The EU

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Tuesday, September 15, 2009

Clunker Program

My buddy Juan sent this along...
  • A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.
  • A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year.
  • The average clunker transaction will reduce US gasoline consumption by 320 gallons per year.
  • They claim 700,000 vehicles – so that's 224 million gallons per year.
  • That equates to a bit over 5 million barrels of oil.
  • 5 million barrels of oil is about ¼ of one day's US consumption.
  • 5 million barrels of oil costs about $350 million dollars at $75 per bbl.
  • So, we all contributed to spending $3 save $350 million.
  • Hmmm! How good a deal was that?
  • I'm thinking that they will probably do a great job with health care though!
The one thing that may be good from the Cash for Clunkers program is that it seems to have provided stimulation for the auto industry.  How long it lasts is yet to be determined.  But, it isn't saving a lot of auto fuel.

Regards  —  Cliff


Craig H said...

My take is that $3B handed directly to the automakers would have been like handing the better part of a trillion to the bankers--it would instantly disappear, and the system would still be broken. At least this way free market competition (i.e. capitalism that all these yahoo anti-dems feel is so important) decided who got the $3B, so that should count for something.

As far as government (i.e. socialist) programs go, this one isn't the worst. The gas savings is an annual annuity that at least pays a little of it back, and that's not bad either.

Anonymous said...

Can't wait to see what the September auto sales will be. My be is we'll be doing another 'stimulus' to them by December.

ncrossland said...

I'm not sure how many automobile dealerships feel "stimulated" by the Clunker program. As I understand it, many if not most are still waiting for that big reimubursement check.

And, I am pretty sure that the "industry" that was stimulated wasn't American. There were many more rice burners sold than Detroit detritus. Now Chevy is boasting a total money back program if you don't like your new Chevy. Talk about hubris. The American auto industry sank in part because they kept on building stuff that few people wanted....and then had to pay unbelievable costs to get it out the door. Nothing has changed except that now by "public ownership," we mean, not stockholders but taxpayers.

Finally, the brain trust that set up the program set it up to fail in terms of any meaningful gas savings. This is in part because they couldn't implement a program to bail out the dealers and manufacturers without including American made cars, very, very few of which actually get the kind of mpg that is necessary for real gas savings. Instead, you had folks trading in a big SUV for another SUV but one that had the requisite mpg difference touted on the sticker.

We used the program to buy a new car. It was more pain than pleasure because the rules and requirements changed almost hourly. Our use of the program was much more coincidence than planned intent. An American SUV turned our Smart Car into a very small wad of twisted metal....about the same time that the dealership announced enthusiastically that my 8 year old Cadillac was due for it's 100k a cost of over $1500k.

I didn't buy American....but primarily because the Prius we did buy gets an average of 51 mpg...and is about the same size inside as any American full size car.

Our gas guzzling dilemma is our own stupid fault resulting from our decades long tolerance of a collusion between the automotive industry and the petroleum industry. The history is quite plain amidst vehement denials from both industry camps and our always honest Congress.