US energy policy

Financial Times
Published: Oct 04, 2007

If US energy policy were a dish, it would be an unwholesome mélange of cake, corn and pork. No wonder America's cars have bulked up. The Environmental Protection Agency says the weight of the average US car or light truck rose 29 per cent in the past 20 years to almost 1.9 tonnes. That helps explain why, despite advances in engine technology, average fuel economy has actually fallen from 22 miles a gallon to 20.2.

Cheap oil meant that "bigger is better" became the mantra of vehicle design. High oil prices have had a small effect recently, with an increase of 0.9mpg in average fuel economy since 2004. But energy policy remains focused on allowing drivers to have their cake and eat it rather than curbing demand.

Nothing demonstrates this better than Washington's love affair with corn-derived ethanol. Corn farmers benefit from subsidies for investments in ethanol production and higher produce prices resulting from the displacement of food crops. Ethanol corrodes pipelines - so it is often transported in trucks which, er, burn fuel - and several academic studies claim its production uses more energy than the resulting fuel actually provides. Continuing subsidies may have something to do with the fact that America's top 10 corn-growing states hold almost 40 per cent of electoral college votes.

Inducements have fuelled oversupply, causing ethanol margins to collapse while also pushing up food prices. Meanwhile, Detroit struggles to reinvent itself, having spent two decades pushing more horsepower and metal at US drivers while foreign competitors have taken the lead in energy efficient vehicles. And a 14-year freeze on federal fuel tax encourages more driving of those heavier cars, battering America's roads and bridges while simultaneously undermining the revenue base used for renewing them. Throw in growing concern about environmental deterioration and it's enough to leave you feeling queasy.