Wednesday, August 5, 2009

Cash for Clunkers and Gasoline Consumption

The AP via CNBC is reporting that:

...the Obama administration has pointed to data collected since the program began July 24:
_ Through early Tuesday, the clunkers program had recorded 157,000 transactions worth $664 million.
_ Eighty-three percent of the vehicles traded in were trucks or SUVs.
_ The new vehicles purchased on average get 9.6 more miles per gallon than the trade-ins, a fuel efficiency improvement of 61 percent..
So that translates into the average "clunker" gets about 16 mpg and the new car purchased is rated at about an average of 25 mpg. If the average driver travels 1,000 miles per month, this extra 9 mpg saves the driver about 22.5 gals./month. The government is forecating that the initial $1B appropriaton to the program will foment/subsidize 250,000 vehicle trades such as this. Those 250,000 new car owners will save an aggregate of 5.6 million gals./month. How does this compare to our total U.S. gasoline consumption?

I've clipped the table below from the EIA's site:

You can see our total U.S. gasoline consumption of late is down to about 370M gallons/day, so the 5.6M gallons/month that our former clunker drivers are saving equates to a national savings of 0.05%. If this relationship scaled, expanding this program to $20B (5 million cars) would "move the needle" or reduce our national gasoline consumption 1%.


googleheim said...

I would like to make the comment that the Texas version of Cash for Clunkers in the past years, called "Drive a Clean Machine" was done in 2007 and 2008 and sold out just as fast.

Very popular.

However, when I asked them if I could get the money to instead convert my existing car to an electric version at 100+ miles proven efficiency, the department did not accept my request for the money.

I would have completely elliminated emissions entirely as well as the need for gas. Something no other car in the program would have done.

So it is entirely false to think that Cash for Clunkers is environmentally beneficial or protecting the USA from terrorist oil.

Nor does it benefit entrepreneurs at all.

Matt Franko said...

Thanks for the comments.
Agree that the amounts appropriated to these types of programs do little to change the macro energy picture.
Perhaps some in a position to be able to buy a new car (or were going to buy anyway) are in effect being proactive and grabbing a $4500 tax cut for themselves, I dont blame them.
A $4500 payroll tax cut for every working taxpayer would have been a true "stimulus" for the overall economy, but I think things will have to get much worse before DC seriously considers it...