Nice Deal – 54.5 mpg!

July 29th, 2011 | Simcha Weinstein | 1 Comment »

Lost in the shuffle of all the noise and antics over our debt ceiling debate, the President this morning announced a deal he has reached with automakers on extending new fuel-economy standards out to 2025. As far as policy to cut back on our oil use, this agreement will be one of the biggest in decades, setting a pace that’s more aggressive than the industry has managed for any sustained period in the last 100 years.

The deal will boost the fuel economy of the vehicles they sell in the U.S. to a fleetwide average of 54.5 miles per gallon by 2025, according to President Obama. This is not quite the 62 mpg that some environmental groups were hoping for, but it’s far higher than our current 27.3 mpg standard. The President negotiated the deal with the automakers which include General Motors Co., Ford Motor Co. and Toyota Motor Corp.

Historically, a proposed increase to CAFÉ (Corporate Average Fuel Economy) standards would involve a pretty major battle in Congress, but in 2007 the Supreme Court ruled to extend the Clean Air Act to cover greenhouse gases, which means that the President can legally act without involving Congress on this one.

President Obama is seeking to limit the amount of fuel used by U.S. vehicles as part of a pledge to reduce oil imports by a third by 2025, as well as reducing greenhouse-gas emissions. According to EPA estimations, these new regulations could reduce U.S. oil consumption by nearly 2.2 million barrels a day by the 2025 deadline. This volume is just about equal to all of our current daily imports from Saudi Arabia, Venezuela, and Kuwait combined. According to researchers and engineers, in order to hit these targets, automobiles are not going to need to be rebuilt from the ground up. The improvements will be possible with lighter vehicles, smaller engines and fuel-saving technologies such as fuel-injectors and turbochargers. Of course, look for more hybrid cars to be making their way into the marketplace. One Transportation Department report predicts that about one-third of new cars will be hybrids by 2025.

It’s a welcomed change to have some good news coming out of Washington. And keep in mind that not that long ago our auto industry was presumed dead. This is a very nice rebirth.