Despite the current lull in gas prices, fuel economy is something that we’re all familiar with. It’s hard to go very long in Canada without someone commenting on the price of gas, and how much it costs to fill up their vehicles.

Conventional wisdom would say that with all the technological breakthroughs that humankind makes on a regular basis, and the rate at which we see technology become obsolete through newer, faster, more efficient devices, that the fuel economy of our vehicles would be constantly improving.

Unfortunately, that’s not really the case. The photo included in this post is from a car advertisement in the UK at the peak of the 1980’s energy crisis. This ad, for a Peugeot 205, claims that it is able to get 72.4 MPG at a steady 90km/h, only dropping to 56 MPG at 120km/h. This isn’t a hybrid. It’s not some fancy prototype. It’s just a run of the mill production car from 1983 that uses less gas than even the most fuel efficient car on the market in Canada in 2008.

The problem is that we haven’t been incentivizing our car manufacturers in North America to produce fuel efficient vehicles. Since we drive pretty much the same vehicles as our neighbors to the south, I’m going to talk about US fuel economy standards, as it is their standards that really drive our fuel efficiency (in fact, Canada currently does not have binding fuel efficiency standards, just voluntary ones).

The Corporate Average Fuel Economy (CAFE) regulations in the US require manufacturers to meet an weighted average fuel economy, or else pay a fine. The weighted average means that if a company sells 10 cars that get 20 MPG, and 5 cars that get 30 MPG, then the weighted average of that car company is:

[(10 x 20) + (5 x 30)]/15 = [200 +150]/15 = 350/15 = 23.3 MPG.

In 2008, that average value had to be equal to, or above 27.5 MPG. For every 0.1MPG below that, the manufacturer must pay $5.50 per vehicle to the government. The problem is that is has been at 27.5 MPG for the last 18 years.

In 1978, the US Government enacted these standards to reduce dependence on foreign oil. In just 7 years, passenger vehicles were required to become 50% more fuel efficient. And guess what? They did. Auto manufacturers were able to meet that challenge because there was a penalty for not doing so. Since 1985, the US has mandated less than a 2% increase in fuel efficiency in passenger vehicles.

The result was that manufacturers didn’t have to focus on fuel economy any more. We made technology breakthroughs, and our cars became better, and even burn less gas per kilogram than before, but they have become heavier, faster, more powerful, and unfortunately no better in terms of gas mileage.

Both Japan and Australia have implemented fuel economy standards that will require vehicles to be almost 30% more efficient than those in North America for 2010. Europe goes even further, with standards in place that will make cars over 50% more fuel efficient my 2012.