CAFE

Chrysler head Lee Iacocca said this in 1986 when Ford/GM lobbied the Reagan Administration to lower (“CAFE”) fuel efficiency standards: “We are about to put up a tombstone that says, ‘Here lies America’s energy policy’. CAFE protects American jobs. If CAFE is weakened now, come the next energy crunch, American car makers will not be able to meet demand for fuel-efficient cars.”

If CAFE is weakened now, come the next energy crunch, American car makers will not be able to meet demand for fuel-efficient cars.” Well, the rest of the world kept on truckin’ as he suggested, and have more efficient fleets (see chart). If the US fleet were 30% more efficient, US gasoline consumption could fall by 40 billion gallons per year (~1 billion barrels). For context, the US imports 0.36 billion barrels of crude per year from Venezuela, and 0.62 billion from the Persian Gulf. The US just increased fuel efficiency standards, but it will take time to make an impact.