Under a plan announced last week, President Obama plans to cut fuel usage in vehicles. The plan sets a national fuel-efficiency standard starting in model year 2012. That number would eventually reach 35.5 miles per gallon in model year 2016. The standard today is about 25 mpg. But how will the nation respond to the new rules? 1. People may start driving more. We see it every time gas prices go down -- people hit the roads because it's cheaper to drive than to fly. Because cars will get better mileage, the cost of driving will decrease. A 2007 analysis by University of California-Irvine researchers estimated that U.S. fuel efficiency improvements from 2000-2004 led Americans to drive 6% more miles. 2. People may hang on to their old jallopies longer. The new plan estimates that new cars and trucks will cost an average of $1,300 more. Older cars are more likely to cause emissions, defeating part of the purpose of the new fuel plan. 3. Car companies the Obama administration is trying to save may have a hard time adapting to the new rules. GM and Chrysler in particular have businesses focused on relatively fuel-hungry vehicles, and they need to sell off those models before the new rules come into play. Long-term, the new fuel rules could bring about greater fuel-efficiency in the U.S., but the road to adaption will be a long one.
Recommended Reading
Coterra Eyes Wolfcamp D, Penn Shale Upside with $3.95B Permian M&A
2024-11-15 - With $3.95 billion in Permian M&A, Coterra is adding new Delaware Basin locations in the Bone Spring, Harkey and Avalon benches—and eyeing upside from deeper zones.
As Permian Targets Grow Scarce, 3Q M&A Drops to $12B—Enverus
2024-10-16 - Upstream M&A activity fell sharply in the third quarter as public consolidation slowed and Permian Basin targets dwindled, according to Enverus Intelligence Research.
Diamondback Swaps Delaware Assets, Pays $238MM For TRP’s Midland Assets
2024-11-04 - After closing a $26 billion acquisition of Endeavor Energy Resources, Diamondback Energy is getting deeper in the Midland Basin through an asset swap with TRP Energy.
Marketed: Providence Energy Partners III LP Permian Non-op Opportunity
2024-10-16 - Providence Energy Partners III LP retained RedOaks Energy Advisors for the sale of certain non-operated working interest properties located in the Permian Basin.
Tailwater Buys Interests Across 5,000 Acres in Permian Core
2024-10-02 - Tailwater E&P's purchase of non-op working interests from Accelerate Resources includes future inventory held by Diamondback, EOG Resources, Devon and several other E&Ps.