The United States has lowered vehicle fuel efficiency standards
The United States is about to implement lenient fuel regulations, reducing the energy-saving requirements for automakers. As a result, the long-term demand for automotive fuel is expected to rise.
The policy has been implemented, and the differences between the old and new fuel standards are significant.
The US Department of Transportation is scheduled to officially announce the new vehicle fuel economy rules on Monday. This set of regulations will apply until 2031, and the overall standards will be lowered. The policies during the Biden administration aimed to force automakers to accelerate their efforts in developing electric vehicles and gradually increase fuel efficiency year by year. From 2024 to 2025, the efficiency of vehicle models would increase by 8% annually, 10% in 2026, and a 2% increase each year from 2027 to 2031. According to this standard, the average fuel consumption of the entire fleet in the United States would need to reach 50.4 miles per gallon by 2031.
The plan proposed by the Trump administration has a completely different pace. The new regulations start to lower the standards from the 2022 model year, and by 2031, the efficiency will only increase slightly by 0.25% to 0.5% each year. The average fuel consumption target for the fleet in 2031 is only 34.5 miles per gallon. The policy design concept is very straightforward, reducing the technical investment pressure on car manufacturers and the average price of new cars is expected to drop by $930. Policy supporters believe that lower purchase costs can alleviate the financial pressure on ordinary families.
The expected energy consumption behind the policy.
The data shows that this lenient standard will lead to a long-term increase in oil consumption. It continues to be projected until 2050, with cumulative fuel consumption increasing by 100 billion gallons, and total fuel expenditure for the public increasing by $185 billion, with carbon dioxide emissions rising by 5%. The consumption of automobiles is a slow-release process, and the replacement cycle of existing cars is very long. However, far-month contracts are different. Funds will start to re-evaluate the long-term demand ceiling for gasoline in the United States.
The lenient policy is equivalent to raising the lower limit of future gasoline demand, bringing a continuous bullish expectation for future contracts. Currently, the US market is already in a high oil price environment. After the outbreak of the US-Iran conflict, domestic gasoline prices have continued to rise since the end of February. At a time when oil prices are already relatively high, relaxing fuel standards will cause the market to worry that oil consumption will further increase, exacerbating the global oil supply-demand imbalance.
Strict fuel standards will force automakers to invest more production capacity in electric vehicles and reduce production plans for large-displacement gasoline vehicles. Once the standards are relaxed, automakers will have more room to produce passenger cars and pickups with lower fuel efficiency. These types of vehicles have higher fuel consumption per vehicle. After the purchase threshold decreases, the market acceptance of gasoline vehicles will be supported. More consumers will choose gasoline models rather than switch to electric vehicles.
The lenient policy has sparked controversy, and gasoline prices have received support.
The policy has caused a heated controversy. Some believe that easing fuel standards is essentially slowing down the transition to clean energy in the United States. The development pace of the American electric vehicle industry will be hindered, and the competitive edge in related clean technology fields will weaken. On the other hand, short-term traders have different opinions. They believe that the technological iteration of electric vehicles and the competition from overseas new energy vehicles will still change the market. Even if the restrictions on domestic fuel vehicle production in the United States are relaxed and the cost of electric vehicles decreases, they will still take market share from fuel vehicles.
The price trend of gasoline futures often depends on the gasoline cracking spread, which is the price difference between gasoline and crude oil. In the short term, refinery operations, seasonal travel demand, still dominate the near-month futures price of gasoline. During the summer travel peak season, gasoline consumption surges. During the winter, demand declines and prices weaken. These seasonal patterns will not be directly changed by the new regulations.