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Gov’t, automakers agree on 54.5 mpg

By Claes Bell ·
Wednesday, July 27, 2011
Posted: 12 pm ET

Unless there's a dramatic political reversal in the near future, it looks like American cars will get radically higher gas mileage in the coming decades. David Shepardson of the Detroit News is reported yesterday Obama administration officials and several key automakers have agreed on a mileage standard of 54.5 miles per gallon, to be reached by 2025:

General Motors Co., Ford Motor Co., Chrysler Group LLC -- along with Asian automakers Honda Motor Co. and Hyundai Motor Co. -- are expected to announce their support for a revised proposal by the Obama administration to dramatically hike fuel efficiency standards, two auto officials said late today.

The expected decision to back a framework came after the Obama administration agreed to lower its proposal from 56.2 mpg by 2025 -- by giving light trucks a smaller increase. The administration will now only hike light trucks by 3.5 percent from 2017-21 on average. Smaller trucks will face a higher annual increase, while the largest light trucks will face a higher increase.

Because of the way mileage standards work, that doesn't mean every car will get twice the mileage of the average vehicle on the road today. Instead, the U.S. fleet as a whole will have to average 54.5 mpg, with some vehicles being more efficient, and some less.

While California regulators had championed a standard as high as 62 mpg, this is still a pretty huge deal from a money standpoint, and it cuts both ways. Reaching that standard will likely require a lot of expensive new technology, such as hybrid or plug-in hybrid technology, and that will probably boost the average starting price of a new car substantially over time.

On the other hand, fuel expenditures for the average family will probably drop substantially. At 30.2 mpg, the average fuel economy U.S. passenger cars are required to hit in 2011, the average driver will burn through $9,065 worth of gas over five years. Contrast that with the $5,023 per person driving a 54.5 mpg car would spend, and you get an idea of what a game changer the new limit could be for car owners.

What do you think of the new fuel economy standard? Do you wish the Obama administration had stuck to its guns on a higher standard?

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Ron Bauer
August 19, 2011 at 12:02 pm

How simple minded can this nation be? As we double the efficiency of our vehicles, the suppliers of oil will simply double the price.

We need a hydrogen fuel cell vehicles, which don't require any oil.