September 25, 2011

Fuel Follies

Did you know that about 70% of all the consumer goods purchased in America are transported by truck? Understanding this bit of economic reality, it doesn't take a rocket scientist to realize that the price of fuel is directly linked to all consumer prices. This is fortunate in that Mr. Obama has charged our real rocket scientists to spend their time trying to make Muslims feel good about the scientific accomplishments of their ancient ancestors.

But Mr. Obama has reiterated, for what is it--the twentieth time?--that creating jobs is his first priority with handling the deficit following close behind. For a bit of perspective, let's journey back to April 8th when Mr. Obama ran into a man with a large family at a town hall meeting in Pennsylvania. The poor fellow was concerned about high gasoline prices and suggested that Mr. Obama do something to lower them. Demonstrating the kind of common touch and concern for the little man for which he has become justly famous, Mr. Obama said:

"I know some of these big guys, they're all still driving their big SUVs. You know, they got their big monster trucks and everything. You're one of them? Well, now, here's my point. If you're complaining about the price of gas and you're only getting eight miles a gallon, you may have a big family, but it's probably not that big. How many you have? Ten kids, you say? Ten kids? Well, you definitely need a hybrid van then."

Yeow. Talk about foot in mouth disease. But Mr. Obama handled it in his usual style, even though off teleprompter:

"So, like I said, if you're getting eight miles a gallon you may want to think about a trade-in. You can get a great deal. I promise you, GM or Ford or Chrysler, they're going to be happy to give you a deal on something that gets you better gas mileage."

I'm sure a man with ten children can easily afford new vehicles at will. As you can see, Mr. Obama will not rest—except for rounds of golf and vacations costing more than a decade of most folk's annual salaries—until the middle class has some relief from high gas prices and the skyrocketing prices of frivolous consumer goods like food. He's our middle class warrior. He recently said so himself so it must be true. So let's all fast forward to the middle of August and a story by Jazz Shaw about Mr. Obama's newest effort on behalf of the middle class: That's right! CAFE standards for semi tractors!

Regular readers know that Mr. Obama is demanding a CAFE average of 54.5 MPG by 2025, but never before have the Feds meddled in the long haul trucking business in this way. Mr. Obama is now mandating that heavy-duty vehicles, work trucks and long-haul semis reduce fuel consumption and greenhouse gas emissions from between 9% to 23% by 2018.

Well now. Let's consider this for a moment. Truck owners and operators already know that their single largest fixed expense is fuel. They have every reason to buy the most fuel-efficient trucks they can afford and manufacturers have every reason to build such vehicles. The problem is that the laws of physics apply to semis just as they do to passenger cars. There are three primary ways to save fuel in motor vehicles: (1) More efficient engines and transmissions; (2) more aerodynamic vehicles; and (3) lighter vehicles.

Diesel engines are already quite efficient but some small progress can, and already is being made in increasing efficiency without sacrificing reliability and longevity. Transmissions are more problematic as manual transmissions are pretty much required and it is driving technique rather than the transmissions themselves that have the largest effect. However, in trucking time is money and driving more slowly is more costly. Aerodynamics and weight are closely intertwined because the only way to significantly increase mileage would be to make trucks smaller and lighter. Of course, doing this means smaller loads and more runs to transport the same amount of goods, all of which is reminiscent of Al Gore (this one, unlike the internet, really is his invention) mandating stingy toilets to save water, except that they flush so poorly that people often have to flush twice to finish the job, actually increasing rather then decreasing water use. Greenie types seem to have no understanding of the law of unintended consequences--not that they'd care if they did.

These new regulations can only greatly increase the costs of transporting the 70% of goods hauled by truck, which will directly increase all consumer costs, including gasoline costs—here comes the irony--because gasoline is virtually exclusively hauled by truck. Higher prices means lower hiring, more unemployment, less consumer spending, which means even less hiring, even more unemployment, even less consumer spending, which means…It's tempting to think that this—rather than what he says--is actually Mr. Obama's real policy. But he's the President of the United States. He wouldn't actually be trying to crash the economy. Would he?

And now for a final shot of outrage-fueled adrenalin to start the week: travel back with me to April for an article at MSN Money by Lynn Mucken. Ms. Mucken will explain to you why $4.00 a gallon—and more—gas is a good thing. I've no doubt Mr. Obama would agree, and he's the President, so we should do what he says. Shouldn't we?

After your blood pressure returns to normal, have a great rest of the week!

Posted by MikeM at September 25, 2011 10:40 PM

Meeting the mpg is easy. Use 1000 hybrid cars (with supermodels driving) to carry 20 lbs each, rather than using truck to carry 20,000 lbs. Of course, the 1000 hybrids will use about 1000 gallons compared to 300 gallons for the truck, but our mpg are great.

Posted by: Phelps at September 26, 2011 12:01 AM

Only 70%? That can't be right. Other than a fraction of 1% that are sold at road-side stands next to the fields, everything goes by truck. Even stuff that goes by rail, sea, and air eventually go by truck that last couple of miles. While some neighborhoods have burried gas lines, there are also a lot that have gas delivered by truck. Every gas station gets its fuel delivered by truck. Everything in walmart and your local grocery store comes by truck. Even new trucks come by truck. I think the only consumer good that does not go by truck at any time in its delivery cycle is electricity. And that will use extensive truck support in pre-production.

Posted by: Professor Hale at September 26, 2011 10:03 AM

I'm with the Prof on this 5 things that are not or do not use items transported by truck.

Posted by: JP at September 27, 2011 01:52 AM

Dear Prof. and JP:

Actually, we're all together on this one. I used 70% as an average of the several statistics I've found on this particular issue. I did this because of the wide variation in methodology used to find a number, which you correctly pointed out. Some 30% of goods are moved by rail, various parcel services, even by jet, but some significant portion of that 30% is doubtless transported at least some distance by diesel-fueled trucks.

I don't believe we have any disagreement at all that because such a significant portion of consumer goods are transported in whole or part by truck, such regulations will have very harmful effects on the economy and on all Americans of every economic strata. Then again, that may be just what the Obamites want.

Thanks for your comments!

Posted by: Mike Mc at September 27, 2011 05:12 PM