Wednesday, 20 May 2009

Obama Would Support Auto Incentives for Consumers


WASHINGTON -- The Obama administration would support the idea of giving consumers additional incentives to buy fuel-efficient vehicles, a White House official said Tuesday.
The White House would likely favor tax credits for vehicle purchases over any proposal to raise the 18.4 cents-a-gallon federal gas tax, as many industry officials and transportation experts have recommended.
"We fought for the $7,500 tax credit for the purchase of advanced technology vehicles in the Recovery Act," the official said, and "our administration remains committed to policies to help bring the costs down" for consumers.
Industry officials in recent days have expressed concern that consumers might balk at paying a premium for costlier, more fuel-efficient cars and trucks if gas prices don't rise to $4 per gallon or more in the years ahead.
The administration estimates fuel-economy regulations will add $1,300 on average to the price of new cars by 2016, but President Barack Obama on Tuesday said fuel savings would offset those costs for the typical motorist in three years. As part of a broader climate change bill, House lawmakers are debating a "cash-for-clunkers" proposal that would encourage consumers to trade in older, less efficient cars and trucks for newer, more efficient models. The proposal's future remains uncertain.
But industry officials have seen consumer tastes whipsaw from sub-compact and hybrid cars last summer - when gas prices soared over $4 per gallon -- back to larger vehicles this year when pump prices plunged.
"If prices are $4 per gallon, I think the math is pretty straightforward for consumers," said Dave McCurdy, president of the Alliance of Automobile Manufacturers, a Washington-based trade group that participated in the negotiations that led to the fuel economy agreement. "If we don't have prices like that, government is going to have to provide more incentives to help overcome the upfront cost differential of this new technology."
Write to Christopher Conkey at

EcoBoost steers US towards a greener future

By Bernard Simon in Toronto
Published: May 19 2009 16:53

As President Barack Obama outlined new rules at the White House on Tuesday to toughen US fuel-economy and vehicle-emission standards, Ford Motor executives were celebrating the reopening of a mothballed plant in Cleveland, Ohio, that will produce the carmaker’s new EcoBoost engine.
The timing of the Ford event was a happy coincidence. EcoBoost uses turbo-charged direct-injection technology to improve fuel economy by up to a fifth and lower carbon-dioxide emissions by 15 per cent.

The engine is an example of the investments that carmakers are likely to make on a growing scale over the next few years to comply with the new rules.
Under the regulations, each carmaker’s fleet will be required to achieve an average fuel economy of 35.5 miles per gallon by 2016, four years earlier than the current law requires. The new rules will also for the first time require a reduction in greenhouse-gas emissions.
Motor industry executives and their supporters, who had previously resisted an acceleration of the targets, have reacted enthusiastically to the tighter rules.
Chrysler, which is forging an alliance with Italy’s Fiat through court-supervised bankruptcy proceedings, said that “with regulatory clarity and certainty, Chrysler and Fiat will now be able to concentrate their resources on developing a nationwide fleet of clean, fuel-efficient vehicles that will help support its revitalisation”.
John Dingell, a Michigan Congressman who is one of the Detroit industry’s closest allies in Washington, described them as “aggressive, but obtainable”.
One big benefit for the carmakers is that the new standards will replace the threat of a widening patchwork of regulations drawn up by two federal agencies – the National Highway Traffic Safety Administration and the Environmental Protection Agency – and various states, led by California.
Furthermore, Eric Fedewa, analyst at CSM Worldwide, predicts that the new regime will bring “huge opportunities” for parts suppliers to win business with a wide range of newly designed components – from transmissions to pumps and hoses.
Another relatively inexpensive way to reduce petrol consumption, vigorously pursued by the three Detroit carmakers in recent years, is to build more biofuel-enabled cars.
Several General Motors, Ford and Chrysler models are already equipped to run on an ethanol-petrol mixture, known as E85. But these vehicles have been slow to catch on. Only a few thousand filling stations carry E85.
The new standards will accelerate the push towards electrification not only of vehicles, but also of components and systems in petrol-powered vehicles.
As Mr Fedewa puts it: “if you make 15, 20 or 30,000 plug-in hybrids a year with 100 miles per gallon, that’s going to be a very effective way of bringing your fleet into compliance”.
Copyright The Financial Times Limited 2009

Scotland's wind power firms urged to set sights on China

Published Date: 20 May 2009
By Frank Urquhart

ONE of Scotland's leading renewable energy organisations will today urge the country's green energy companies to grab a lion's share of the rapidly expanding wind power market in China.
In an address to delegates at the opening day of the All Energy '09 exhibition and conference in Aberdeen, Iain Todd of the Aberdeen Renewable Energy Group (AREG) will claim it is vital to seize the "substantial" business opportunities in the Far East to reinforce Scotland's status as a global energy leader.Mr Todd, AREG's renewables champion – who recently attended the Global Wind Energy Conference in Beijing – said yesterday: "China is the fastest-growing market in installed wind ener-gy and there is little doubt it is working towards becoming the dominant nation in this sector as it currently is in other renewable technologies like solar thermal."The country doubled its wind energy capacity in 2007, while the government recently tripled its 2020 target for installed wind to 100,000 megawatts."He continued: "As in many sectors, plans and projects in China are on a scale which tends to dwarf activities elsewhere but Scotland should see this as a significant opportunity to demonstrate and capitalise on its wealth of capabilities. "One of the most exciting opportunities is China's plans for offshore wind farms where, if acted upon quickly, Scottish expertise could have a central part to play."Meanwhile, it was revealed yesterday that a record number of 45 renewable energy companies, based in the Highlands and Islands, will be joining more than 350 exhibitors from across the globe at this year's annual energy showcase at the Aberdeen Exhibition and Conference Centre.

New training centre will focus on renewable energy skills

Published Date: 20 May 2009
By John Ross

SCOTLAND's first training centre for the installation of micro-renewables is to be set up.
Inverness College, which is part of the prospective University of the Highlands and Islands (UHI), will work in partnership with Community Energy Scotland and Highlands and Islands Enterprise.The new centre will be funded through CARES, the Scottish Government's Communities and Renewable Energy Scheme, delivered by Community Energy Scotland.It will work with local businesses on a range of issues relating to the small-scale renewable energy and low carbon market. This could include the installation of micro-renewables, the design and construction of sustainable buildings or the development, testing and manufacture of renewables kit.The college, which has a demonstration wood chip boiler heating its campus at the Scottish School of Forestry, will also be offering a BSc in sustainable construction from September 2009.Angus Macleod, head of the forestry school, said: "Inverness College has been at the forefront of micro-renewables installation training in Scotland for some years."The establishment of the centre will allow us to build on this position."The range of courses available for tradesmen and professionals will ensure that businesses in the Highlands and beyond are able to develop their skills and capitalise on the opportunities presented by renewable energy."Colin Grant, HIE's senior development manager, said it is vital that businesses and individuals in the Highlands and Islands who want to learn new renewables skills, to allow them to work in this fast growing industry, can do so locally."

‘False debate’ of food versus biofuel

By Clive Cookson in Atlanta
Published: May 19 2009 16:43

New technology will enable the US to increase the production of biofuels rapidly without jeopardising food output, the biotech industry said on Tuesday.
At the annual Biotechnology Industry Organisation’s meeting in Atlanta, Georgia, companies said they were poised to commercialise “advanced biofuels” made from cellulose. This comes from non-food crops such as fast-growing grasses or from inedible parts of food crops such as stalks and husks. Today’s biofuels come from edible starches and sugars, derived mainly from sugarcane and maize.

Brent Erickson, head of Bio’s industrial and environmental section, said the target set by the new National Renewable Fuel Standard – to increase production of cellulosic biofuel from nothing this year to 1bn gallons in 2013 and 16bn gallons in 2022 – was achievable.
He praised US president Barack Obama’s initiative to stimulate renewable fuel production, including $786m (€577m, £507m) in new federal support for bio-refineries. “The food versus fuels argument was a false debate,” said Mr Erickson. “We can produce all the food we need and all the fuel we need. Advanced biofuels use up the residues of food crops, and we are also seeing dedicated biofuel crops going into land that was used for cotton.”
New technology uses enzymes and micro-organisms to break down tough molecules such as cellulose in grasses and lignin in wood, producing ethanol and other liquids for use as fuels that can replace petrol (gasoline) or diesel for transport. Jack Huttner, who runs a cellulosic ethanol partnership between DuPont of the US and Danisco of Denmark, said: “From our point of view the technology is ready for commercialisation. It is no longer five years from the market.”
Copyright The Financial Times Limited 2009

Daimler to Buy Stake in Electric-Vehicle Company Tesla


Daimler AG said it will buy a 10% stake in Silicon Valley electric-vehicle start-up Tesla Motors Inc., boosting its presence in the field of alternative drive systems.
The investment will earn Daimler a seat on the board of the venture capital-backed U.S. company. The German auto maker would only say it's paying a sum in the double-digit millions of euros. Tesla's investors will likely welcome the deal with Daimler, which brings a needed endorsement from an established auto maker as well as a partner offering deep pockets, a path to market and technical expertise.
The company is a fringe player in the global automotive business, selling sporty, all-electric two-seat roadsters for $109,000 apiece. The San Carlos, Calif., company is developing a sedan, the Model S, slated for 2011 and priced at $57,400. Tesla Chief Executive Elon Musk said the tie-up with Daimler is mainly motivated by industrial reasons rather than financial.
The two companies are already cooperating to integrate Tesla's lithium-ion battery packs and charging electronics into the first 1,000 electric versions of Daimler's tiny Smart car. As part of the deal, Daimler and Tesla will collaborate more closely on the development of battery systems, electric-drive systems and individual vehicle projects. Mr. Musk is also hoping to make use of Daimler's engineering, production and supply chain expertise to speed development of the Model S sedan.
"Our strategic partnership is an important step to accelerate the commercialization of electric drives globally," Daimler's research and development chief, Thomas Weber, said at a press conference in Stuttgart.
The move is part of a wider effort by Daimler to foster lithium-ion technology. In March, the company founded Deutsche Accumotive GmbH, a joint venture with Evonik Industries AG, making it the first vehicle manufacturer that develops, produces and markets batteries for automotive applications.
Daimler plans to introduce its first battery-powered Mercedes-Benz car next year. By 2012, Daimler aims to have its own lithium-ion batteries in all of its battery-powered Smart and Mercedes-Benz vehicles.
Write to Christoph Rauwald at and Mara Lemos Stein at

Curbing gas guzzlers is the easy part

Obama's new fuel efficiency standards are ambitious and welcome. But they alone won't combat climate change

Brian Beutler, Tuesday 19 May 2009 18.30 BST

The good news first. The Obama administration's proposal for new vehicle emissions and fuel economy standards are extremely ambitious. And this isn't just ambitious in the way Obama's entire agenda is ambitious but sadly susceptible to the whims of Congress.
Today, Obama has the support of industry (predictably, I suppose, since he all-but-owns Detroit auto manufacturers) and of the relevant politicians in Washington DC and Michigan, so the new standards face no real opposition.
Over time, they will make an appreciable and badly-needed dent in the amount of greenhouse gas pollution Americans emit each year – something which can be celebrated equally by environmentalists and commuters who will now stand to save on fuel in the long term.
But now for the bad news. Actually, there is no bad news. Or, at least, no more bad news than there was last week. Today's announcement represents an important step forward, but it's also a relatively easy one given the political realities of the moment. And it doesn't really bring us any closer to what we desperately need to combat global warming: an economy-wide plan to price carbon emissions.
More on that in a second, though. First, let's focus on what fuel economy (Cafe) standards actually do. As far as reducing greenhouse gases goes, Cafe standards are an important, but slow-moving weapon in the policy-maker's arsenal. The standards announced today will require American cars built seven years from now (if, of course, there are any) to be significantly more fuel efficient than cars built today. But they don't do anything to address the cars on the road right now, many of which will be in working condition for years to come.
One way to get commuters to make the switch sooner would be to impose higher taxes on fuel. But such taxes aren't on the table, and without them the Cafe standards can only really limit peoples' options, not really change their behaviour. And drastic changes in behaviour – beyond the realm of individual drivers – is what the country and the world really needs. And cap-and-trade would provide that push.
Now there's a danger here of conflating the two policies, and on this point, Mother Jones blogger Kevin Drum offers an important caveat:
As important as [cap-and-trade] is … I think of it as sort of like a headwind, something that helps get all the ships moving in the right direction. But that's not enough. There are plenty of other currents and eddies and storm systems that, individually, aren't as important as pricing carbon, but put together are actually far more important. Mileage standards for cars are one of them: pricing carbon can help motivate people to drive less and buy stingier cars, but federal Cafe standards can do it a lot faster and a lot more efficiently. Cap-and-trade is no substitute.
And that's entirely true. By pricing carbon, a cap-and-trade programme would have a tremendous number of beneficial second- and third-order ramifications, from incentivising clean energy at the provider level, to making individuals more efficiency minded and on and on down the line. Its passage would signal the beginning of the greatest overhaul of the country's economy in perhaps a century.
But unlike a direct tax on gasoline, it would do little on its own to change peoples' driving habits, or to immediately reduce the price of renewable forms of energy, and that's where ancillary policies like increasing Cafe standards come in handy.
The problem is, there's no way to tell how much a patchwork of such ancillary policies will decrease emissions in the absence of a mandate for specific reductions – a cap-and-trade programme. Such a policy is one of Obama's highest priorities, but is also almost certain to be the greatest domestic political challenge of his first term. And he needs to get it done well before that first term comes to an end.
Right now, one such bill (the so-called Waxman-Markey bill) is making its way through the House of Representatives, where it's already hit some significant bumps. And that's well before it reaches the Senate where it will be subject to a supermajority requirement and, therefore, the whims of dirty energy producers and soi disant centrists in both parties, who will either weaken it further or kill it entirely.
So yes. Today's news is welcome news. In fact, it's better than welcome news. It's a concrete sign that Obama plans to do something with his power to regulate carbon emissions. But it's a sideshow to the events in Congress, which, though promising in their own right, are also much less auspicious.

US auto emissions

Published: May 19 2009 14:56

Obama administration officials touted the tougher car mileage standards announced on Tuesday as “truly historic”. A historic missed opportunity is more like it. A popular president with a green agenda and with his party in control of Congress could have taken the direct approach to reducing America’s carbon footprint by raising the lowest gasoline taxes in the developed world. Detroit, which traditionally lobbied against fuel taxes, is suddenly in no position to argue. Instead, Barack Obama is tightening the flawed corporate average fuel economy standards imposed in 1975.
CAFE forces manufacturers to meet targets for their entire fleet or pay fines but does not reduce miles driven. More expensive gasoline would influence which cars are bought and the use of existing ones. The Congressional Budget Office estimated that a 46-cent-a-gallon tax increase would achieve a 10 per cent reduction in demand. A separate study at Stanford University calculates that direct taxes can achieve an equivalent reduction to CAFE at one-sixth the cost. And CAFE standards have had unintended consequences. By making “light trucks” a separate category, it encouraged a boom in the large vehicles that became Detroit’s cash cow, at least until recently.

For an administration ready to spend billions on a “cash for clunkers” programme, its policies are inconsistent. Higher CAFE standards could add $1,300 to the cost of a vehicle, incentivising consumers to keep older, inefficient ones. By contrast, raising pump prices would have an immediate impact on miles driven and make gas guzzlers unattractive. But Washington is run by politicians, not economists. A subsidy for buying new cars is viewed by voters as a gift, even though they ultimately foot the bill. Tinkering with CAFE rather than taxes, creates the illusion among voters that costs are borne by someone else whereas the effect of an increase in pump prices is felt directly. Strong CAFE is not preferable to bitter medicine.

Obama Says New Car-Fuel Rules Give Industry 'Certainty'


WASHINGTON-- President Barack Obama said new government rules designed to boost fuel efficiency and slash greenhouse-gas emissions will give auto makers "clear certainty" at a time when their business is enduring a "historic crisis."
"In the past, an agreement such as this would have been considered impossible," Mr. Obama said in a speech in the Rose Garden, where he was joined by auto executives, state governors and car-union officials.
"At a time of historic crisis in our auto industry... this rule provides the clear certainty that will allow these companies to plan for a future in which they are building the cars of the 21st century," the president said.

WSJ's Dennis Berman and Evan Newmark discuss the impact of new fuel-efficiency standards and what they believe may be the inevitable bankruptcy of Big Three auto maker General Motors.
The rules would require new passenger cars sold in the U.S. to meet an average mileage requirement of 39 miles per gallon by 2016. Light trucks would have to deliver an average of 30 mpg. That's a dramatic rise from current averages--27.5 mpg for cars, 23 mpg for trucks--and would bring the overall average of cars and light trucks to 35.5 mpg by 2016, four years earlier than current federal law requires.
"Right now the rules governing fuel economy in this country are inadequate, uncertain and in flux," Mr. Obama said.
The new standards also resolve a dispute between the auto industry and California, which is seeking a waiver from the federal government to set its own rules on greenhouse-gas emissions from vehicles. California officials have agreed to defer to the national standard if they win the waiver.
Green groups applauded the administration announcement as a significant step toward addressing global warming and achieving energy independence. The Union of Concerned Scientists said it expects the plan to slash the U.S.'s dependence on oil by about 1.4 million barrels a day by 2020, almost as much as daily imports from Saudi Arabia. A UCS analysis also suggests that carbon-dioxide emissions would be cut by 230 million metric tons by 2020, and net savings to consumers would reach $30 billion by 2020, based on a gas price of $2.25 a gallon.

But the rules also will raise the cost of manufacturing new vehicles at a time when the auto industry is struggling, and Chrysler LLC is in bankruptcy, where it may soon be joined by General Motors Corp. Still, car makers have signaled support for the new standards, which would likely bring an end to long-running court battles with states over emissions and bring the regulatory certainty of a single national fuel-economy regulation.
Ford Motor Co. CEO Alan Mulally called the new rules a "crucial milestone."
"The framework of the national program will give us greater clarity, certainty and flexibility to achieve the nation's goals," Mr. Mulally said in a statement. "We will continue to work with the federal agencies to finalize the standards that we are committed to meeting."
An administration official said Monday that the cost of making a new vehicle will increase by $600, a cost the White House believes will be offset later by savings at the pump.
Mr. Obama said Tuesday that consumers who invest in the vehicles will pay off their investment in three years.
Unlike under existing rules, auto makers won't be able to boost the fuel efficiency of some models while leaving others untouched. That's because standards will be set for each vehicle size and manufacturer.
Questions remain over how the government can persuade car buyers to purchase the greener and more expensive vehicles, particularly if gas prices remain relatively low.
"U.S. consumers, despite their responses to surveys saying they would like their vehicles to achieve better fuel economy, truly do not have the same inclination for small cars as their European or Asian counterparts, given that the tax and cost structures of vehicle usage in the United States are completely different," IHS Global Insight automotive analyst Aaron Bragman wrote in a report.
"Thus, the government is going to have to come up with a way to entice people to buy the next generation of fuel-efficient cars, either through taxation changes or incentivisation of purchases," Mr. Bragman wrote.
--Josh Mitchell contributed to this report.
Write to Henry J. Pulizzi at

U.S. Orders Stricter Fuel Goals for Autos


WASHINGTON -- The Obama administration plans to order auto makers to increase the fuel economy of automobiles sold in the U.S. to 35.5 miles per gallon by 2016, four years faster than current federal law requires, people familiar with the matter said.

President Obama is scheduled to announce a series of new regulations for the auto industry, but as Fox's Doug Luzader reports, those new standards will come at a cost. Video courtesy of Fox News.
The move, part of a broader overhaul of fuel-economy rules aimed at cutting greenhouse-gas emissions, would accelerate the largest government-mandated transformation of vehicles on the American road since the late 1970s and early 1980s, when the first federal fuel-economy standards took effect.
A senior administration official said late Monday that the regulations would save 1.8 billion barrels of oil and reduce emissions of greenhouse gases by 900 million metric tons over the lifetime of the more efficient vehicles, equivalent to taking 177 million cars off the road or shutting down 194 coal-fired power plants.
By 2016, if the new rules take effect as planned, new passenger cars sold in the U.S. will have to meet an average mileage requirement of 39 mpg, up from 27.5 mpg currently. Light trucks would have to deliver an average of 30 mpg, compared with about 23 mpg today.

Plans to speed up tougher mileage requirements for autos sold in the U.S. should increase sales of gas-sipping cars, such as Toyota's Prius hybrid.

In practice, the new mileage rules would mean that seven years from now many more cars for sale in the U.S. would be gas-electric hybrids or subcompacts, such as the Honda Motor Co. Fit, outfitted with fuel-stingy engines. A truck capable of averaging 30 miles per gallon probably would be equipped with a gas-electric hybrid or a diesel engine. Even trucks the size of today's Ford Motor Co. Escape do not deliver that fuel economy.
The technology required to make the cars and trucks able to meet the proposed standard could add $1,300 to the average cost of making a vehicle -- a significant share of the money Detroit's auto makers are trying to save by slashing their union retiree health care costs.
Disclosure of the agreement is expected Tuesday, with executives from several large auto companies, including General Motors Corp. Chief Executive Frederick "Fritz" Henderson, as well as United Auto Workers President Ron Gettelfinger, expected to participate, people familiar with the matter said.

Auto makers tentatively have agreed to drop litigation challenging the legality of state-level curbs on tailpipe greenhouse-gas emissions, people familiar with the matter said. They appear ready to support the more aggressive timetable in exchange for the certainty of a single national fuel-economy standard, instead of a jumble of federal and state standards. The state of California also will agree to accept the proposed federal standards.
But regulatory certainty by itself doesn't bring market acceptance or technology breakthroughs. Among the risks that auto makers and dealers face is the need to produce and maintain a highly efficient fleet of hybrids, electric cars and advanced gasoline engines at prices that customers can afford.
Auto makers on Monday said they were awaiting more information on how the new standards would be applied and what assistance they may receive to meet the tighter timeline. In the past, for instance, auto makers received credits toward meeting fuel-efficiency standards even when the average efficiency of their vehicles fell short.
"If gasoline is cheap, there's going to be a huge disconnect" between the vehicles available and what consumers will want, argues AutoNation Inc. Chief Executive Mike Jackson. He has long advocated a higher federal gasoline tax to ensure that gas prices stay above $4 a gallon, the level that drove demand for small cars last summer.
Currently, the federal gas tax is 18.4 cents a gallon for gasoline and 24.4 cents per gallon of diesel. President Barack Obama has said he isn't interested in raising fuel taxes, and the senior administration official said Monday that the administration is confident that auto makers will be able to continue to offer and sell a wide range of vehicle types without having to rely on government incentives such as tax credits.

The decline in gas prices from last summer's record highs has revived demand for large sport-utility vehicles. In April, such vehicles accounted for 4.4% of all vehicles sold in the U.S., compared with 3.8% in April 2008, when fuel prices were higher. Meanwhile, compact cars -- which accounted for 22% of all vehicles sold in the U.S. in May 2008 -- made up just 16.8% of new vehicles sold last month.
"With this type of volatility, you can't effectively plan your product lineup for the next several years and hope to make money as an auto maker," said Jesse Toprak, executive director of industry analysis for, a Web site that tracks auto sales. "If the government wants to be realistic, it has to come up with incentives for people to buy fuel-efficient vehicles."
Complicating matters for the administration are the financial struggles of Chrysler LLC, which is now receiving government funding under bankruptcy-court protection, and GM, which has said it could file for Chapter 11 bankruptcy at the end of May.
The costs of meeting the new standard would be high. The Transportation Department last year estimated that requiring auto makers to achieve 31.6 mpg by 2015 would cost the industry $46.7 billion, among the most expensive rule makings in U.S. history.

Dave McCurdy, president of the Alliance of Automobile Manufacturers, said on Monday, "Unless there's a huge spike in the price of gasoline...there will have to be incentives from the government" to encourage consumers to buy advanced-technology vehicles at prices that will return a profit to manufacturers.
The Obama administration's action accelerates a drive to dramatically change the size, shape and fuel consumption of American cars and trucks that started gathering steam in the final year of the Bush administration. President George W. Bush signed an energy bill in December 2007 that called for the first significant increase in passenger-car fuel economy in more than two decades.
Under the plan being considered, the Environmental Protection Agency and the Department of Transportation would work together on the rules raising fuel-economy standards and reducing greenhouse-gas emissions. It is unclear how quickly the EPA and the National Highway Traffic Safety Administration will be able to make a formal proposal for curbing emissions and boosting fuel economy.
Write to Stephen Power at and Christopher Conkey at

Fuel Standards Could Augur Market Shift


HOUSTON -- The Obama administration's toughening of fuel-efficiency standards is poised to knock U.S. gasoline demand lower in coming years and could help steer oil supplies to faster-growing economies in the developing world.
The new regulations, unveiled late Monday, are part of a broader policy to curb emissions of greenhouse gases and cut dependence on foreign-oil imports. The rules have vast implications not only for refiners, which have long faced the specter of falling U.S. demand, but also for global energy markets. The U.S. consumes about a fourth of the world's petroleum supply.
"When we move, the market moves with us," said Kenneth Medlock, an energy economist at Rice University in Houston.
Under the new rules, new passenger cars sold in the U.S. would have to meet an average mileage requirement of 39 miles per gallon by 2016. Light trucks would have to deliver an average of 30 mpg. That would bring the overall average of cars and light trucks on U.S. roads to 35.5 mpg by 2016, four years earlier than current federal law requires.
In a speech Tuesday, Mr. Obama said the new rules would save 1.8 billion barrels of oil over the lifetime of vehicles sold in the next five years.
The administration's move reinforces a secular shift in the U.S. gasoline market, which, after growing for more than a century, is beginning to show a slow decline on greater efficiency, changing consumer habits and biofuel mandates.
Daniel Yergin, head of energy consultancy IHS Cambridge Energy Research Associates, estimates that U.S. gasoline consumption peaked in 2007, and said the upcoming efficiency standard "reinforces the trend."
"It further highlights what has been clear over this decade: Growth markets for oil are not going to be in the developed world -- they are going to be in the emerging markets," he said.
Energy Security Analysis Inc., or ESAI, estimates that the new standards will curb U.S. demand by 350,000 barrels a day by 2016 and 750,000 barrels a day by 2020.
It's unlikely, though, that these demand reductions will result in dramatically lower global oil prices, as growing consumption in Asia will pick up the slack, said Greg Priddy, an oil market analyst with the Eurasia Group.
"Prices will be a little bit lower than they would otherwise have been, but you'll end up with more cars in China," he said.
Still, an acceleration in the drop of gasoline demand would add pressure to refiners, which are already looking for ways to increase diesel production as gasoline use declines. Diesel demand is expected to remain strong thanks to its use by the long-haul transportation fleet and by the fact that car makers could more easily reach the new efficiency targets by adopting diesel.
Refining companies say that they will have nearly a decade to adjust to the new standards because the U.S. vehicle fleet won't be able to change overnight.
"It's not a shotgun start," said Mike Jennings, chief executive of Frontier Oil Corp.
Although the impact on the demand will be substantial, "it won't put anyone out of business," said Sander Cohan, a transportation fuels analyst at ESAI in Wakefield, Mass.
Write to Angel Gonzalez at and Susan Daker at