Corporate Average Fuel Economy

CAFE, RFS Endanger Convenience Stores, Study Cautions

by Marlo Lewis on April 25, 2012

in Features

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Today, the National Association of Convenience Stores (NACS) published a study on the challenges facing the more than 120,000 U.S. convenience stores that sell motor fuel in a market increasingly shaped by the competing requirements of two federal programs: renewable fuel standard (RFS, a.k.a. the ethanol mandate) and corporate average fuel economy (CAFE).

I may have more to say about the study in a later post, but the skinny is that RFS and CAFE may whipsaw the retail fuel outlets upon which most of us depend to fill our tanks. CAFE will decrease the amount of fuel purchased and the frequency of consumer transactions at convenience stores, while the RFS will force convenience stores to make costly investments in storage tanks and blender pumps to sell increasing amounts and percentages of high-ethanol blends.

The excerpts below from NACS’s press release paint a disturbing picture on an industry caught in the regulatory cross hairs:

“RFS and CAFE policies cannot coexist without substantial changes in the retail and vehicle markets to accommodate significantly higher concentrations of renewable fuels, an unlikely scenario given that we may not even meet current requirements as they stand in 2012,” said John Eichberger, NACS vice president of government relations and the author of the new NACS whitepaper, The Future of Fuels: An Analysis of Future Energy Trends and Potential Retail Market Opportunities.

The Renewable Fuels Standard, revised by Congress as part of the Energy Independence and Security Act of 2007 (EISA), requires that increasing amounts of qualified renewable fuels be integrated into the motor fuels supply, culminating at a minimum of 36 billion gallons in 2022. This mandate was expected to increase renewables to approximately 20% to 25% of the overall gasoline market in 2022, about double the rate of 10.4% last year.

Meanwhile, in 2011 the Obama administration proposed new CAFE standards, which are expected to be finalized this summer, that seek to increase the average fleet fuel efficiency to an equivalent of 54.5 miles per gallon by 2025. The cumulative effect of the two mandates is that renewable fuels will be required to represent a significantly greater share of the market than originally anticipated — perhaps as much as 40%, or four times higher than today.

“This level of renewable fuels penetration in the market will impose significant economic burdens on the retail fuels market and consumers,” said Eichberger. “To meet such a high renewable fuels concentration, it is likely that most retailers in the country will have to replace their underground storage tank systems and fuel dispensers. For the convenience industry alone, this will require a minimum infrastructure investment that will add nearly $22 billion to the cost of retailing fuels.” [And where will they get the scratch, I wonder, with CAFE depressing motor fuel demand and sales?]

Even after this enormous infrastructure investment, it still may be impossible to satisfy the RFS, considering that only one in six consumers will drive vehicles capable of running on the mandated fuels. The U.S. Energy Information Administration (EIA) projects only 16% of on-road vehicles in 2022 will be flexible fuel vehicles.

“Unless something dramatic happens, we will hit the ‘blend wall’ within the next two years and will not be able to meet RFS requirements. This will trigger massive fines throughout the petroleum distribution system that will increase the cost to sell motor fuels,” said Eichberger.

An industry expert explains the problem to me as follows: [click to continue…]

EPA Greenhouse Gas/NHTSA Fuel Economy Standards: ‘Harmonized and Consistent’?

by Marlo Lewis on June 24, 2011

in Blog, Features

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This post updates my June 14 post on the mantra intoned by EPA, the California Air Resources Board (CARB), and the National Highway Traffic Safety Administration (NHTSA) that EPA/CARB’s greenhouse gas (GHG) motor vehicle emission standards are “harmonized and consistent” with NHTSA’s fuel economy standards.

EPA Associate Administrator David McIntosh recently sent written responses to questions from House Energy and Commerce Committee members following up on a May 5, 2011 hearing entitled “The American Energy Initiative.”

In a nutshell, EPA defines “harmonized and consistent” as “whatever we say it is.” [click to continue…]

California Air Board Boasts Its GHG Standards Save More Fuel than DOT’s Fuel Economy Standards — But Denies GHG Standards Are Fuel Economy Standards. Huh?

by Marlo Lewis on June 14, 2011

in Blog, Features

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The California Air Resources Board (CARB) boasts that its greenhouse gas (GHG) emission standards save more fuel than the National Highway Traffic Safety Administration’s (NHTSA) Corporate Average Fuel Economy (CAFE) standards – but denies that GHG standards are fuel economy standards. Huh?

Well, of course, CARB denies it, because the Energy Policy Conservation Act (EPCA) prohibits states from adopting laws or regulations “related to” fuel economy.

But CARB has to trumpet the fuel savings from its GHG standards to attack H.R. 910, the Energy Tax Prevention Act. H.R. 910, says CARB, would make America more dependent on foreign oil by prohibiting CARB and EPA from adopting tougher GHG standards.

H.R. 910 opponents talk as if policymaking were a game in which the regulatory option with the biggest fuel savings wins. By that criterion, why not just let EPA and CARB impose a de facto 100 mpg CAFE standard and declare America to be “energy independent”?

If Congress thinks NHTSA’s standards don’t go far enough, there is a simple fix. Pass a law! What H.R. 910 opponents want is for EPA and CARB to legislate in lieu of Congress. That is neither lawful nor constitutional. [click to continue…]

Next Generation Fuel Economy Sticker – To Boldly Label What No Agency Has Labeled Before

by Marlo Lewis on May 25, 2011

in Blog, Features

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Today, the U.S. EPA and the National Highway Traffic Safety Administration (NHTSA) proudly unveil their new, improved, long-awaited, supah-dupah, “next generation” fuel economy sticker. All model year 2013 vehicles will have to display the redesigned stickers.

“The new labels, which are the most dramatic overhaul to fuel economy labels since the program began more than 30 years ago, will provide more comprehensive fuel efficiency information, including estimated annual fuel costs, savings, as well as information on each vehicle’s environmental impact,” EPA’s press releaseenthuses. Only in the makework world of bureaucracy central would this “overhaul” of a label be hailed as “dramatic.”

As my colleague William Yeatman joked when I told him the news: “Anyone can have a sticker, but a next generation sticker — the future is here, my friend!”

In their original August 2010 regulatory proposal, the agencies wanted the new label to include letter grades based on the car’s fuel economy and carbon dioxide (CO2) emissions. Electric vehicles and plug-in hybrids would get an A+; the biggest, heaviest, gas guzzling SUVs would get a D.

However, in December 2010, 53 House Members sent a bipartisan letter to EPA Administrator Lisa Jackson and DOT Secretary Ray LaHood protesting that letter grades would “unfairly promote certain vehicles over others.” Indeed, that was the point. Stigmatize SUVs and other politically-incorrect vehicles by giving them bad grades.

Worse, grading cars implicitly means grading the people who buy them. People who buy cars with super-low or zero emissions are caring and ahead of the curve. Those who buy gas guzzlers are yokels who voted for Bush and wear baseball caps in restaurants. The South Park spoof on the “Toyonda Pius,” Smug Alert, all-too-accurately depicts the greener-than-thou pretension of EPA and NHTSA’s proposed grading system.

Rebuked by those wielding the power of the purse, the agencies relented and the “next generation” sticker does not include letter grades. To view the current sticker, click here. To see what the scolds at EPA and NHTSA originally planned to replace it with, click here.

Clearly, these folks are into behavior modification. How potent will the redesigned label be in modifying your behavior? [click to continue…]

Fuel Economy Mandates and Dumb Public Surveys

by Sam Kazman on May 25, 2011

in Blog, Features

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Last week the Consumer Federation of America issued another of those consumer “surveys” supposedly showing that the public solidly supports higher energy efficiency standards.  The previous one in this series was a Federation survey in March of alleged consumer demand for more stringent home appliance standards.  Even though affordable top-loading washers have pretty much been ruined by existing federal regulations, the March survey “found” that consumers wanted even tougher regs. The Federation’s trick: just ask pie-in-the-sky questions that portray these mandates as win-win situations.  Never suggest that the mandates mess up appliance performance, even when the evidence is staring you in the face.

The topic of last week’s survey was autos and fuel economy standards.  The Federation dressed its report up in the usual language of “ending our addiction to oil”.  But if you think oil is addictive, are you really fighting that addiction by squeezing more miles out of every gallon? Doesn’t that make oil even more addictive?

[click to continue…]