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Cash for Clunkers part 2

I have received a lot of response about my Cash for Clunkers post from Tuesday.  In addition to the post here, I posted on Cincinnati.com (link) where I have received the most comments.

I like to reply to comments if I feel it is proper.  It is through these replies that I have decided to make a second part to the Cash for Clunkers posts.

I really have no other opinions to add to the matter, but some interesting calculations.  Someone made comment “in what world is the economic impact of increasing your mileage by a trivial amount (as low as 4mpg) enough to offset the pollution, energy, and cost of designing, producing, shipping, test driving all these new cars.”

The following is my response:

Doing some quick math (We’ll run through two different scenarios here)

We are assuming a person drives 15,000 miles per year and that gas costs $2.61 (national average found today), and the old car was getting 20 mpg. Also let’s assume the average life of a car is 10 years (very conservative estimate)

Old car @ 20mpg
15,000 miles / 20mpg = 750 gallons per year

Assuming everyone buys a car that increases the minimum 4mpg to 24mpg and receives the $3,500 discount.
$3 billion / $3,500 = 857,142 new cars
15,000 miles / 24mpg = 625 gallons per year
750 gallons – 625 gallons = 125 gallons saved per person per year
125 gallons * $2.61 = $326.25 saved per person per year
$326.25 * 10 years = $3,262.50 saved per person over car’s life
125 gallons * 857,142 cars = 107,142,750 gallons saved total per year
107,142,750 gallons * $2.61 = $279,642,577.50 saved total per year
$279,642,577.50 * 10 years = $2,796,425,775.00 money saved over car’s life

Now, Assuming everyone buys a car that increases the minimum 10mpg to 30mpg and receives the $4,500 discount.
$3 billion / $4,500 = 666,666 new cars
15,000 miles / 30mpg = 500 gallons per year
750 gallons – 500 gallons = 250 gallons saved per person per year
250 gallons * $2.61 = $652.50 saved per person per year
$652.50 * 10 years = $6,525.00 saved per person over car’s life
250 gallons * 666,666 cars = 166,666,500 gallons saved total per year
166,666,500 gallons * $2.61 = $434,999,565.00 saved total per year
$434,999,565.00 * 10 years = $4,349,995,650.00 money saved over car’s life

I’m not going to talk too much about those numbers but that measly “trivial amount” as you say of fuel adds up very quick.

Each barrel of crude oil (42 gallons) makes “19.6 gallons of finished motor gasoline” (http://tonto.eia.doe.gov/ask/gasoline_faqs.asp#gallons_per_barrel)

In 2008, the US imported 4,726,994,000 barrels of oil (http://tonto.eia.doe.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbbl_a.htm)

So in the first scenario, we are saving 107,142,750 gallons of gas per year. This equates to saving 5,466,467 barrels of crude oil / year. This means that we could import about 0.12% less oil.

In the second scenario, we are saving 166,666,500 gallons of gas per year. This equates to saving 8,503,392 barrels of crude oil / year. This means that we could import about 0.18% less oil.

I didn’t know the results of these calculations before writing this post and I just figured them out while writing, so my initial impression is, that’s less than 1/5 of 1 percent! Not much! Keeping in mind that these are the two minimum scenarios, I guess it is still pretty decent for being part of a stimulus plan.

Closing … Cash for Clunkers isn’t a way to get us off foreign oil (which I think anyone could have said quite confidently beforehand) but it is a pleasant side effect.

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