A few weeks ago there was a brief piece in the NYT Magazine entitled "Gallons Per Mile." It got me thinking; my noodlings follow the article itself:
The problem with m.p.g., argues Richard Larrick, who wrote the article with his business-school colleague (and carpooling partner) Jack Soll, is that it leads consumers to significantly underestimate the gains in fuel efficiency that can be achieved by trading in very low m.p.g. vehicles — even for one that gets only a few more miles per gallon. Less detrimentally, m.p.g. also misleads people about the fuel savings achieved by moving from an ordinary family sedan into a Prius.
Larrick emphasizes that his long-term goal is to get everyone into the most fuel-efficient vehicles that exist. But right now, he says, “as a national-policy question, the urgency is getting people out of the 14-m.p.g. vehicles.” And m.p.g. ratings aren’t the most useful prod, largely because the real significance of differences in m.p.g. is often counterintuitive. The jump from 10 to 20 m.p.g., for example, saves more gas than the one from 20 to 40 m.p.g. The move from 10 to 11 m.p.g. can save nearly as much as the leap from 33 to 50 m.p.g.
Consider the much-mocked S.U.V. hybrids, which seem to offer only incremental gains. Someone who trades in an all-wheel-drive Cadillac Escalade (14 m.p.g.) for an Escalade hybrid (20 m.p.g.) would save 214 gallons of gasoline over the course of 10,000 miles.
That’s about as much fuel as would be saved by two people currently driving 33-m.p.g. cars who switch to 50-m.p.g. hybrids, assuming everyone drives the same distance.
I do better when I see the numbers. Here's the table I put together:
Current New Vehicle: 10mpg 15mpg 20mpg 25mpg 30mpg 35 mpg 40 mpg 50 mpg
Vehicle: per 10,000 mi: 1000 667 500 400 333 286 250 200
10 mpg 0 333 500 600 667 714 750 800
15 mpg 167 267 333 381 417 467
20 mpg 100 167 214 250 300
25 mpg 67 114 150 200
30 mpg 47 83 133
35 mpg 36 86
On the diagonal are the amounts to be gained by moving someone from their current vehicle to one which gets 5 miles more per gallon. We gain the most by moving those in the lowest-mpg vehicles to higher mpg vehicles -- even by 5MPG.
Further, moving someone from a 10MPG vehicle to a 20 MPG vehicle saves 500 gallons per 10,000 miles; moving someone from 20MPG to 40MPG only saves 250 gallons. We'd do far better to concentrate on
In other words, if we want to organize public policy or target public spending to reduce fuel usage without reducing the number of miles driven per year, we ought to concentrate our efforts on providing appropriate incentives for those who currently drive vehicles whose MPG is in the 10 to 20 mpg range. Incentivizing someone who drives a 10mpg vehicle to shift to a vehicle that gets 5 mpg more will save 333 gallons -- 33%. Getting them into a 20MPG vehicle will save 500 gallons; 50%.
Causing that 10mpg vehicle to be shipped to another country, or sold to a poorer person, is like selling an "Energy Star" refrigerator to a family who puts their old fridge in the garage for beer, even if they replace it with a high MPG vehicle.
We could, however, make a difference in a household's fuel usage if we were to provide incentives to keep the SUV for the occasions on which only the SUV would suffice, but also to have a high MPG vehicle, which would serve many day to day needs. How might we do that? One way would be to force insurance companies to price their insurance according to annual mileage driven. The elderly couple who drive their Taurus 4,000 miles a year and the middle-aged skiers who drive their SUV nearly every weekend to their ski/vacation house 200 miles away, and thereby expend 20,000 miles a year -- all "leisure" driving -- are treated similarly by their insurance company, which only asks how many miles the daily commute is. (Yes, the latter couple may have fewer accidents, because they are more skillful and relaxed drivers; but their car is on the road and therefore subject to hazards for many more hours per year.) A better insurance scheme might take into account the actual mileage driven, and charge customers accordingly. This might help encourage people to have cars suitable to the uses to which they put them.
A few years ago, Congress set things up so that "small business" owners could write off most of the cost of vehicles over 6,000 pounds. Ford Excursions and Expeditions, Hummers, Suburbans were heavily subsidized ... but arguably many of them were used for driving youth soccer players around, not business tools or even customers; dentists and accountants were just as eligible as builders. Meanwhile, the subsidies on high-MPG hybrids were much smaller and didn't last long.
It is time to take another look at these incentives. And to look at what provisos we might want to put on any bailouts of auto, SUV and small truck manufacturers.
And we can start paying more attention to measuring the right things. Yes, that includes realistic mileage ratings, but more important, putting our emphasis on the reforms that will make a big difference first.
An afterthought: We can use this same data to visualize some other important facets of the problem of low-MPG vehicles, both from the point of view of fuel consumption and production of pollution.
Let's look at a hypothetical community of 7 households, each with one car. Each gets driven 10,000 miles per year. The vehicles get, respectively, 15, 20, 25, 30, 35, 40 and 45 MPG. What are the effects on individual and aggregate fuel consumption of shifting each family to a vehicle which gets 5MPG more?
Initial Gallons Pct of Cumulative Pct of Gallons saved Pct Decrease Pct Decrease Pct of
MPG used Total Gallons Total by 5MPG increase for HH for total Total Decrease
(1) (2) (3) (4) (5) (6) (7) (8) (9)
15 667 25.1% 667 25.1% 167 -25.0% -6.3% 36%
20 500 18.8% 1,167 43.9% 100 -20.0% -3.8% 21%
25 400 15.0% 1,567 59.0% 67 -16.8% -2.5% 14%
30 333 12.5% 1,900 71.5% 47 -14.1% -1.8% 10%
35 286 10.8% 2,186 82.2% 36 -12.6% -1.3% 8%
40 250 9.4% 2,436 91.6% 28 -11.2% -1.1% 6%
45 222 8.4% 2,658 100.0% 22 -9.9% -17.6% 100%
This table shows that if we seek to increase each household's gas milage by 5 MPG, 36% of the aggregate savings of fuel usage (and pollution production) will come from replacing the 15MPG vehicle with a 20MPG vehicle. [Line 1, column 9], and over half of the aggregate comes from the two lowest-MPG groups. So clearly, we ought to concentrate our incentives and our R&D and our bailouts on efforts that will (1) get the lowest-MPG vehicles totally off the road or used far less; (2) provide attractive alternatives to meet the perceived needs of those who drive our the lowest MPG vehicles in our national fleet. We ought not to spend much moving people from 25mpg cars to 30mpg ones, or from 40 to 45.
A gas tax will fall most heavily on those who drive the lowest MPG vehicles. To the extent that they tend to be higher income people, this is progressive taxation; but in a few years, wealthier people may have abandoned the current fleet of low MPG vehicles, leaving them to poor people, IF we don't also take the steps to get the gas guzzlers off the road ... not shipped overseas. To some extent, the expected price of gas will be capitalized into the resale price of such vehicles, but poor people will still have the burden of maintaining and feeding these low MPG vehicles.
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