Green Car Congress reports on a study finding that increasing the average fuel economy of new automobiles to 35 mpg by 2018 would save consumers $61 billion at the gas pump. This money would be spent elsewhere, increasing US employment by 241,000 jobs in the year 2020. [via WorldChanging]
Technological efficiency should be a good thing, but I am not convinced that this particular improvement would result in greater disposable income for the consumer, as the analysis claims. There are at least two other possible scenarios.
One is that the cost of fuel will increase, offsetting the benefit of reduced consumption. This can happen regardless of the type of fuel used. Petroleum is likely to increase in price as oil supplies decline, and there is no guarantee that replacement fuels won't rise along with it. The nascent bioethanol industry in the US is subsidised, but once the industry is established the subsidies could disappear, particularly if a higher oil price makes ethanol more competitive without artificial subsidies.
The other possibility is that people will use travel savings to increase the distance they travel. I haven't seen any evidence that savings in cost per km travelled result in reduced spending on travel. (Anyone?) In fact, over the decades there has been a steady improvement in automobile fuel economy, and a steady increase in commuting distances. This makes intuitive sense: people balance their personal budgets by trading off the cost of housing against the cost of travel. Or we keep spending the same on travel, but the reduced cost per km lets us travel farther to reach a bigger range of products, services or jobs. The point is that even if we are spending less on fossil fuels, we aren't spending less (or more)on transport and housing, so we aren't creating jobs directly. We may be replacing some oil industry jobs with ethanol industry jobs, but the ethanol industry is creating new challenges that threaten to overshadow potential employment benefits.
If you want to get technical about why reduced travel costs per unit distance can have almost no impact on personal travel budgets, Echenique and Ponti have written a very clear 7-page explanation. [234 KB PDF] Which, to keep things interesting, also raises the point that reduced transport costs per unit distance can increase competition between businesses by reducing locational advantages. Their point is that there are potential benefits from reduced transport costs beyond those generally considered by transport planners, and so I have to admit the possibility of economic benefits from improved fuel efficiency. But there would still be a downside: increased travel requires more road capacity, more urban sprawl and associated negative implications for sustainability. Damn, this stuff is complicated.
Comments