Consumer decisions on the desirable fuel economy level in new cars are based on current and projected costs of gasoline. To the extent that this price is artificially low—that is, it does not reflect pollution, security, or other societal costs—the consumer will not choose a sufficient level of fuel economy when purchasing a new vehicle.
Higher gasoline prices will cause people to drive less and thus will reduce gasoline consumption. Higher gasoline prices will also induce people to buy vehicles with greater fuel economy, although the effect may be modest.