New Rule Raises Costs

White House’s fuel rules will raise car costs by $2,000

AP Images
• August 28, 2012 1:40 pm


The White House finalized its new fuel efficiency standards Tuesday. The new standards are designed to double the miles-per-gallon of consumer vehicles by 2025, and will raise the average cost of a car by $2,000.

The Obama administration’s finalized Corporate Average Fuel Economy (CAFE) fuel standards rule will require cars and light trucks to achieve fuel efficiency of 54.5 mpg by model year 2025. The standards will also cost up to an estimated $157 billion and add $2,000 to the price of passenger automobiles, according to two federal agencies.

"These fuel standards represent the single most important step we’ve ever taken to reduce our dependence on foreign oil," President Obama said in a statement Tuesday. This reduction comes with a cost, however.

Republicans have panned the rule changes. Rep. Darrell Issa (R., Calif.), who chairs the House Oversight Committee, has questioned whether the rules were rushed and could jeopardize safety by reducing the weight of cars.

"The rule finalized today by the Obama Administration will hurt American consumers by forcing them to drive more expensive and less safe automobiles," Issa said in a statement. "The Administration drafted these standards in secret, strong-arming automakers and short-circuiting the deliberative regulatory process to achieve a purely political result, abandoning sound science and objectivity to appease its political allies in the extreme environmentalist lobby. I support the goal of higher fuel efficiency, but this rule will only add to the burdens American small businesses and middle class families face under the heavy hand of the Obama Administration."

In an analysis of the rule posted on their websites last summer, the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) predicted the administration’s new CAFE standards would add an average of $2,000 to the price of each new passenger vehicle sold by 2025. The NHTSA attributed the increased costs to the price of developing new fuel-saving technology.

However, the highway agency predicted the costs of the new standards will be offset by benefits of $419 billion to $515 billion. The Obama administration also claims the rules will save consumers $8,000 in reduced gas costs over the lifetime of a vehicle by 2025, ultimately reduce oil consumption by 2 million barrels a day, and reduce carbon emissions by six billion metric tons over the course of the program.

The rules were first drafted in July 2011 with the cooperation of 13 major auto manufacturers, and will go into effect in 2017.