A 15 minute back-of-the-envelope benefit-cost analysis of tighter fuel standards

Concerning new fuel economy rules ...:

The administration says its plan will save 1.8 billion barrels of oil and cut 992 million tons of global-warming gases over the program's lifetime[*].

If the price of a barrel of oil is about $100 "over the program's lifetime" (61% greater than yesterday's price) then the savings in oil expenditures is $180 billion (about 1.3% of annual GDP).

If the cost per ton of carbon dioxide is $12 then the benefits of cutting 992 million tons is almost $12 billion "over the program's lifetime."

If about 8 million cars and trucks are sold each year [source] "over the program's lifetime" and the price per car rises by about $1300 then the cost to consumers is $52 billion.

Using the back of an envelope, the benefits seem to outweigh the costs:

• Net benefits (in $billions) = [$180 + $12] - $52 = $140

Use the comment area to let me know how close I am to the actual estimate of net benefits. Thank you. I'll be here all week.

*Here is what President Obama actually said:

As a result, we will save 1.8 billion barrels of oil over the lifetime of the vehicles sold in the next five years (2012-2016).

Personal note: with 60,000 miles on my 2004 Suburu Forester, I should be about ready to buy a Suburu hybrid in 2012.