Tuesday, February 10, 2009

Rick Wagoner Does Something Right.

General Motors CEO Rick Wagoner is now calling for higher federal gas taxes. Finally we see the American car companies doing something proactive to protect themselves rather than complaining and dragging their feet ad nauseum about fuel economy standards.

Rick is finally seeing what Europeans have seen for years. The only way to support higher fuel economy is to raise the price of fuel. When fuel economy standards are levied against car makers, they have to sell somewhat unpopular fuel efficient cars, often at a loss, so they can meet the standards, while the big money making gas guzzlers get sold quick because they are popular. As I've said before, this is a top down approach, and it hasn't worked for years. See car makers' financial crisis.

The bottom up approach, the correct approach is to encourage buyers to want to buy more fuel efficient cars. Why would they need to buy a fuel efficient car? The only way it works is if fuel is expensive. I noticed a stark difference in driving habits when I moved to Arkansas. When I lived in Oregon, I lived about 15 miles from town. We only went to town when we really needed to and cut or consolidated unnecessary trips. Gas was somewhat expensive. Therefore, many people drove smaller or at least more modest cars. Compact pickups like Chevy S10's, Toyota Tacomas and Nissans were more popular. Only the more wealthy among them drove the big SUV's, most families with a bunch of kids had minivans, not Suburbans. When I moved to Arkansas, I noticed that there were many more of the large SUVs, pickups and cars. The gas was cheaper.

The truth is, people will buy what they want to buy, you can't tell the car manufacturers to make fewer big vehicles. They make what is demanded of them. Now car makers realize that what is demanded of them (due to their needing money) is fuel efficinet cars. They also realize that they can't keep doing what they always have because the climate has changed. So in order to be able to market and support expensive but excellent electric and hybrid cars like the Chevy Volt, they need gas prices to be higher. We all need gas prices to be higher to support the changes that are necessary to achieve a sustainable existence.

If you buy a gallon of gas, the terrorists win. Really.

No comments: