of diesel, I just don't hear many Europeans complaining about the diesel engine or the smaller vehicle, which has three rows of seats.

Toyota's (TM) Prius, a legitimate alternative to a Toyota Camry or Ford Fusion, gets nearly 50 mpg depending on real-world driving use. And truthfully, a lot of Edge owners would get along fine with a Prius as well, or even a Ford Escape Hybrid, which gets around 30 mpg.

Incentives and Diesel Education

What's missing from this energy bill are sufficient carrots and sticks for automakers, oil companies, and consumers to make this transition happen. "I honestly don't know how we are supposed to reach the 35-mpg standard," says GM Vice-Chairman Robert Lutz. "I'm not sure anyone knows."