U.S. Senate Auto Fuel Plan Proposes 35 MPG by 2020

WASHINGTON, May 4, 2007; Reuters reported that auto makers will be required to ensure that their range of cars, SUVs, vans and pickups on U.S. roads achieve an average fuel consumption rating of 35 miles per gallon by 2020 under a compromise Senate proposal.

The measure unveiled on today, combinining aspects of several plans advanced by individual members, also requires that the fuel efficiency of cars and light trucks is boosted by 4 percent each year after 2020.

The target should be achieved as long as the Transportation Department concludes that it is technically and financially feasible, lawmakers said.

The proposal by Commerce Committee Chairman Daniel Inouye, a Hawaii Democrat, and Alaska's Ted Stevens, the panel's top Republican, gives industry -- including struggling U.S. automakers -- more time to meet the tougher standards than many lawmakers would prefer.

Committee members are expected to take up the plan next week.

The House of Representatives is working on a competing bill to also reduce gasoline use and tail pipe emissions.

U.S. automakers and their allies in the Senate will likely oppose key aspects of the proposed legislation.

For instance, the domestic industry has not supported calls to combine fuel efficiency requirements car and light truck fleets.

Cars get much better gas mileage than SUVs and pickups, which are the biggest sellers domestically for Ford Motor Co., General Motors Corp., and DaimlerChrysler AG's Chrysler Group.

Foreign rivals, like global sales leader Toyota Motor Corp., Honda Motor Co. Ltd, and Nissan Motor Co. Ltd. make more cars than trucks, making a combined fuel standard easier to achieve.

Currently, the light truck and passenger fleets meet separate targets under Corporate Average Fuel Economy (CAFE).

Trucks must get 24 MPG by 2011 while cars have had to average 27.5 MPG for years.

The Senate plan also proposes to eliminate a tax credit after 2009 that is most popular with manufacturers.

The break is given for production of vehicles that can run on both gasoline and alternative fuels.

But since ethanol-gasoline blends and other options to traditional fuel are not widely available, these dual-fueled vehicles predominantly run on gasoline.

Environmental and consumer groups have complained that the tax credit is a loophole that does not reduce oil use and should be cut entirely unless there is greater consumer access to alternative fuels.

American automakers have long resisted calls for significantly higher CAFE standards but congressional support for their position has weakened considerably due to global security concerns over imported oil and soaring pump prices.

Gas prices nationally have soared 10 cents over the past week to $2.97 a gallon and top $3.00 in some areas.

Gasoline demand accounts for nearly half of the average daily U.S. consumption of 20.9 million barrels of oil.