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Far from oil right

12 January 2016 By Kevin Allison, Antony Currie

Cheap oil is fueling dreams of a higher U.S. gas tax. Automakers used both this week’s Detroit auto show and last week’s Consumer Electronics Show in Las Vegas to put a spotlight on shiny, new hybrid and electric cars designed to meet rising fuel-economy standards. With the price of crude falling – briefly below $30 a barrel on Tuesday – gas-guzzling vehicles become more attractive to U.S. consumers. Among its many benefits, jacking up petrol levies would help smooth demand.

SUVs and light trucks accounted for 55 percent of the record 17.5 million vehicles sold in the United States in 2015, up from 52 percent in 2014, as gas prices fell to around $2 a gallon. It’s great for earnings. Fuel efficiency is suffering, though. Last year’s U.S. average of 24.9 miles per gallon, according to the University of Michigan, was the first drop in several years. Carmakers are supposed to get their fleets to an average of 37 next year and nearly 55 by 2025.

Manufacturers have some levers to pull. Ford, for example, now makes its best-selling F-150 truck out of aluminum instead of steel. New technologies like engine-killing mechanisms at stoplights cut fuel use, too. And the more of its new Chevy Bolt electric cars GM can sell to new partner Lyft, the ride-hailing service, the more its overall fleet’s fuel usage will drop.

Increasing the federal gas tax would help all automakers, though. It hasn’t budged from 18.4 cents a gallon since 1993. A levy that kept gasoline above at least, say, $3 a gallon may be enough to steer consumers away from SUVs. That would free up money for car companies to invest in fuel-saving technology – whether for gasoline, electric or even hydrogen vehicles – knowing there would be a big enough market for them.

Meanwhile, the government could spend the additional revenue on badly needed improvements to the nation’s infrastructure. Hiking taxes is not something auto executives will call for in public, even if it benefits them. Few, if any, lawmakers will push for pricier gas, especially in an election year, despite the number of pork-barrel projects it could fund. It’s just one more upheaval caused by cheap oil: the reluctance to choose self-interest.

 

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