What Mileage Rules May Not Mean
The Newport Daily News headline for this AP report pretty well captures the spin and points to the possible problem: “New mileage rules will save drivers at the pump.”
The rules will cost consumers an estimated $434 extra per vehicle in the 2012 model year and $926 per vehicle by 2016, the government said. But the heads of the Transportation Department and Environmental Protection Agency said car owners would save more than $3,000 over the lives of their vehicles through better gas mileage.
One would normally expect, as demand goes down, that prices would go down as well, owing to competition, but I’m not so sure that will be the case with a permanent reduction in the amount of fuel that people need for their cars. “Need” is the operative word, there. It takes a certain amount of infrastructure and investment to move gasoline from the ground to the pump, and since it’s not a product that consumers will be able to go without, even with better gas mileage, providers may adjust prices upwards to make up the difference.