Friday, January 13, 2006

Hybrid vehicles and Fuel Economy

Hybrid automobiles have gotten a lot of publicity as a way of getting better gas mileage and reducing auto emissions and our dependence on imported petroleum. These newfangled autos gain mileage efficiency by providing supplementary energy from batteries that are recharged when the gasoline engine is operating. Their development is a consequence of government energy and environmental policies—plus the failure to develop a practical all-electric vehicle, which the government promoted for decades and wasted millions of dollars subsidizing. (It also pressured the auto companies to waste vast sums of their own money on that uneconomic project.)

No hybrid car has gotten more publicity than the Toyota Prius. But according to, the auto shopper site, the Prius retails for $9,500 more than comparable vehicles. calculates you would have to drive 66,500 miles per year or gasoline would have to sell for $10 per gallon for the Prius to be economic. Kazuo Okamot, Toyota’s own research chief, admits that in terms of fuel efficiency, “the purchase of a hybrid car is not justified.”

But isn’t it beneficial to the economy and the environment that hybrids consume less gasoline? Ironically, no. To the extent they reduce demand for gasoline by consuming less, hybrids keep the price of gasoline lower than it otherwise would be—thereby encouraging greater sales of SUVs and other gas guzzlers. Moreover, as Holman Jenkins pointed out in the Wall Street Journal, “Thanks to the special genius of our corporate fuel economy rules, Prius buyers directly underwrite Toyota’s ability to sell more SUVs and pickups in the U.S. market without paying the fines that Mercedes, BMW and Volvo long ago accepted as a cost of doing business in the U.S.”

Once again, government attempts to manipulate markets prove futile. Politicians, with inflated opinions of their own power, never seem to understand that they can’t re-write the laws of economics, which, like the tides of the ocean, are a reality of nature not subject to political control. The wisest politicians cannot allocate material and financial resources and direct human efforts as efficaciously as the natural order of the marketplace. Simply put: free markets always work better than government intervention.