Not Enough Pain from $3 Gas

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GM estimates that meeting that challenge would add a minimum of $5,000 per car in costs, which would have to be passed on to the consumer.

This is a method of increasing fuel economy that automakers don't like because it is not market based. In other words, the car companies have to strain to make SUVs much more fuel efficient rather than public policy pushing consumers to buy smaller, more fuel-efficient vehicles.

When Europe passed huge gasoline taxes, consumers quickly moved to smaller vehicles. In response, General Motors (GM), Ford (F), Toyota (TM) and the rest have been selling smaller, more fuel efficient vehicles there than they sell in the U.S for the past decade.

What's the Incentive?

Higher gas taxes have also been suggested as a way to compel drivers here to move to smaller, more fuel-efficient cars as they have in Europe, but such a move would be politically difficult.

Senator Chris Dodd (D-Conn.), who is running for President, recently said that voters probably won't stand for a "direct tax." Indeed, new taxes are almost as deadly an issue in this election as privatizing Social Security. Polling data tell candidates a gas tax would be the most unpopular kind of tax Congress could pass, even though it's the most sure way of achieving greater fuel economy fast.

If the U.S. adopted taxes that would keep gas above $4 per gallon for the long term, many experts and politicians believe the demand for smaller vehicles would drive the average fuel economy in the U.S. to 35 mpg inside of 10 years, up from 24 mpg today.

The real goal, believe many who are advocating higher fuel economy, should not be to make a Chevy Suburban, which gets about 14 mpg on a good day, achieve 20 mpg. Rather it is to have public policy that gives consumers the incentive to buy a vehicle that gets 35 mpg instead of one that gets only 15. Part of that incentive has to be a guaranteed price floor of $50 per barrel of oil, so that consumers know that cheap gasoline is no longer around the corner.

Many U.S. drivers have already found inspiration to cut fuel consumption. Take Anne Harris of Plainfield, N.J. A retired high school teacher, Harris sold her Jeep Grand Cherokee that got only about 17 mpg and bought a Honda Civic hybrid, which she says can get as much as 50 mpg depending on how she drives.

The $4 Line

"It's the money savings, but it's also the right thing to do," says Harris. She finds herself needing something like a minivan or SUV about six times a year for visits to antique fairs and the like. For that, she rents a vehicle. "I come out way ahead at the end of the year."

That attitude is becoming more common, but not common enough to create widespread change. A sharp leap in demand for high-fuel-efficiency vehicles is around the corner, though. That corner is probably $4 per gallon.

David Kiley is a senior correspondent in BusinessWeek's Detroit bureau.