# If Americans drive more and consume more oil, why are cars less efficient?

According to this figure from the Center for Climate and Energy Solutions, US, Canada, or Australia car fuel efficiencies are considerably lower than those for Europe or Japan:

At the same time, cities in US, Canada, and Australia, are far more spread out than in Europe or Japan. There is more car dependency and people drive more and longer distances in North America.

Then why are fuel efficiencies so much lower? I would think that it makes sense to market the most fuel efficient cars in the market where people drive the largest distances. And as the automobile market is quite globalised, even if it's European regulations requiring manufacturers to develop cars with higher fuel efficiencies than North American regulations, it would make economic sense to sell the same cars in North America.

What is the economic reason for the observed pattern?

• (I'm not quite sure if this is really an economics question. I'm happy to migrate to Sustainable Living if appropriate.) – gerrit Feb 2 '15 at 19:07
• No, this is a perfectly fine economics question. – jmbejara Feb 2 '15 at 20:14
• Because the long distance isn't the only factor - maybe smaller cars look uncool, maybe the pickup truck bed is wanted, ... – user45891 Feb 2 '15 at 20:42
• Consider the costs of fuel in the US relative to costs of fuel throughout Europe, island nations etc. Perhaps Americans are not as efficiency-conscious because we've always had access to cheaper gasoline than many of those nations. Personal preferences and also utilitarian necessity would factor into this. Perhaps you might also look into regulations imposed by different nations. Perhaps there is less stringent regulation in the US and so firms avoid incurring the higher costs associated with increased fuel efficiency to produce cars for the US market. These sorts of things... – 123 Feb 2 '15 at 20:49
• @user45891 Isn't the idea that manuals are more efficient than automatics outdated? And, wow @ "prius repellents"... – gerrit Feb 2 '15 at 23:34

Allcott & Wozny (2014) tested the hypothesis that consumers, on average, are willing to pay \$1 more to buy a car with \$1 less in discounted future fuel costs. They used panel data relating to purchases of different car models in the US over the period 1999-2008, relying on changes in gasoline prices over time (rather than differences between countries) to permit a test of the hypothesis. Their sample was impressively large, including 86 million transactions. Purchases were assumed to be informed by assumptions on future fuel costs. On their base specification, willingness to pay for \$1 less in discounted future fuel costs was estimated as \$0.76. Alternative specifications with different assumptions on discount rates and the basis for forecasting future fuel costs yielded willingness to pay figures in the range \$0.42 to \$1.01. Given the large sample, the standard errors of these results were small, at most \\$0.06, even after clustering by model and age was allowed for.