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Obama’s $8,000 in gas savings a year — oops, over a car’s life

at 06:02 AM ET, 03/09/2012

PRESIDENT OBAMA: “Now, because of these new standards for cars and trucks, they’re going to — all going to be able to go further and use less fuel every year.  And that means pretty soon you’ll be able to fill up your car every two weeks instead of every week — and, over time, that saves you, a typical family, about $8,000 a year.”

 AUDIENCE MEMBER:  “We like that.”

 OBAMA:  “You like that, don't you?” 

 AUDIENCE:  “Yes!”  

 OBAMA:  “Eight thousand dollars — that's no joke. … It looks like somebody might have fainted up here.”

— Exchange during President Obama’s speech in Mount Holly, N.C., March 7, 2012

It is certainly possible to get carried away at a rally with adoring supporters. And every politician misspeaks from time to time. But these remarks stand out because the president engaged in conversation with the audience about his figure – savings of $8,000 a year in gasoline costs – and declared “that’s no joke.”

 Oops. No wonder folks were fainting. The average annual cost for gasoline is less than $3,000, according to the Consumer Federation of America.

 Let’s take a closer look at this figure.

 

The Facts

 To be fair to the president, he has gotten this $8,000 figure correct on a number of occasions — at least four times in the past two weeks.

As he put it in a weekly radio address this month:

“Thanks to new fuel efficiency standards we put in place, they’re building cars that will average nearly 55 miles per gallon by the middle of the next decade.  That’s almost double what they get today.  That means folks will be able to fill up every two weeks instead of every week, saving the typical family more than $8,000 at the pump over time.” 

 “Over time” means the life of a “typical car.” In other words, the savings is not over a year — an impossibility unless gasoline prices really soar — but over many, many years.

 In fact, according to a National Highway Transportation Safety Administration calculation (page 624), the typical maximum age for a passenger car is calculated as 26 years, or nearly 162,000 miles. NHTSA does not add much fuel savings for any driving of a car past age 20 but, still, you will need to drive a long time to get every drop of fuel savings.

 As we said, everyone misspeaks and we do not like to play gotcha. But people should admit mistakes. After waiting a day, we are disappointed to note that the White House has not tried to correct the transcript with some sort of explanatory note. At least one news organization reported “$8,000 a year” as fact. And Politico also highlighted the presidential error.

 When Obama does say this talking point correctly, note the careful wording — “$8,000 at the pump over time.” He’s talking about the savings on gasoline, the happy part of the story. But he has left out part of the total picture — the costs of compliance with the new rules.

 The standards are coming in two phases. The first, which affects cars in model years 2012-2016, will increase the average cost of model 2016 car about $950, while saving $4,000 in fuel, according to government estimates.  So the net savings is about $3,000. The second set of standards, which affects cars in model years 2017-2025, will add $2,200 to the cost of a model 2025 car, while reducing fuel costs by $6,600, for a net lifetime savings of $4,400. (Gasoline is presumed to cost about $3.42 before taxes.)

 For complicated reasons, the predicted fuel savings from the two rules appears to amount to a maximum of $8,000, while the cost of the rules amounts to about $3,000, for a total savings of $5,000 over the life of the car. The proposed rule for the 2017-2025 standard suggests it will take about four years for the car owner to recoup the higher vehicle cost through gasoline savings.

For perspective, one study calculates (page 24) that more than $4,700 of the cost of a 2009 car already stems from added safety and emission equipment. So these rules would add about $3,000 on top of that. (UPDATE: Note, these are government estimates. A reader sent us an interestingly analysis by the Center for Automative Research which calculates the cost of new equipment would more than wipe out any fuel savings, even with gasoline selling at $6 a gallon. See Table 12.)

The administration makes these trade-offs clear in the proposed rule and in its news releases, but as far as we can tell, Obama himself has never spelled it out directly.

 

The Pinocchio Test

 Increasing fuel economy as a way to reduce greenhouse emissions and reliance on oil imports is a laudable goal, but the president should do a better job of making clear the costs and benefits of his approach.

Meanwhile, the White House should also make a habit of correcting presidential mistakes in the official transcripts, which after all are part of the historical record.

 These are both one-Pinocchio errors.  

One Pinocchio

 


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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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