Last night the Senate passed an “energy bill.” Instead of actually doing anything to reduce the cost of energy or increase access to energy, the bill limits the liquid fuel Americans can use and it limits our automobile choices. Of course the bills sponsors didn’t put it that way. They say the bill promotes “energy independence” by requiring 36 billion gallons of renewable fuels a year. They also say that the fuel efficiency standards are necessary to give Detroit a nudge forward on fuel efficiency.

36 Billion Gallons of Miracle Fuel

This is truly silly. Congress is doing nothing less than mandating a miracle–and not a small one. In 2006 20 percent of the total U.S. corn crop went into making an estimated 5 billion gallon of ethanol. The Senate’s bill requires us to use 7 times that amount, or 140 percent of the total US corn crop. The bill requires that 21 billion gallons of fuel be derived from sources other than corn, but that still means we’ll most likely be using 60 percent of our corn crop to fuel cars. This will drive up corn prices, drive up pork prices, drive up chicken prices, and drive up the prices of things that use corn syrup. And for what? It won’t make us “energy independent.”

Even the National Commission on Energy Policy, who are no lovers of the oil industry think this amount of biofuel will be nearly impossible to create without serious problems. As they stated before Congress:

there is simply not enough corn to being to keep pace with expected growth in transportation energy demand, let alone reduce current U.S. gasoline consumption in absolute terms. Put simply, it takes roughly 4 percent of our nation’s corn supply to displace 1 percent of our gasoline supply. Even organizations devoted to ethanol advocacy agree that it will be difficult to produce more than 10-12 billion gallons of ethanol a year without imposing unacceptable demands on corn supply and significant upward pressure on livestock feed prices.

Oh, but the sponsors of this legislation (President Bush endorsed this idea in the State of the Union) insist that technology will magically appear that solve all of our problems. Cellulosic ethanol technology is just around the corner we just need the additional financial incentives that this regulation will impose upon us for new and innovative technologies to come on line.

This may be true, but there is little to no guarantee than the technologies will develop. Markets produce amazing things. Something they produce miracles, but what Congress and the President don’t understand is that you can’t predict markets. If Congress could predict technological improvements all 86 members of the Senate that voted for the bill would be a self-made billionaires. Markets produce amazing advancements, but you can’t predict what they are going to be.

This mandate to use biofuel will further enrich corn farmers at an expense to all other Americans. It will reduce our economic competitiveness since it will increase the price of nearly everything that uses transportation fuels. It isn’t the end of the world, but why do we want to economically handicap ourselves?

Increase in Fuel Efficiency Standards to 35 MPG

While the miracle fuels mandate will reduce our economic competitiveness, the mandate to increase fuel efficiency standards will kill people who would prefer not to die. That sounds a bit extreme. Let me explain.

There are two main ways improve the fuel efficiency of automobiles–reduce weight or use a more efficient engine. With fuel efficient cars, car companies usually do both–they reduce the car’s weight and they use smaller, less powerful, and more fuel efficient engines. The problem with lighter cars is that, on average, people are less safe than heavier cars. According to a 2002 report by the National Academy of Sciences:

the downsizing and weight reduction that occurred in the late 1970s and early 1980s most likely produced between 1,300 and 2,600 crash fatalities and between 13,000 and 26,000 serious injuries in 1993. The proportion of these causalities attributable to CAFE standards is uncertain.

NAS continued, answering critics who claim that vehicle downsizing and occur without cars becoming more dangerous:

Just because these anticipated safety innovation will improve the safety of vehicles of all sizes does not mean that downsizing to achieve fuel economy improvements will have no safety costs.

If an increase in fuel economy is effected by a system that encourages either downweighting or the produce and sale of smaller cars, some additional traffic fatalities would be expected.

To meet the 35 mpg standard, the car companies will almost certainly be forced to reduce consumer choice and offer smaller. Large cars with more safety features will likely still be available, but they will be more expensive, forcing people who, without the law would buy the larger cars, to drive smaller cars.

The real issue is that Congress is not happy with consumers’ current choice about fuel efficiency and safety. Car companies in America sell more fuel efficient cars in other markets, such as Europe. There is nothing stopping car markers from selling more fuel efficient cars today. For example, in Europe Mercedes Benz sells A and B class cars, but not in the United States. BMW sells a 1-series in Europe, but not in America. Personally, I like these cars, but Mercedes and BMW doesn’t sell them here because they don’t think they can make money.

Car companies have a long, long way to go to meet these standards. EPA rates the fuel economy for hundreds of cars a year (2008′s Fuel Economy Guide is here). How many cars currently sold in America meet the 35 MPG standard for both city and highway? 50? 20? 10? 5? Nope. Two cars meet the 35 MPG standard–the Toyota Prius and the Honda Civic Hybrid. That’s right, one midsize car, and one compact car. Trucks and SUVs aren’t even close.

Congress isn’t telling car companies to make more fuel efficient cars, they are telling the American people that Congress does not approve of their car choices. Car companies only stay in business by selling cars that people buy. Car companies try their best to respond to consumer demand. It is too bad that Congress wants to force people to buy less safe cars than they would otherwise purchase.