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Stricter Auto Fuel Use Would Slow Oil Demand - EIA
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USA: April 14, 2005


WASHINGTON - A bipartisan commission's proposal to tighten fuel efficiency standards for new US cars, trucks, mini-vans and sport utility vehicles would cut forecast American oil demand in 2015 by 2.5 percent, the Energy Information Administration said Wednesday.


With retail gasoline prices at a record high, environmentalists, Democrats and even a group of former US national security officials have urged Congress to tighten federal regulations known as the Corporate Average Fuel Economy (CAFE) standards.

However, a House committee drafting a broad energy bill refused Wednesday to ratchet up mileage standards, saying consumers prefer to drive large, heavy vehicles for safety.

Most US automakers have fought changes in the CAFE standards.

Current CAFE standards require automakers to achieve an average fuel economy of 27.5 miles per gallon for all passenger cars sold, and 21.0 mpg for vans, SUVs and pick-up trucks.

The requirements have not been changed for more than a dozen years despite a steady drop in the average US fuel economy to 20.8 mpg for 2003 model vehicles.

The EIA, the statistical arm of the Energy Department, said it analyzed the package of energy proposals the National Commission on Energy Policy issued last December. The privately funded commission is a group of energy experts, company executives and government officials from both political parties.

The EIA said the panel's proposal to tighten mileage standards would slow the growth in US oil demand.

Although the commission was unable to agree on a specific increase in CAFE standards, the EIA said it based its analysis on a 36 percent increase by 2015.

Boosting CAFE standards by 6.8 miles per gallon in 2015 would trim forecast US oil demand by 2.5 percent, or 610,000 barrels per day (bpd), to 24.06 million bpd, the EIA said.

A further increase of 6.3 mpg by 2025 would cut forecast oil demand by 5.8 percent, the EIA said.

"The increases in measured fuel economy are smaller than the increases in the CAFE standard because new light duty vehicles are projected to exceed the existing CAFE standard," the EIA said.

Although the EIA assumed a 36 percent increase in CAFE standards, the agency said that rise would be partially offset by older, existing vehicles on the road and the fact that drivers typically do not achieve the full fuel efficiency rating of a new vehicle.

Even with record high retail gasoline prices well above $2 per gallon, Congress remains reluctant to impose tougher fuel standards to dampen demand.

The House Energy and Commerce Committee overwhelmingly rejected an attempt to require US automakers to make cars that average 33 mpg by 2014. The panel instead is focusing on incentives to boost the domestic supply of oil, natural gas, coal, nuclear and other energy.

Gasoline accounts for nearly half of total US oil demand of some 21 million barrels per day.

The EIA report noted that stricter mileage requirements would boost the price of new vehicles by about $1,400 in 2015, and by $1,200 in 2025, as measured in current dollars.

Other proposals by the bipartisan commission to promote hybrid vehicles, stricter energy efficiency standards for new buildings and appliances, and launch a greenhouse gas trading scheme for companies would further slow the growth in US oil demand, the EIA said.

The policy package would cost the average American household about $78 annually through 2025, the EIA said, while also addressing greenhouse gases linked to climate change.


REUTERS NEWS SERVICE


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