posted 12-15-2005 12:01 PM         

By Holman W. Jenkins, Jr. (Commentary)
December 14, 2005

Since we're still on the subject of fuel mileage – or at least still responding to email after a column two weeks ago on the Toyota Prius – let's spill a few more gallons of petroleum-based ink.

The Prius is a nifty gadget and comes with lots of extras. But Toyota markets the vehicle on its fuel efficiency, and fans tout its fuel efficiency. And our point was to debunk the idea that saving gasoline is a virtue independent of economics, such that it makes sense, say, to spend a buck to reduce gas use by 50 cents.

Edmunds.com, the auto shopper site, guided us to Honda's Civic and Toyota's Corolla as conventional alternatives to the hybrid Prius. This was the source of our claim that the Prius retails for $9,500 more than comparable vehicles. In its own research, Edmunds concluded a Prius owner would have to drive 66,500 miles per year or gasoline would have to jump to $10 for the purchase to pay off.

But don't take our word for it. Kazuo Okamoto, Toyota's research chief, recently told the Financial Times that, in terms of fuel efficiency, "the purchase of a hybrid car is not justified."

Now, as an economic matter, overpaying for the privilege of saving gasoline is simply a subsidy to other gasoline consumers. Also as a regulatory matter: Thanks to the special genius of our corporate fuel economy rules, Prius buyers directly underwrite Toyota's ability to sell more SUVs and pickups in the U.S. market without paying the fines that Mercedes, BMW and Volvo long ago accepted as a cost of doing business in the U.S.

But doesn't saving oil have benefits beyond the dollars saved – for instance, postponing the doom of civilization?

No: If Prius owners consume less, there's less demand, prices will be lower and somebody else will step up to consume more than they would at the otherwise higher price. That's the price mechanism at work. Oil is a fantastically useful commodity. Humans can be relied upon to consume all the oil they'd be willing to consume at a given price.

But wouldn't using less oil make us less dependent on Mideast imports?

Just the opposite: In the nature of things, the cheapest oil is consumed first, and Mideast oil is the cheapest. Drive a Hummer if you want to reduce America's reliance on Arab oil. Indeed, if we could all just pull together and drive gasoline prices high enough, we'd be able to satisfy all our fuel needs next door from Canadian oil sands.

Let it also be noted our primary political interest in the Middle East over the past 50 years has been Israel, which has no oil. Even Saddam would have been delighted to sell us all the oil we wanted if we had been prepared to acquiesce in his extracurricular depredations. Our attempt to reform Iraqi society is costing us many multiples of the real value of Iraqi oil exports to the world market.

To wit, let's not underestimate the degree to which our overseas entanglements are despite our interest in oil, rather than because of it.

Not that Toyota is to blame for the mystification of energy economics, which is a hardy perennial without which the nation's pundits could hardly make their gardens bloom on a semi-weekly schedule year after year. Take a bit of fluff from a group called 40mpg.org, a subsidiary of the Civil Society Institute. It recently put out a list of 89 vehicles made by major global automakers that rate 40 miles per gallon or better.

These cars include the Ford Fiesta, Volkswagen Lupo and Toyota Yaris, none of which is available in the U.S. Only two vehicles sold in the U.S. get 50 mpg or better, compared to 39 such cars overseas. The group underlined its polemical point with a poll purporting to show that 88 percent of Americans believe "U.S. consumers should be able to get the best of the more fuel-efficient vehicles that already are available in other countries."

Try not to be bowled over by the paradox: In the hyper-competitive U.S. car market, manufacturers are withholding fuel-efficient cars that Americans would be eager to buy.

All this really proves is the pollster's facility for getting large majorities to affirm views at odds with their own behavior. Such fuel scrimpers sell in Europe because gas retails $5 a gallon, thanks to petrol taxes that feed the welfare state and keep the autobahns clear of poor people. Americans make an equally sensible decision, in dollars and cents, when they skip over fuel efficiency in favor of features more important to them, such as size, comfort and horsepower.

Several Prius partisans emailed to say they purchased their cars not to save money but to save the earth, or at least make a statement about doing so. That's a perfectly good reason to buy a car (as is wanting to meet girls). However, we doubt their Hollywood coreligionists would be so keen on solidarity if it meant driving around town in a Ford Fiesta.

In any case, fuel economy plays an ambiguous role in the fight against air pollution. Our considerable progress against the traditional pollutants has come by specifying allowable emissions per mile driven, not per gallon consumed. Meanwhile, CAFE rules raise the cost of a car while reducing the cost of operating it. Being rational even when they don't meant to be, consumers respond by getting more use of out their cars – driving 15,000 miles per year, up from 10,000 since the rules were adopted. (And automakers have met this demand by greatly improving vehicle reliability.)

posted 12-15-2005 03:00 PM         

Today's Wall Street Journal features business opinion columnist Holman Jenkins Jr. on the warpath against the Prius. Again. It's a reprise of a satirical column published two weeks ago that succeeded in so thoroughly outraging Prius owners that Jenkins must have decided to take another poke just for the fun of watching the ants swarm. (You can find the bulk of today's column here and the one that kicked off the hooha here.)

Prius owners should relax, before lurching into another fit of apoplectic rage. When the Wall Street Journal's opinion page goes after you, you can be sure you're on the right track. In fact, the whole culture war over hybrids is pretty amusing. In the normal scheme of things, apologists for the free market might be expected to shower admiration on Toyota, the most profitable (and soon to be the largest) car company in the world. But because the Prius has become popular as a symbol of hippie-dippy left-wing green-living principles, it must be attacked, its buyers must be labeled as dupes, and the company itself suddenly becomes a con artist. If you track the links around the Web discussing Jenkins' columns, the political split between those who find him funny and incisive, and those who find him a blithering troll is beyond obvious.

Jenkins lambastes the Prius on a number of counts, some of which, if one were inclined to take him seriously, would be worthy of a serious look. The Prius certainly isn't perfect and it's hard to argue against the idea that purchasing one is a pretty pricey way to make an ecological point. But the assertion that is generating the most fury, and the one that places his whole anti-Prius campaign in the clearest ideological context, is his contention that any fuel saved by Prius owners isn't really saved at all. Instead it's just an invitation to others to consume more. So there is no ecological point.

"If Prius owners consume less, there's less demand, prices will be lower and somebody else will step up to consume more than they would at the otherwise higher price. That's the price mechanism at work. Oil is a fantastically useful commodity. Humans can be relied upon to consume all the oil they'd be willing to consume at a given price."

If Prius owners really wanted to save the world, Jenkins suggests, they should all be driving Hummers, and using up oil as fast they could, so as to drive the price up enough to spur alternative energy technologies.

It's no wonder this statement has upset people. Taken at face value, Jenkins is declaring that there is no economic rationale for conservation. So anyone who feels good about biking to work instead of driving, or setting the thermostat low in one's house, or in any other way trying to reduce one's resource-extraction footprint in the world today, is a fool. The less you use, the more someone else will. And Prius owners, who are actually paying a premium for their cars, are the biggest fools of all.

Now, one easy way to rebut this might be to note that some of the U.S.'s most prominent neoconservatives, who normally don't find much in common with Northern California Prius drivers, are somehow also conservation dupes, because they are currently lobbying the Bush administration to invest in hybrid technology. They advocate the reduction of consumption because they think U.S. dependence on foreign oil is a security concern and a drain on the national budget. Imagine that!

Embracing the idea that reducing consumption is pointless because others will just consume more is both a striking rationale for selfish behavior and embarrassingly shortsighted. Growing world demand and decreasing supply for oil will drive prices up in the long run, regardless of how many Priuses Toyota sells. The challenge facing the world is to avoid having the global economy sent completely off the rails by the inevitable surge. To achieve that we have little choice but to simultaneously embrace new, fuel-efficient technologies and learn to live in ways that depress demand -- just to keep things manageable.

By making the idea, the image, of fuel efficiency sexy and cool, Toyota has done the world a huge service. The company has proved that there is a market for getting consumers to feel good about themselves in an ecologically sustainable way. Quibbling over whether the Prius delivers as much as its most ardent defenders want or Toyota's marketers declare misses the point. Instead, we should be clamoring for more of the competition that the free market is supposedly famous for. We should be asking why GM and Ford aren't offering us sexier, cooler, cheaper, more fuel-efficient cars. Every manufacturer of consumer goods should be looking for ways to capitalize on green-living marketing. And even if it does mean that new car buyers in China opt to buy a Ford Expedition because Berkeley Prius owners have managed to keep the price of gas low enough for them to afford such idiocy, so be it. It won't be long before the Chinese car buyers figure it out, too.

I find it hilarious that fans of Jenkins' "humor" like to call Priuses "smugmobiles." Prius owners, in my experience, feel good about themselves because they feel like they're being responsible when they drive a Prius. They feel like they're making a statement about how to live in the world. Now, I've known my share of obnoxious, holier-than-thou Berkeley hippies who are so secure in their knowledge that they are living in an irreproachable state of Gaia-respecting ecological purity that they are absolutely intolerable to be around. But what I suspect really is getting the anti-Prius faction's goat is not the smugness; it's that Toyota is making so much money off Prius lust.

The free market has spoken: there are an awful lot of people who think we should be behaving more sensibly as to how we consume our planet's resources. They can't be ignored, so they must be ridiculed. I guess that's one more thing to feel smug about.

posted 12-15-2005 03:14 PM         

Compacts & Sedans

The Toyota Prius, considered a midsize sedan, is the number-one selling hybrid car.

posted 12-15-2005 03:17 PM         

At the briefing, Walter McManus, director of the Office for the Study of Automotive Transportation and HybridCars.com blogger, said, “I’ve been an auto economist for 16 years, and in a very real sense, this research represents a significant evolution in my personal view. The old paradigm was that fuel prices for oil will be cheap forever, or that they will return to $25 per barrel. We had 100 years of relatively calm prices for oil. Now they are very volatile.”

McManus described a domino effect in which higher oil prices would create higher demand for fuel-efficiency, sending consumers away from the large SUVs that make up Detroit’s largest and most profitable segment. McManus said, “The traditional Big 3 headquartered in Detroit, would absorb 75% of those lost sales. And because their profits are so tied to those vehicles, they would lose $7 to $11 billion.” Studies that McManus and the University of Michigan conducted with the National Resource Defense Council (NRDC) estimate that between 297,000 to 465,000 jobs would be lost.

Environmentalists and conservatives are aligned on the need to reduce oil dependency and raise fuel economy.

McManus posed the $64,000 question: “Is Detroit adopting technologies to improve fuel economy, especially in segments that are going to be necessary to make them competitive in the future?”

The Times Are Changing, Slowly
Roland Hwang, vehicles policy director at NRDC, said, “Detroit is not moving fast enough.” Yet, Hwang remained hopeful that the collapse of the SUV market would get previously unconvinced players to listen. “It’s not just environmentalists who are talking about reducing our oil dependency and raising fuel economy. There are a lot of groups that realize there’s a lot out stake here—from hawks to conservative Christians to labor to business groups. The time is changing, and the time is right to look for solutions. There’s a great urgency.”

For Hwang, and for Alan Reuther, legislative director of the Union Auto Workers, the solution is enhanced incentives for manufacturers. Reuther’s main concern was breaking a decades-long legislative stalemate over fuel efficiency standards and to focus the debate on enhanced incentives for industry. Reuther was not optimistic that the Bush administration would lead the charge for these changes. He said, “We have heard reports of top administration officials privately saying, ‘What’s the big deal if auto companies go bankrupt?’ They don’t seem to think it is a problem that hundreds of thousands of people could lose health care and pensions. And tens of thousands could lose their jobs.”

Hybrids as a Technology Solution
The briefing session on Capital Hill repeatedly returned to the issue of hybrid cars, and their rapid adoption by consumers. Hwang said, “One study by the Oak Ridge Department of Energy Lab estimated that it’s likely that 2.5 million hybrid units could be sold in this country by 2012. And that study was done prior to these high oil and gasoline prices.” He added, “Detroit is trying to play catch-up. But Toyota has had a hybrid on the market since 1997. That’s a long ways to play catch-up.” Japanese automakers dominate this market. In the first nine months of 2005, they earned 92% of the market.

The participants pointed to Ford as the only American automaker with a hybrid on the market. Ford has sold about 12,000 of its Escape Hybrids so far this year, representing less than 8% of the hybrid market. Reuther tempered any enthusiasm about Ford’s hybrid program as signs of change in the American auto industry. “We’re very glad they’re assembling the Ford Escape Hybrid in Kansas City. The truth is that not one of the components that make that vehicle a hybrid, rather than a traditional vehicle, is made in this country. And yet the company is saying that it’s an American hybrid. It’s absolutely is not an American hybrid.”

An unidentified attendee asked if Toyota is so gung-ho on hybrids, then why the logic of hybrids has been lost on Detroit.
Tough Question from the Crowd
An unidentified attendee at the session extolled the virtues of hybrid technology. He said that a hybrid vehicle will out-excelerate a gas vehicle and get twice the gas mileage, and described Toyota’s plans to offer a hybrid option for nearly all its vehicles within five years. He asked, “The logic of the hybrid seems to have been lost on Ford, and G.M., and perhaps Chrysler. Why is that?”

McManus said that American automakers are not willing to spend the necessary money to produce hybrids. He estimates that the hybrid technology costs for the Toyota Prius at $7,000. He said, “Toyota is willing to accept those costs on the hope, that in the future, they’ll be the ones that have the low-priced hybrids. They way they’re going, they probably will be.”

Reuther added, “For a long time, the Big Three thought you couldn’t sell hybrids, but they can sell SUVs. That’s the way they went. Now, the market’s changed, and they have to play catch up.”

The moderator of the briefing, Daniel Lashof, climate center science director at the NRDC, questioned if the benefits of a hybrid unrelated to fuel economy may be a factor. He said, “The hybrids are attractive from a performance standpoint. What role does that play in this market really taking off, whereas another technology with only a fuel economy benefit might not take off?”

The unidentified attendee replied, “If Detroit plays to performance, as I do, why not go hybrid, have the fastest accelerating cars, and get twice the gas mileage? The logic is so compelling.”

posted 12-15-2005 03:32 PM         

If we raise fuel efficiency standards in American cars by one mile per gallon, in one year, we would save twice the amount of oil that could be obtained from the Arctic National Wildlife Refuge
Raising it by 2.7 mpg would save enough to eliminate all the oil imports from Iraq and Kuwait combined
Raising it by 7.6 mpg would save enough to eliminate 100% of our gulf oil imports into this country
Source: Environmental Attorney Robert F. Kennedy Jr.
Driving a hybrid car is one way to take a real step toward reducing our dangerous addiction to oil.

The Importance of Oil
We have staked our entire way of life on a non-renewable resource that may be largely exhausted in our lifetime.

Security Risks
In 2001, imported oil accounted for 55% of US consumption; this figure is projected to rise to 70% by 2020. Our dependency supports terrorism and repressive regimes.

Economic Risks
Our economy is held hostage to the ups and downs of the world oil market.

Current Policies
There are two ways to reduce our dependency: use less oil or produce more of it. Where does the current administration stand?

Plans for Change
What are think tanks, environmentalists, and government agencies suggesting we do to make a U-turn on our oil addiction?

posted 12-16-2005 12:53 PM         

Here is an address where you can personally write to Robert F. Kennedy Jr. and discuss your issues with him.

Professor of Environmental Law
Co-Director, Pace Environmental Litigation Clinic
A.B. Harvard University
J.D. University of Virginia
LL.M. Pace University
Email: rkennedy@law.pace.edu
Tel: (914) 422-4343

Pace Law School
78 North Broadway
White Plains, NY 10603
Admissions Phone:
914-422-4210
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Pace Faculty Contact:
Sonia Zawadski
(914) 422-4407

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posted 12-22-2005 11:05 AM         

quote:

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Originally posted by Randy Cobb:

Hypocitical.

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