Detroit wishes for an oil shock

Sliding gas prices make General Motors skittish. How about some presidential leadership?

Topics: Globalization, How the World Works, State of the Union, Toyota,

Detroit is getting nervous now that gas prices are back down under $2, the Wall Street Journal informs us this morning, providing a nice follow-up to How the World Works’ ruminations last week about what the sliding price of oil might mean for the health of renewable energy initiatives. The Journal quotes G.M. CEO Rick Wagoner:

“With the price of oil at its lowest level in 19 months, we run the risk of reverting back to our traditional energy policy,” Mr. Wagoner said in a speech at the Automotive News World Congress in Dearborn, Mich., last week. “That is, relying on the lowest-cost energy available on world markets (including imported oil), without providing adequate support for developing alternative sources.”

…If fuel prices are too low, particularly relative to the incomes of new car buyers, there’s less economic rationale for paying a premium to own a high-tech, fuel-saving car. GM’s North American auto business is fighting to break even as it is. Mr. Wagoner hardly needs to lose more money pushing expensive alternative technology vehicles, such as a production version of the plug-in hybrid Chevrolet Volt that anchored GM’s publicity blitz earlier this month at the North American International Auto Show in Detroit.

The Journal’s Joseph White tells us that Toyota and Honda are concerned too, although there are no quotes from Japanese automaker execs, who might be expected to say something sensible about keeping focused on the long term, a strategy that has proven to work out remarkably well for Toyota, but clashes directly with Detroit’s classic cash-in-on-the-SUV-craze-now mind-set. But although White does observe that the government mandate to enact Corporate Average Fuel Economy standards in the late ’70s “pushed auto makers to more than double the average fuel economy of their cars,” no one in the article is quoted as explicitly recommending a similar government push today.

(Indeed, as noted here two weeks ago, G.M.’s vice chairman, Robert Lutz, is on record as fearing that the new Democratic congressional leadership won’t be “understanding” about Detroit’s concern about new fuel economy regulations.)



But wouldn’t new fuel economy regulations assuage Wagoner’s worries? There won’t be any reverting back to traditional energy policies if Detroit, and everybody else who wants to sell a car in the United States, is required by law to significantly increase their fuel mileage.

In his State of the Union speech tomorrow, President Bush is expected to ramp up government support for ethanol, for the second straight year. We’d all be much better off if he came out strongly in favor of fuel economy standards with a real bite to them.

Surprise us, George!

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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