Tuesday, September 22, 2009

Clunker Math.

A good friend made the following observation. A "clunker" that gets 12 mpg, driven 16,000 miles in a year consumes about 1300 gallons of gasoline, while a replacement car at 30 mpg uses about 550 gallons. So retiring a million clunkers will save about 750 million gallons of gasoline, equivalent to 37.5 million barrels of oil (a barrel is normally distilled to yield about 50% gasoline). At $70 a barrel, this means we are spending well in excess of $4B in clunker funding to save $2.7B in petroleum imports this year. This calculation is being very generous in estimating oil savings; the net mpg difference of the clunkers program is substantially smaller, and other distilled petroleum products need the crude oil, too. The clunkers program would have been better run by the Department of Agriculture, for they have extensive experience running subsidy programs.

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