New Fuel Efficiency Standards Hit Auto Manufacturers

Major U.S. automakers have agreed to the Obama administration’s new fuel efficiency standards, which will have all cars and light trucks sold in the U.S. driving an average of 54.5 miles per gallon of fuel by 2025, compared to 27.8 mpg average required of 2011 models.

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The new measures are intended to decrease U.S. dependence on foreign oil (NYSE:USO) imports and keep gas prices (NYSE:UGA) down. The deal would lower the country’s oil use by 2.2 million barrels a day over the next 15 years, saving consumers nearly $2 trillion in fuel costs. “This agreement on fuel standards represents the single most important step we’ve ever taken as a nation to reduce our dependence on foreign oil,” said President Obama, announcing the plan at Washington’s annual auto show Friday.

The new standards will go into effect in 2017, with manufacturers such as Ford (NYSE:F), GM (NYSE:GM), and Toyota Motors (NYSE:TM) being allowed to move at a slower pace to improve the fuel efficiency of their light truck fleets — which includes minivans, SUVs, and full-size pickup trucks — over the first five years of the plan. Standards for 2012 to 2016 models were set two years ago, with automakers quickly agreeing to higher efficiency standards as they dealt with lawsuits and their own financial failures.

With automakers just beginning to recover, they were slow to negotiate this time around, pushing for a significantly lower average of 40 mpg while Obama was proposing 56.2 mpg. However, they ultimately agreed to a figure closer to that originally proposed by Obama when the administration agreed to include credits and exemptions that would make actual mileage about 50 mpg for cars and 40 to 45 mpg for light trucks, and included the five year extension for that category.