Update on The More You Pay, the More You Save

    I just found some fascinating information on those new fuel efficiency standards that I just recently wrote about.  An August 28th article in USA Today reports the following about the 54.5 MPG fuel efficiency standards set to take effect in 2025:

What you won't see is anything close to 54.5 mpg on the window sticker of 2025-model cars and trucks.
Why your real-world mileage will vary:
The government mileage rating on the new vehicle window stickers will be in the high 30s to around 40 mpg in combined city/highway driving. The window-sticker mileage rating is arrived at using a formula meant to match real-world driving. By contrast, the federal mileage rule -- so-called CAFE, for corporate average fuel economy -- is based on lab tests for combined city and highway driving...

The new regulation isn't strictly a fuel-consumption rule. Rather, it limits the amount of carbon dioxide a vehicle may emit to 163 grams per mile, Hwang noted. The amount of carbon dioxide coming out the tailpipe, however, is directly related to the amount of fuel burned, and translates to the 54.5 mpg standard.
But there are credits automakers can use to reduce the actual laboratory-tested mpg it must achieve. For instance, a credit of as much as 5 mpg is available for making more efficient air conditioning that uses coolant expected to be more benign environmentally than the HFC now used. It, in turn, was expected to have been better than the CFC -- freon -- it replaced in the 1990s...

Not each new vehicle has to hit the regulatory number. Instead, all the vehicles an automaker sells must average at least the government number. Thus, a company that specialized in small cars would have an easier time reaching an average of 54.5 mpg than a company that sold mostly bigger, heavier vehicles.

    Isn't that great?  I suppose it should not surprise me that 54.5 = 40 in governmentese.  And at the lower mileage of 40 MPG, gallons saved over the life of a vehicle drops from 2,247 to 917, bringing the $8,000 savings the government trumpeted to about $3,000.  Hmmmm... and why does $3,000 sound familiar?  Oh, yes.  That's about how much extra the average car will cost in order to achieve the increased fuel efficiency.  And people say the government doesn't know how to break even.

The More You Pay, the More You Save

    Recently, the president touted new fuel efficiency standards for cars and light-duty trucks (to be achieved by 2025) with the following tweet:

FACT: The President is nearly doubling fuel efficiency standards for cars & trucks, saving families more than $8,000 at the pump per car.
— Barack Obama (@BarackObama) August 23, 2012

    Let's set aside for now the increased cost of the vehicles resulting from the technological advances needed to achieve the increased fuel efficieny (up to $3,000 from some estimates I've seen) and accept the $8,000 savings at face value.  Average fuel efficiency of 2012 vehicles is 33.8 MPG.  The new standard beginning in 2025 is 54.5 MPG.  The consensus on the average life of a vehicle these days seems to be 200,000 miles.  Using these figures, a 2012 vehicle will use 5,917 gallons of gas in its lifetime.  If the new standards are met, a 2025 vehicle will use 3,670 gallons of gas in its lifetime, a reduction of 2,247 gallons.  A total savings of $8,000 means an average gas price of $3.56 per gallon which is actually a little low, but let's give it to the Obama administration because prices have certainly fluctuated recently.
    However, the price of gasoline when President Obama was inaugurated is no mystery.  It was $1.84/gallon.  At that price, the Obama administration would have been touting savings of $4,134 at the pump per car, not $8,000.  So it appears there was some benefit to the increased gas prices that President Obama's Energy Secretary Steven Chu was yearning for - an increase in "savings" of $3,866!
    And let's not forget what the President said in 2008 when gas prices were also close to $4 per gallon:

ARWOOD: So could these high prices help us? 

Sen. OBAMA: I think that I would have preferred a gradual adjustment. The fact that this is such a shock to American pocketbooks is not a good thing. But if we take some steps right now to help people make the adjustment, first of all by putting more money into their pockets, but also by encouraging the market to adapt to these new circumstances more quickly, particularly US automakers, then I think ultimately, we can come out of this stronger and have a more efficient energy policy than we do right now.

Since gas prices plunged later in 2008, the president got a chance for a do-over and throughout his presidency there has indeed been a more "gradual adjustment."  And no doubt this gradual adjustment back up to near $4/gallon was part of the reason US automakers were persuaded to go along with the new standards.  So regardless of what the Fact Checkers say Obama's true intentions were, things seem to have worked out according to plan.

See update to this post here.

The Pipeline to Nowhere

    CNN reports today that President Obama will endorse the permitting of the southern half of the controversial Keystone XL pipeline:

President Barack Obama plans to announce in Cushing, Oklahoma, on Thursday that his administration will expedite the permit for the southern half of the Keystone XL pipeline, a source familiar with the president's announcement told CNN.
In January, the Obama administration denied a permit for the 1,700-mile-long Keystone XL oil pipeline, which would stretch from Canada's tar sands development to the U.S. Gulf Coast. That decision was met by persistent Republican criticism that the president has not been doing everything possible to create jobs and combat high gas prices.
Late last month, TransCanada, the company behind the Keystone XL Pipeline, announced it would move forward with the process to build the southern half of the pipeline, which would begin in Cushing - the president's third stop on his two-day energy tour. The White House praised the move.
Senior administration officials would not confirm the president's plan to unveil the effort to cut red tape for the project, though one senior administration official acknowledged the need to deal with the glut of oil in Cushing, where oil from the Midwest hits a bottleneck as it is transported to the Gulf of Mexico.

    It's a far cry from what the pipeline's backers had sought, and the timing of the announcement has led to suspicions that the Obama administration is seeking a way to blunt criticism of the January rejection of the full project.  The recent rise in gas prices also has had the president looking for ways to show that he is trying to help bring down the cost of energy even while claiming a general inability of government to do so.  Needless to say, there will be mixed reactions to this partial permitting announcement.  NPR reports:

What's clear is that Obama's announcement won't be met with cheers from oil executives. The heads of four big energy companies — Continental Resources, Chesapeake Energy, Devon Energy and Sandridge Energy — said as much in an an open letter to the president published in The Oklahoman.
Their message to the president: Approve the entire XL pipeline, now. They write:

"Approval of the entire Keystone XL pipeline should happen now — not after the election. Yes, we are pleased TransCanada decided to build a critical section of the project from Cushing to the Gulf Coast. We note that this section doesn't require State Department approval. However, America's greatest benefit will come when we can transport oil from our best energy partner, Canada, and oil-rich North Dakota and Montana."

    Although most would have to acknowledge some benefit to the partial construction of the pipeline, the section being fast-tracked is only a fraction of the total project.  As the general election season draws near, will the Keystone XL Pipeline turn into the 2012 version of Sarah Palin's support for the Bridge to Nowhere that was resurrected as an issue when she was named John McCain's running mate?  Except in this case, it wouldn't be support for an expensive government project with questionable benefits, but rather the government's lack of support for a private sector project with multiple unquestionable benefits, not the least of which would be thousands of jobs.  The president can only hope that the parallel doesn't catch on.


This post was originally published on March 21, 2012 at Blogger News Network.