For decades when we were growing up we were enticed to save 10 percent of our income for the future. Part of that sales pitch was the line, “the magic of compound interest.” Therein lay our promise of future riches in retirement; a moderate amount of savings combined with the magic of compound interest could make everyone a millionaire in their lifetime. Then came the Financial Meltdown of 2008, and Ben Bernanke performed the real magic for those who had saved their entire lives: He made interest rates disappear.But by then we had a new and exciting phrase, “the magic of the marketplace.” This magic promised that if we just privatized everything the government has done correctly in the past — not to be confused with activities government has never been very good at — we would have better, more substantial and necessary goods delivered to the marketplace at lower costs. The only magical thing about that promise was that anyone believed it to begin with. “Free the Magic!”That was in line with constant drum that all government regulations were bad; to highlight the foolishness of many government regulations, corporations and lobbying groups handed the most egregious cases to the media. They always added the line that if one could just “free up the magic of the marketplace” by ridding us of these job-killing regulations, the economy would explode into exciting new heights. No one bothered to ask why when we ended so many regulations that the overall employment picture darkened. Ultimately, what we have come to believe after 30 years of being promised our lives would get better, and deregulated things made cheaper, is the exact opposite of our economic reality. We got rid of those “foolish” regulations on the commodities market and ended up paying far more than the supply and demand price for fuels, raw materials and food worldwide. The same can be said for electricity in our state. In 1996, former Enron president Jeff Skilling was quoted in the Fort Worth Star-Telegram as saying that 6 cents per kilowatt-hour was an “absurdly high” price for electricity. We were told, “the magic of the marketplace,” along with deregulation, could lower that price. Yeah, that didn’t happen either. Regulations v.2For three decades we allowed all automakers, not just Detroit, to put off higher fuel economy standards. This is because the automakers always claimed that they were spending billions to do just that, with or without the government’s demands. They would add that the public was really determining fuel efficiency; car companies were only building what their consumers demanded. True, when gasoline was 99 cents per gallon in 1999 few cared about mileage. When it hit $4.08 per gallon in 2008, for whatever reason those same customers became fickle. So the government, using its power to regulate industry, demanded much higher fuel economy in all vehicles. The car companies and their lobbyists, naturally, screamed, claiming that building such vehicles would cost customers untold thousands more per car — and even then, they could never build a family-sized automobile that delivered that 54.5 miles per gallon by the 2025 deadline, as the Obama Administration mandated in July of 2011.Oops. Over the Christmas holiday I was given the new 2014 Honda Accord hybrid electric to review for Fox Four’s Good Day. During the 10-mile in-town fuel economy test I did, that Accord delivered 56.2 miles per gallon. That’s almost identical to the highway mileage I achieved in the new Volkswagen Passat with VW’s TDI diesel engine. In case you were wondering, the 2014 Accord hybrid electric is not far off in price from the 2005 version — but it gets far superior mileage, so you actually pay less to drive it. Likewise, the superb 2014 Passat diesel is almost identical in price to the failed Passat diesel of a decade ago. Driving the new Accord hybrid, I flashed back to 1973; that’s when all the car companies went in front of Congress to beg for relief on the 1975 emission standards, saying they could not possibly meet the mandated deadline. But Honda showed up at that hearing, too, and announced that its CVCC engine was already 1975-compliant and ready to go into production. In 1973 Honda ruined other automakers’ excuses for not meeting the 1975 emission standards. In late 2013 Honda is inches away from the 2025 fuel efficiency standards and has ruined everyone’s excuses again. “New and Improved” Magic!Yet that wasn’t the big story of the last week of 2013. No, that honor went again to the push for natural gas-powered automobiles, this time again emphasizing the line that this fuel is a game changer for the automotive industry, including Class 8 Semi trucks. But the multi-year story line on that fuel has already changed — a fact that is conveniently missing from the PR blitz. After all, the fuel with the largest increase in prices on those deregulated commodity exchanges in 2013 was, you guessed it, natural gas, up 26 percent. At the same time, the price of diesel fell slightly in the market, along with that of gasoline. So it was time to go find the value calculators on the cost of operating a big rig truck, comparing CNG to diesel fuel. Freightliner has one such calculator on its website. Putting in a 5,000-mile round trip (slightly shorter than from Fort Worth to Quebec and back), using the $3.54 average price of diesel and getting 6 miles to the gallon, and comparing that to a GGE (Gasoline Gallon Equivalent) for natural gas and an average price — though natural gas prices can fluctuate by $1 per GGE in any given region — according to Freightliner’s website, the driver achieves only a $301 fuel savings for that round trip. But here’s where it gets more interesting; at another website, this one promoting the use of natural gas over other fuels, the calculator shows a $832 savings on fuel for the exact same trip. Which should one believe, numbers produced by the group promoting natural gas, or those of Freightliner, which has a fiduciary responsibility to its end users? Therein lies the problem: Too many promoters push “facts” that are in no way true, sidelining simple and obvious truths. One such truth is that natural gas, when leaked into the atmosphere, does 21 times more damage than carbon dioxide, yet it’s always pushed as the ultimate “green” alternative.Don’t be misled; I think there is a great future for natural gas-powered vehicles and trucks — just as there is also a great future for gasoline vehicles with much better fuel efficiency. It would just be nice to get rid of the hype and simply look at facts to determine our economic reality. Major Fact-Checker ShortageThen again, the dominant energy story for all of 2013 was “Saudi-America”, or how our country’s shale boom for oil and natural gas was altering the global equation for energy and would lead to far lower prices for these critical commodities. Yet with this glut of new energy on the market, natural gas prices rose 26 percent and the net cost of oil went virtually unchanged by the year’s end. And somehow that overshadowed a new Honda Accord that effectively doubled its in-town fuel efficiency and already comes within a hair’s breadth of meeting the 2025 fuel efficiency standards?One of these stories is all hype and promises that “the magic of the marketplace” will somehow produce value, which so far hasn’t materialized. The other spotlights a reality, a current and future value that consumers can own now. Guess which one is which?
© Ed Wallace 2014 Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism. He hosts Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. E-mail: email@example.com, and read all of Ed’s work at www.insideautomotive.com.