Study: Cheap Fuel, High Fuel Economy Standards Could Cut 1.1 Million U.S. Jobs

Continued low fuel prices in the U.S. could eliminate at least 1.1 million jobs in the U.S. because consumers won’t buy the costly fuel-efficient cars being mandated by federal fuel economy rules, predicts the Center for Automotive Research in Ann Arbor, Mich.

CAR’s analysis challenges the government’s assumption that the estimated $200 billion in higher vehicle costs needed to double fuel economy averages by 2025 will be offset by fuel savings for consumers. But if fuel prices remain low, the industry faces “serious consequences,” according to the researchers.

CAR opines that chronically cheap fuel will prompt consumers to shun costlier but more efficient cars in favor of less efficient large trucks and SUVs. That will cause a slump in sales of high-tech, fuel-efficient cars, thus leading to job cuts across the industry.

The center analyzed the effect of nine variations of future fuel and vehicle prices. Its conclusion: The only combination that will lead to more production and employment pairs the highest fuel prices ($4.64 per gallon) with the lowest vehicle price increase ($2,000).

Sean McAlinden, CAR’s chief economist and lead author of the analysis, says the report underscores the importance of fuel prices as the government assesses the viability of its fuel economy target for 2025.