Since 1980, the innovations implemented in cars should’ve increased our fuel efficiency by 60%. So why did it actually only go up 15%? A study by MIT economist Christopher Knittel pinpointed the problem and it’s simple – we countered the gains in fuel efficiency by increasing the size and horsepower of our vehicles at an even higher rate. Mr. Knittel’s research paper, “Automobiles on Steroids” (PDF), outlines the results of his study.

According to the study, adjusted for inflation, gas prices fell by 30% between 1980 and 2004. During this period, sales of light trucks/SUV’s increased from 20% of all vehicles purchased to 51%. Manufacturers were building larger cars to meet the demand.

Mr. Knittel’s conclusion is that the best way to increase fuel efficiency is through the creation of a national gas tax. President Obama’s new CAFE standard that requires automakers to reach a fleet average of 54.5 mpg by 2025 will get us there but Mr. Knittel fears a “rebound effect” of the law where people would buy more fuel efficient cars and would then drive more. A gas tax would not only lead consumers to purchase more efficient vehicles but it would also encourage people to drive less.