How Much Oil Did Cash for Clunkers Save?
Posted August 24, 2009 at 7:53 am 
Filed in: As cash for clunkers comes to an end tonight, I thought it would be interesting to estimate how much it cost per barrel of oil saved. First, I want to make clear that I understand that the purpose of the program was not to save oil. The purpose was to stimulate demand for new vehicles, and presumably someone decided if we are going to stimulate demand for new vehicles they might as well be efficient. And, that is a perfectly rational basis for a policy.
Some have suggested that we use this as a model to promote the transformation to a fuel efficient fleet. So, the question is how much might it cost to save a barrel of oil using this approach.
Our brief analysis starts with a bunch of assumptions.
Cost of Program: $3 billion
Cars sold under program: 500,000
Fuel economy of average clunker: 15 miles per gallon
Fuel economy of average new car: 30 miles per gallon
Miles driven per vehicle: 12,000 annually
Based on these assumptions, the clunkers were each consuming 800 gallons of gas a year, and the new cars will consume 400 gallons per year, for a savings of 400 per year per vehicle. Nationwide that yields a savings of 200,000,000 gallons per year, which is 4,761,905 barrels per year or 13,046 barrels per day.
If each car lasts for 10 years, the lifetime saving 47,617,900 barrels of oil at a cost of $3 billion, or about $63 per barrel of oil saved.
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