Thursday, August 13, 2009

Cash for clunkers by the numbers

The US government is putting $3 billion into the Cash for Clunkers program, which has 4 stated goals: stimulate the economy, help the struggling auto industry, reduce air pollution, reduce defendence of foreign oil. Let's see how it stacks up.

You can get between $3,500 and $4,500 per car from the CFC program. The $3 billion will yield 750,000 sales at the average of $4,000. If the average car sells for $15,000, this results in $11,250,000,000 in new car sales.

If each car gets 5 mpg better gas mileage, that's 3,750,000 saved miles. If the traded in cars averaged 15 mpg, that's 250,000 gallons of gas saved, which @ $2.60 per gallon, that's $650,000 per year saved. If the clunkers got off the road an average of 5 years sooner, that's total savings of $3,250,000 for drivers.

I guess it varies, but a Physics prof says we get about 20 gallons of gasoline per each 42 gal of oil. So, the 250,000 gallons of gas saved divided by 20 = 12,500 barrels of oil saved. At $70 per barrell, that's $900,000 not sent to Venezuela or Saudi Arabia.

Each gallon of gasoline produces 20 lbs of carbon dioxide, times 250,000 gallons, equals 5,000,000 pounds of carbon dioxide saved.

So, we get over $11 bil in stimulous to the economy, 750,000 new cars are sold, we reduce air pollution by 5 mil pounds of CO2, and we send almost $1 bil less to regimes that hate us. Looks like a winner.

But wait, you say, most of those cars would have been sold eventually anyway, this just speeded things up. I guess to a certain extent, that's true, but completely unquantifiable. Also, making that argument just reinforces that the CFC program is giving a quick boost to the economy, it is helping the auto industry in a slow period, it is reducing air pollution more quickly, and it will send less $$$ overseas. It speeded things up.


tippyrich said...

Nice post! It's cool to see it laid out in those numbers; 'specially for those of us who are inclined to avoid researching those details.

fortboise said...

More numbers reviewed at the close of the program on my blog today.