Investing in the past

Back in 2003, the U.S. Environmental Protection Agency implemented tough new emissions rules for diesel cars and trucks. At the time, most of the industry said the EPA’s goal of reducing diesel emissions by 95 percent couldn’t be done, and that forcing companies to meet the new standard would wipe out the industry.

Of course, it didn’t work out that way. Instead, the new rule is not only helping to clear American skies and improve public health, it has forced American companies to do something they do well when forced to by regulation or the marketplace— innovate. And it led to a diesel engine industry in the U.S. that is better able to compete in a global marketplace because of it. Volkswagen was caught cheating on emissions tests a couple years ago because American engine manufacturers had beat them in the innovation game. Innovation makes American products more attractive to consumers, and not just in the U.S.

That’s why the Trump administration’s moves to weaken automobile mileage standards won’t help the U.S. auto industry, or create new American jobs. In fact, they’ll do exactly the opposite.

There’s little doubt what’s behind the Trump administration policy agenda. President Trump has filled his cabinet with representatives of the fossil fuel industry— people like former Exxon CEO and now Secretary of State Rex Tillerson, and Trump’s new EPA chief Scott Pruitt. Pruitt may have previously held the title of Oklahoma attorney general, but in that capacity he was little more than a litigator for the oil and gas industry.

More than two-thirds of the oil produced globally goes to fuel cars and trucks. High fuel economy certainly doesn’t harm consumers, who save money at the pump, nor does it hurt manufacturers, who can tout fuel efficiency in their sales pitches. But the push for higher mileage standards has had a significant impact on the oil industry, which has experienced softer demand as the world’s auto fleet grows increasingly more efficient. Among other things, you can thank stricter mileage standards put in place by the Obama administration for the price of gas at the pump today.

For the oil industry, these are perilous times. The automobile industry is in a period of transition, and high mileage and electric vehicles are increasingly positioned to eventually dominate the industry globally. While sales of electric vehicles are still relatively sluggish in the U.S., that’s not the case in China or Europe, where government regulations are aggressively encouraging the transition, and consumers are buying huge numbers of electric vehicles or highly-efficient hybrids. Sales of electric vehicles grew 60 percent globally in 2016 alone, and that trend is expected to continue for the foreseeable future. As the transition accelerates, demand for oil will fall. That, combined with the growing realization that we can’t pump all the world’s fossil fuels without overheating the planet, means the end of the age of oil could well be within sight.

The Trump administration, in other words, is betting on the losers in history rather than the winners. It’s like propping up the horse and buggy industry at the dawn of the automobile age.

Americans remember what happened to the automobile industry when left to its own devices. We saw it in the 1970s and 1980s, when Detroit turned out junk and Americans increasingly turned to imports, leaving the U.S. auto industry in dire straits.

Thanks in part to government regulations that forced U.S. automakers to invest in safety, quality, and fuel efficiency, the U.S. auto industry is back and competing on the global stage. But it won’t stay there long without a continued push from Washington. Gas may be cheap in the U.S., which is encouraging Americans to buy bigger vehicles again, but that’s not the case in the rest of the world, or even in large domestic markets like California, where fuel taxes keep gas prices high and government incentives make electric vehicles attractive. If the U.S. auto industry is going to remain viable, it needs to manufacture vehicles for that global market.

The good news is that most industry leaders understand this, even if President Trump and his oil industry minions don’t. That’s why Trump’s planned rollback of mileage standards probably won’t matter that much in the end. The U.S. industry has experienced the benefits of innovation and they know they can’t be left behind as the global auto industry transitions to a future of high mileage and electric vehicles. Washington should be encouraging that transition and the innovation that will come with it— innovation that will help American industry and American workers. Unfortunately, the Trump administration seems content to stand in the way.