Unintended consequences

The idea behind CAFE standards is that if the government regulates the minimum amount of gas mileage a car must have to be sold at a dealership, then this will help improve fuel efficiency in the long run. For example, the current standard for automobiles is 27.5 miles per gallon and 20.7 miles per gallon for light trucks. The CAFE standards prevent Ford from selling an automobile that only gets 15 miles per gallon.

Here's the funny part of the story and a good illustration of how the government can mess things up, even though it has the best of intentions. A good case can be made that CAFE standards created the SUV. The story goes like this: consumers demanded bigger cars, but automobile manufactures couldn't supply the bigger cars, because they couldn't meet the fuel efficiency requirements. So what the automobile manufactures did was create the SUV, which is classified as a light truck and has a lower fuel efficency requirment. Hence, if this story is true then government regulations designed to improve fuel efficiency created the SUV, which is now being condemned today because of how much fuel it consumes.

One other interesting tidbit: the PT cruiser is classified as a light truck. If regulations change, Chrysler is going to be in serious trouble.