The Senate just passed a bill that will require all vehicle makes to average 35 miles to the gallon by 2020. U.S. automakers in traditional fashion are opposed to the bill. Chrysler put the cost of meeting these standards at $6700 per vehicle. The question is, should we care?
Let’s do the math. According to the U.S. Department of Transportation, the average vehicle in the U.S. will drive 145,000 miles before officially heading to the scrapyard. According to an annual report by the EPA, vehicles in the U.S., from the Prius to the Expedition, averaged 21.6 miles to the gallon just one year ago. That means the average vehicle uses 6,904 gallons of gas in its lifespan.
If that same vehicle averaged the bare minimum requirements of 35 miles to the gallon, it would only take 4,143 gallons of gas to drive 145,000 miles. That’s a full 2,761 gallons less than the average vehicle in 2006.
If you figure that gas prices will go up to $4 a gallon, which is not an unreasonable assumption given the fact that we are looking at making these changes by 2020, saving 2,761 gallons of gas would save you $11,044. If gas somehow magically stays around $3 a gallon, you still save $8,283. Is that $6,700 a car really that big a deal? Even if you factor the interest on that extra $6,700 ($469 more at seven percent), the numbers say it’s not.
Given America’s dependence on the greedy oil industry, the implications of doing business with risky nations to get oil, and the negative effects of vehicle emissions on the environment, I’d say Chrysler has a very weak case. Fortunately the President thinks so too, so look for this bill to get passed next week.
Will we be smart enough to look for efficient sources for ethanol so that gasoline and food prices don’t go up as gallons consumed goes down? That is a whole other issue.