Rhein on Energy and Climate

Economists keep telling us that demand is insensitive to oil price changes because consumers are so hooked on petrol that they are ready to pay any price. Recent experience in the USA seems to prove them wrong, provided there is a jumbo price rise.

Under the impact of the doubling of oil prices over the past 12 months, the US car market is undergoing a sea change. Small cars with high fuel efficiency are “in” since the gallon of gas costs $ 3.50, and SUVs have lost their decade-old popularity.

According to the latest car sales statistics, almost 20 percent of all cars sold in April were compact or sub-compact models. These were the only ones to register, sometimes, steep sales increases in a depressed market, which saw the sales of traditional SUVs decline by as much as a quarter since the beginning of the year.

This is good news for everyone who cares about climate change.

The trend towards small cars will be there to stay.

By 2015 the average car sold in the USA will have to respect a fuel efficiency of 7.5 litre/100 km. That constitutes a huge progress compared to present standards, even if it will fall short of the much more ambitious standards being enacted by the EU ( 120 g C02 emissions/km corresponding to about 4.5 litre/100 km). But it gives hope that by 2020 the US automobile fleet will use substantially, say 30 percent, less gas than today.

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