CAFE still saves money
Sam Smith at the Progressive Review was taken by a press release that shouted “New gas MPG rules will cost over $6000 per car.” Mostly Sam knows that a basic rule of good journalism (as opposed to what the corporate media does) is think a bit about such press releases and looks for the flaws. But this one slipped by him.
Let’s do the arithmetic. Measure of gas mileage for CAFE purposes over states efficiency slightly, so it would be reasonable to assume that these rules will double mileage to 50 mpg. Right now gas is around $3.50 a gallon. A typical car is driven about 12,000 miles per year, and last 20 years, though after the 12th year of life, miles driven per year drops. So these rules are saving the driver about $840 per year. Let’s take the $6,714 the auto industry study cites and round it up to $7,000. To invest that same $7,000 and get $840 a year you would have to get a rate of return of slightly over 6 percent. So car buyers are coming out ahead on that regulation. And that assumes that long term gas prices don’t rise.