BILL ANALYSIS 1
1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
MARTHA M. ESCUTIA, CHAIRWOMAN
AJR 5 - Oropeza Hearing Date:
June 21, 2005 A
As Amended: April 28, 2005 Non-FISCAL J
R
5
DESCRIPTION
This resolution notes that:
Californians consume more than 18 billion gallons of
motor fuel annually;
Gasoline demand is projected to increase 1.6% annually
through 2020;
California's refineries are operating near capacity and
California is importing gasoline and diesel fuel to meet
growing demand;
Motor vehicle fuel economy dramatically affects fuel
demand;
A study adopted by the California Energy Commission
(CEC) and the California Air Resources Board determined
that doubling the fuel economy of the nation's light-duty
motor vehicle fleet is technically achievable;
This resolution urges that Congress and the President increase
average fuel economy by 1.5 miles per gallon annually until
total average fuel economy for new light duty motor vehicles
sold in California is double today's average.
BACKGROUND
Corporate Average Fuel Economy (CAFE) standards were established
by the federal government in 1975. According to the author,
CAFE standards have increased new car and truck fuel economy by
70% between 1975 and 1988, though CAFE standards have not
increased for cars since 1985. Current California fuel economy
for California cars and light trucks are 27.5 mpg and 21 mpg
respectively. These averages have dropped a bit over the past
few years as Californians have purchased less fuel-efficient
vehicles.
In a May 13, 2005 letter to Congressman Pete Domenici, Chairman
of the House Energy and Commerce Committee, the Governor had
this to say about motor vehicle fuel efficiency:
Between 1970 and 1985 on-road fuel economy of cars and
light-duty trucks in California increased from 12.6
miles per gallon to 20.7 mpg as a result of federal
CAFE standards. Unfortunately, fuel economy has
actually decreased in recent years. Because CAFE
standards have been largely unchanged since 1985, most
automotive technological improvements to engines and
vehicles have been used to increase performance and
overcome gains in weight. To avoid the adverse
environmental and economic consequences of our
nation's dependence on foreign petroleum fuels, I
strongly urge Congress to take advantage of these
existing technologies and to establish national fuel
economy standards that double the fuel efficiency of
new cars, light trucks and SUVs.
Gasoline prices are at or near historic highs. California
efforts to reduce gasoline prices and price volatility have been
consistently unsuccessful.
COMMENTS
Increasing the CAFE standard will reduce gasoline and diesel
demand but will still keep transportation fuels totally
dependent on oil, most of which is foreign. A second,
complementary strategy is to manufacture transportation fuels
from non-petroleum sources. Typically these fuels are made from
agricultural crops, such as sugar cane, and blended with
traditional fuels. Brazil has made ethanol, derived from sugar
cane, a significant transportation fuel with Brazilian car
companies manufacturing vehicles that can operate on either
gasoline or blends of gasoline and ethanol.
Rather than establish fuel economy standards, some nations have
instead substantially increased taxes on transportation fuel.
Consequently gasoline in Western Europe costs more than double
what it costs in California.
An argument against increasing CAFE standards is that
individuals can make their own decisions about fuel economy.
When there is a demand for fuel efficient vehicles car
manufacturers will make them, as they have with fuel efficient
hybrids. As oil supplies grow short prices will increase,
raising gasoline prices and causing people to drive less while
further encouraging car buyers to purchase fuel efficient
vehicles. The weakness in this argument is that oil supplies
are tight and worldwide demand is increasing rapidly; demand in
China and India has doubled in the last ten years. This means
that prices could raise rapidly, a situation made worse because
much of the supply is held in politically volatile countries.
As evidence, consider that the price of oil has doubled since
2002. While the American economy seems to have weathered this
jump in oil prices, it's clear that individual motorists and
certain businesses are feeling the pain. Such pain can be
moderated for everyone by increasing fuel efficiency through an
increase in the CAFE standard.
In a sign that gasoline consumption is sensitive to price, at
least in the long term, sales of large, energy-inefficient SUV's
are down by about 10% since 2001; sales of Hummers were down 17%
last year.
The United States will always be dependent on foreign oil, as
Americans consume 25% of the world's oil but have less than 3%
of its proven reserves.
Related legislation: SB 757 (Kehoe) requires state agencies to
take all feasible and cost effective actions to reduce the
growth of transportation fuel consumption, increase
transportation energy efficiency, and increase the use of
alternative transportation fuels. This bill is pending hearing
in the Assembly.
ASSEMBLY VOTES
Assembly Floor (48-24)
Assembly Transportation Committee (9-4)
POSITIONS
Sponsor:
Author
Support:
Association for Commuter Transportation
Attorney General
California Air Pollution Control Officers' Association
California Alliance For Consumer Protection
California League of Conservation Voters
Planning and Conservation League
Sacramento Metropolitan Air Quality Management District
Sierra Club California
WalkSacramento
Oppose:
None on file
Randy Chinn
AJR 5 Analysis
Hearing Date: June 21, 2005