Obama Ups Fuel Efficiency to 54.5 mpg to Promote Energy Independence: This Could Backfire


The Obama administration announced on Tuesday that new fuel-efficiency regulations had been finalized that would require automakers to achieve an average 54.5 miles per gallon fuel economy on new cars and light trucks by 2025. This is an increase on current auto industry efforts that are set to achieve 35.5 miles per gallon by 2016. National fuel efficiency was 28.6 mpg as of the end of 2011, making the new target a nearly 100% increase in efficiency in just thirteen years.

The new standard is in response to a request from the president in 2010 that the EPA and NHTSA work together with automakers to set a long-term objective for improved fuel efficiency. The new target is a compromise between government agencies, regulators, and automobile makers. It is considered a major victory for environmentalists and conservationists. Thirteen leading auto manufacturers, including the American "Big 3" have all indicated their support for the new standard.

The Obama administration estimates that the program should save Americans a total of $1.7 trillion in fuel costs by 2025, or an average of $8,000 per vehicle, by reducing American fuel consumption by 12 billion barrels of oil. However, the National Automobile Dealers Association, a critic of the program, estimates that the regulations will increase the average price of a vehicle by approximately $3,000 and shut nearly 7 million Americans out of the new car market.

The administration also estimates that the program will reduce greenhouse gas emissions by 6 million tons by 2025. Critics of the new standards argue that the target is unachievable due to faulty assumptions around consumer demand for alternative fuel vehicles, such as hybrids and electric vehicles. One of the primary compromises that gained the support of the majority of automakers is a mid-term review of the progress of the program in 2017.

President Obama states that the new fuel standards "represent the single most important step" that his administration has taken in achieving energy independence for America. 

What do you think? Are the new standards a leap in the right direction or a misguided attempt by the government to overregulate an already-struggling industry?