How much will updated CAFE standards actually save you? – Tips & Results

After the U.S. Department of Transportation formally announced improved corporate average fuel economy (CAFE) standards beginning in 2024, the Biden administration was quick to point out that the decision would likely make cars even more expensive than they already are. The caveat to this, however, was that it was also expected that fuel prices would fall as improved efficiency reduced North America’s hunger for fuel.

This effectively reverses the fuel withdrawals introduced under the Trump administration to lower costs for consumers and reduce the red tape for a probable future in which fuel prices are reduced without the need to boost oil production. But what does that actually mean in dollars and cents?

At first, all we knew was that the National Highway Traffic Safety Administration (NHTSA) is moving forward with its plan to raise CAFE standards to 49 miles per gallon by the 2026 model year. That would require an average fleetwide efficiency increase of eight percent annually for the 2024-2025 model years, followed by 10 percent annually for MY 2026. But as luck would have it, Transport Secretary Pete Buttigieg has become a little clearer on how this is breaking down.

“[In] For today’s ’21 vehicles, the standard is 36 miles per gallon,” he explained. “By 2026 it will be over 48. That means an increase of 33 percent. [which] meaning if you fill up four times a month, that would become three times a month by the 2026 model year based on these averages, and of course that would save a typical American household hundreds of dollars.”

That’s hundreds of dollars over the life of the vehicle based entirely on the assumption that future fuel prices will be far lower than they are today – which NHTSA attributes to the United States gradually becoming less dependent on foreign oil.

While energy independence is a key factor in reducing fuel costs, we’ve tried the strategy above and it hasn’t worked exactly as claimed. Fuel prices began to rise immediately after Barack Obama entered the White House, with most analysts at the time citing the oil market and anticipating tough environmental policies and the government’s planned moratorium on certain types of drilling. The end result was that the average cost of a gallon of gasoline increased from $1.84 in January 2009 to $3.96 in May 2011.

This is strongly reminiscent of what happened to the market in response to Biden’s decision to ban fracking and terminate the Keystone XL pipeline, which would have routed Canadian crude directly to Texas refiners. Now the White House is similarly bringing back stricter CAFE standards and promising to push electric vehicle adoption as soon as possible. The theory here is that prices could be reduced over time by curtailing national energy use rather than increasing energy production, and has some historical issues.

When the Obama administration raised corporate requirements to 52mpg by 2025 a decade ago, practical fuel economy (based on actual vehicles purchased) rose a little at first, then averaged about 24mpg as people made up their minds to buy larger vehicles. The silver lining is that fuel prices did indeed come down slightly in 2014 and automakers became increasingly interested in non-traditional powertrains. But it’s hard to attribute this to improvements in nationwide efficiency when most studies show that practical efficiency advanced most in the 1980s and then again between 2002 and 2008. If anything, the CAFE regulations appear to be causing automakers to release more compliance-focused vehicles, which typically don’t sell that well, but need to exist to ensure they can continue to sell the products that people are more interested in.

Although it could be argued that we haven’t seen the entire plan. While Donald Trump’s proposed rollback has been repeatedly watered down to find common ground with the opposition party and has since been canceled by the Biden administration, it still technically delayed Obama’s original timeline for increased CAFE standards. But even the government that wrote the strategy has expressed concern that 52 miles per gallon by 2025 may have been unsustainable.

But there is one quality that all of the above strategies have in common – and that is an almost complete confidence in the belief that they will succeed and that the public will play along.

Today’s government and industry claim that all-electric vehicles will automatically save consumers money when the reality is that the true cost of ownership is determined by driving habits, the car purchased, the current car, the power source, the stability of future energy prices, and dozens of other factors. It’s a similar story with CAFE, as companies can still produce gas guzzlers if the fleet-wide breakdown continues to comply with federal regulations. But even if they don’t, companies can buy carbon credits to absolve themselves of all environmental, social and governance (ESG) violations – something that Greenpeace has repeatedly called an outright scam and put it in the same camp as others represents the most passionate conservative voices.

car and driver recently claimed that the rules are further complicated by the language used in the relevant legislation. The outlet noted that the US government is now using the controversial catch-all-footprint methodology that was introduced in 2012. But she disliked earlier versions, which somewhat arbitrarily categorized cars as passenger cars or light trucks:

The old rules had their own problems. The Chrysler PT Cruiser, for example, was considered a light truck despite sharing a platform with the Dodge Neon, and was therefore subject to less stringent mpg standards. Since the PT Cruiser easily surpassed truck mpg requirements, this gave Chrysler more breathing room to make other vehicles in its lineup at the time not as fuel efficient as they would have a car if the PT Cruiser was a car would be considered.

Today, NHTSA uses the “footprint” approach, defined by the four points where tires touch the ground, or wheelbase times track width. NHTSA clarifies in its document that it operates under regulations that “[require] Different sized vehicles (footprints) have different CO2 targets” and that these rules mean that the average fuel economy standards that each company must meet are based on the footprint found in the mix of vehicles it produces. By law, the NHTSA must regulate vehicles using attributes that “can be expressed in terms of a mathematical function,” and a vehicle footprint is certainly more mathematical than deciding that taped-on neon is actually a truck.

The bottom line, however, is that larger vehicles are generally subject to less stringent standards, and there’s no real guarantee that practical economy will yield the net gain desired – especially as cars have gotten much larger over time. The NHTSA has directly acknowledged this, saying that improvements in fuel economy “will vary depending on the mix of vehicles that the industry is making for sale during those model years,” in addition to what types of vehicles people end up buying.

Let’s focus on these drivers again. At the beginning of this article, we wanted to get the most accurate figure possible on how much the Biden administration believes average people will save over the course of a vehicle’s lifetime under the revised CAFE standards under the most idyllic of circumstances. Are you ready?

According to the Department of Transportation, changes to existing regulations are expected to result in a price increase of $960 for the typical all-new 2029 model year car. Meanwhile, total fuel economy savings over the lifetime of this vehicle are estimated to be approximately $1,280. That’s only $320 in hypothetical savings over a dozen or so years of driving the same car, and you’ll have to wait for the earth to wrap around the sun a few times before we even get there.

Secretary of Transportation Buttigieg called this a crucial win for “every driver in America, but I’d like to note that it’s an especially big win for drivers in rural areas, where residents drive more distance every day and fill up more often.”

[Image: Michael Vi/Shutterstock]

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