How Much Are Updated CAFE Standards Actually Going to Save You?

Matt Posky
by Matt Posky

With the United States Department of Transportation having formally announced upgraded Corporate Average Fuel Economy (CAFE) standards starting in 2024, the Biden administration was quick to point out that the decision would likely make automobiles even more expensive than they already are. However, the caveat to this was that it also assumed fuel prices would come down as improved efficiencies reduced North America’s hunger for fuel.

This effectively undoes fueling rollbacks instituted under the Trump administration on the grounds of reducing costs to consumers and cutting regulatory red tape for a prospective future where fuel prices are reduced without the need to spur oil production. But what does that actually mean in terms of dollars and cents?

Initially, all we knew was that the National Highway Traffic Safety Administration (NHTSA) was going ahead with its plan to raise CAFE standards to 49 miles per gallon by the 2026 model year. This would require an average increase in fleetwide efficiencies of eight percent annually for model years 2024-2025, followed by 10 percent annually for MY 2026. But, as luck would have it, Transportation Secretary Pete Buttigieg has gotten a bit clearer in how this breaks down.

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

That’s hundreds of dollars over the entire lifespan of the vehicle based entirely on the presumption that future fuel prices will be far lower than they are today — which the NHTSA has attributed to making the United States gradually less dependent upon foreign oil.

While energy independence is a key factor in lowering fuel costs, we’ve already tried the above strategy and it didn’t play out exactly as claimed. Fuel prices began to climb immediately after Barack Obama entered the White House, with most analysts of the time citing the oil market anticipating stringent environmental policies and the administration’s planned moratorium on certain types of drilling. The end result was that the average cost for a gallon of gas went from $1.84 in January 2009 to $3.96 by May 2011.

This is highly reminiscent of what happened to the market in response to Biden’s decision to deter fracking and cancel the Keystone XL pipeline that would have funneled Canadian crude directly to Texas refineries. Now the White House is similarly bringing back stiffer CAFE standards while promising to advance EV adoption as quickly as possible. The theory here is that prices could be lowered over time by curtailing national energy use, rather than increasing energy production, and has a few historic problems.

When the Obama administration raised corporate requirements to 52 mpg by 2025 a decade ago, practical fuel economy (based upon the vehicles people actually bought) jumped a bit initially and then averaged around 24 mpg as people opted to purchase increasingly large vehicles. The silver lining is that fuel prices actually did decline slightly in 2014 and automakers got increasingly interested in non-traditional powertrains. But it’s hard to attribute this to improvements in nationwide efficiencies when most studies show practical efficiency making the most headway during the 1980s, and then again between 2002 and 2008. If anything, CAFE regulations seem to result in automakers launching more compliance-focused vehicles that typically don’t sell all that well but have to exist to ensure they can continue selling the products people are more interested in buying.

Though one could make the argument that we didn’t get to see the entirety of the plan play out. While Donald Trump’s planned rollback was repeatedly softened in an attempt to find common ground with the opposition party and has since been nullified by the Biden administration, it still technically delayed Obama’s original timeline for increased CAFE standards. But even the administration that penned the strategy expressed concerns that 52 miles per gallon by 2025 could have been untenable.

But there’s one trait that all the above strategies share — and that’s the near-total reliance on the assumption that they’ll be successful and that the public will play along.

The government and industries of today are claiming that all-electric vehicles will automatically save consumers money when the reality is that the true cost of ownership is determined by driving habits, which car is being purchased, what car you currently own, where the electricity is being sourced from, the stability of future energy prices, and dozens of other factors. It’s a similar story with CAFE since companies can still produce gas guzzlers people if the fleetwide breakdown remains in compliance with federal regulations. But even if it doesn’t, businesses can purchase carbon credits to absolve themselves of any Environmental, Social, and Governance (ESG) transgressions they’ve committed — something Greenpeace has repeatedly called an outright scam, placing it in the same camp as some of the most ardent conservative voices.

Car and Driver recently claimed that regulations are further complicated by the language used in the relevant legislation. The outlet noted that the U.S. government now uses the controversial, catch-all footprint methodology instituted in 2012. But it held no love for earlier versions that somewhat arbitrarily categorized autos as passenger vehicles or light trucks:

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

Today, NHTSA uses the “footprint” approach, which is defined by the four points where the tires touch the ground, or wheelbase times track width. NHTSA makes clear in its document that it is operating under regulations that “[require] vehicles of differing sizes (footprints) to have different CO2 targets” and that these rules mean the average fuel-economy standards each company has to hit are based on the footprints found in the mix of vehicles it produces. By law, NHTSA has to regulate vehicles using attributes that can “be expressed in the form of a mathematical function,” and a vehicle footprint is certainly more mathematical than deciding that a gussied-up Neon is actually a truck.

But the end result is that larger vehicles will generally be held to less stringent standards and there’s no real guarantee that practical economy will have the desired net gain — especially since cars have gotten much larger over time. The NHTSA has acknowledged this directly, saying that improvements in fuel economy will “vary depending on the mix of vehicles that industry produces for sale in those model years,” in addition to what type of vehicles people ultimately buy.

Let’s refocus on those drivers. At the start of this article, we wanted to get the most precise figure possible for how much the Biden administration thinks average people will save over the course of a vehicle’s life 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 anticipated to result in a price increase of $960 for the typical, brand-new, car from the 2029 model year. Meanwhile, overall fuel economy savings are estimated at around $1,280 over the course of that vehicle’s lifespan. That’s just $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.

Transport Secretary Buttigieg framed this as a decisive victory for “every driver in America, but I would note it is a particularly big win for drivers in rural areas where residents cover more distance every day and fill up more frequently.”

[Image: Michael Vi/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • ToolGuy ToolGuy on Apr 12, 2022

    The idealist in me says (again) that CAFE legislation is stupid and ineffective, ineffectual and stupid (and always was). But the realist in me says it's the law, so, realistically: • At the margin [which is all that matters], this legislative (regulatory?) change will further delay the time at which I 'upgrade' our family's fleet to newer vehicles. I wish our vehicles got better fuel economy. I wish I could replace them with lighter [but safe -- and yes there are ways to do this] smaller (but more space-efficient) vehicles with adequate torque and better fuel economy. All of this is possible in theory, but none of it is going to happen. Instead, I have the option to choose from a used vehicle parc [oui, "parc"] of oversize (on the outside), overweight, overwrought and overcomplicated vehicles designed by brats and purchased by sheep. No, thank you. Therefore I shall wait a little longer and likely switch to electric (hopefully not an early compromised design). In the meantime, our ICE fleet will continue to consume more petrol than either the U.S. Government or myself would find ideal. [So good job there, legislators. And by good job I mean not a good job unless you intended to tailor your rules to GM and of course you did because you know which side your bread is buttered on don't you.]

  • Speedlaw Speedlaw on Apr 13, 2022

    Our system makes no sense. CAFE pushed everyone into "trucks" and Detroit saw that loophole, even to the point we get "trucks" from car makers who don't normally do trucks. The demise of the Station Wagon/Estate is an unanticipated by product

  • 1995 SC Modern 4 door sedans stink. The roofline on them is such that it wrecks both the back seat and trunk access in most models. Watch someone try to get their kid into a car seat in the back of a modern sedan. Then watch them try to get the stroller into the mail slot t of a trunk opening. I would happily trade the 2 MPG at highway speed that shape may be giving me for trunk and rear seat accessibility of the sedans before this stupidity took over. I ask you, back in the day when Sedans were king, would any of them with the compromises of modern sedans have sold well? So why do we expect them to sell today? Make them usable for the target audience again and just maybe people will buy them. Keep them just as they are and they'll keep buying crossovers which might be the point.
  • Kwik_Shift_Pro4X As much problems as I had with my '96 Chevy Impala SS.....I would love to try one again. I've seen a Dark Cherry Metallic one today and it looked great.
  • Susan O’Neil There is a good reason to keep the Chevrolet Malibu and other 4 door family sedans! You can transport your parents and other somewhat handicapped people comfortably and safety! If someone can stand and pivot you can put them in your car. An armrest in the back seat is appreciated and a handle above the door! Oh…and leather seats so your passenger can slide across the seat! 😊Plus, you can place a full sized wheelchair or walker in the trunk! The car sits a little lower…so it’s doable! I currently have a Ford Fusion and we have a Honda Accord. Our previous cars were Mercury Sables-excellent for transporting handicapped people and equipment! As the population ages-sedans are a very practical choice! POV from a retired handicapped advocate and daughter! 😊
  • Freddie Remember those ads that say "Call your doctor if you still have...after four hours"?You don't need to call your doctor, just get behind the wheel of a CUV. In fact, just look at one.I'm a car guy with finite resources; I can't afford a practical car during the week plus a fun car on the weekend. My solution is my Honda Civic Si 4 door sedan. Maybe yours is a Dodge Charger (a lot of new Chargers are still on dealer lots).
  • Daniel J Interesting in that we have several weeks where the temperature stays below 45 but all weather tires can't be found in a shop anywhere. I guess all seasons are "good enough".