Fuel-economy rules threaten one million US jobs, study says

[SOUTHFIELD, Michigan] More than 1.1 million US workers would lose their jobs because of tougher fuel-economy regulations coming next decade if prices at the gasoline pump remain low in America, a new study found.

With low fuel prices, consumers won't get the payback they are expecting from expensive fuel-saving technology as automakers strive to reach a US mandate to achieve 54.5 miles per gallon by 2025, according to the study released today by the Center for Automotive Research in Ann Arbor, Michigan.

The group analysed nine scenarios with varying fuel prices and technology costs and concluded that significant job loss would result in eight cases.

Automakers and President Barack Obama agreed to double fuel economy standards from 2012 to 2025, with a projected US$200 billion cost to the industry that would be made up in fuel savings to car buyers.

Since 2012, fuel prices in America have plunged and consumers have returned to buying less efficient sport utility vehicles and trucks, which accounted for about 60 per cent of sales this year through August. If fuel prices stay low, it be will hard to sell fuel-efficient vehicles with advanced technology, resulting in job losses at factories, suppliers, car dealers and businesses that depend on the workers' spending, the study said.

"If the value of fuel savings to the new vehicle buyer falls short of the cost of mandated fuel economy technologies then US automotive sales, production and manufacturing and retail employment will fall with serious consequences for the US economy," Sean P McAlinden, lead author of the study, wrote in its executive summary.

The study was self-funded by CAR, a research organisation supported by funding from state and federal government, industry associations, corporations and foundations.

Automakers say they're already straining to meet US fuel economy targets in this low gas-price environment. The Alliance for Automobile Manufacturers last month petitioned the Obama administration for more time to evaluate a key technical report that lays the ground work for a so-called midterm review that regulators will complete next year. The industry is asking for some relief from regulations starting in 2022.

The US Environmental Protection Agency "will carefully review" the study and other comments it received on the draft technical report, Monica Lee, an agency spokeswoman, said in an e-mailed statement.

"We are in an era of record sales and profits for the auto industry," she said. "During this time, the greenhouse gas standards for light duty vehicles appear by all measures to be working."

Using gasoline price forecasts from the US Energy Information Administration, CAR said it analysed scenarios using per-gallon prices of US$2.44, US$3 and US$4.64 in 2025 dollars. It also used three levels of potential technology costs per vehicle - US$2,000, US$4,000 and US$6,000 - to meet the 54.5 mpg mandate. Based on previously published research, it estimated that consumers expect a payback on those extra vehicle costs in 3.4 years.

Only one scenario - with the highest gas price and lowest vehicle cost - resulted in an increase in auto sales, production and employment. Eight of the nine scenarios estimate a production decrease, with five scenarios seeing a loss of the factory output of more than 1 million vehicles. Three scenarios foresee a sales loss of 3 million vehicles or more.

"An important conclusion of this study is the overwhelming and direct importance of fuel prices in forecasting the economic effects of the 2025 fuel economy mandates," Mr McAlinden wrote.

BLOOMBERG