Projo Cars Blog

The writing is off the wall and on the page.

I just hope presidential hopefuls Senators Hillary Clinton and John McCain get to read it. Their proposal to suspend the federal excise tax on gasoline this summer sends confusing signals about U.S. energy policy to both consumers and manufacturers.

The facts are these: Auto industry sales in April were down to an annualized rate of fewer than 14.5 million vehicles, according to Autodata, mainly due to a big drop in gas-guzzling pickup truck and SUV sales.

That hit Detroit’s Big Three especially hard. General Motors’ sales were off 16.2 percent compared with last April, while Ford’s were down 12.1 percent and Chrysler’s off 23.5 percent.

The top three Asian manufacturers – who missed the boom in truck and SUV sales during the 1990s – reported sales increases: Toyota up 3.4 percent while Honda and Nissan were both up six percent.

In fact, sales of small, fuel efficient cars were up quite dramatically, largely due to rising gas prices. Gasoline may not consume a major part of the average family’s budget, but you sure know what you pay at the pumps each week and regular is now running at about $3.60 a gallon.

Sales of Ford’s Focus, for example, were up 43.5 percent; Ford recently upped production of the car by 30 percent. Meanwhile, its SUV sales were off 36 percent.

Likewise, sales of Toyota’s Yaris were up by 46 percent while truck and SUV sales were off 12 percent.

Nor can we reasonably expect gas prices to come down anytime soon. U.S. demand is increasing as the summer driving season approaches and the price of oil is now well over $100 a barrel, with the new benchmark around $120. That’s due in part to the weak dollar but more importantly to the soaring demand from the fast-growing economies in mega-nations like China and India.

Unfortunately, the proposal by Senators Clinton and McCain to suspend the 18.4 cent federal excise tax on gasoline would make it cheaper to fill up, but goes against all the "energy saving/independence from foreign sources of oil/addiction to cheap oil" arguments we have been hearing lo these many years.

It also goes against the intent of the new mileage standards outlined by the National Highway Transportation Safety Administration (35.7 miles per gallon by 2015) just last month.

Indeed, it is interesting that many in the auto industry itself are coming out against the idea, with Chrysler CEO Bob Nardelli arguing it would affect sales of small fuel efficient vehicles, and giant auto dealer Autonation CEO Mike Jackson telling the Detroit Free Press it gives confusing signals.

These are sobering times, with prices rising on everything from gas to food and a slowing economy forcing everyone to take stock of their personal and business finances. Let alone the ongoing emotional and financial drain of George Bush's War in Iraq.

As much as we all might welcome paying less at the pump, it is not the time to sacrifice the long term interests of the nation by pandering to the immediate gratification of cheaper gas prices this summer.

- Peter C.T. Elsworth

---