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Saturday, February 6. 2010

A 15 mpg clunker that travels 12,000 miles a year uses 800 gallons of gas a year. A 25 mpg vehicle that travels 12,000 miles a year uses 480 gallons a year.

So, the average Cash for Clunkers transaction will reduce US gasoline consumption by 320 gallons per year. They claim 700,000 clunkers were turned-in, so that's 224 million gallons saved per year. That equates to a bit over 5 million barrels of oil. 5 million barrels is about 5 hours worth of US consumption.

More importantly, 5 million barrels of oil at $70 per barrel costs about $350 million dollars. So, the government paid $3 billion of our tax dollars to save $350 million. We spent $8.57 for every dollar we saved.

I'm pretty sure they will do a great job with our health care, though.

Posted by Gwynnie in Hot News & Misc. Short Subjects at 18:45 | Comments (9) | Trackbacks (0)

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Needlessly indirect, and there's a units problem

$3 billion / 224 million gallons per year = 13.39 dollar years per gallon

You'd have to divide 13.39 by some number of years, and then you'd get dollars per gallon. Like how many years before the cars would have been replaced anyway.

You'd be computing whether it would have been cheaper just to buy the guys gas (but why are you buying them gas?), forgetting that they also have a nifty new car.

It doesn't seem to be a price of gas problem. It seems to be a buying them a new car problem, and forget the gas.

Another problem to consider, inspired by the pointless introduction of barrels of oil into the car problem:

3 salesmen take a room for the night in a hotel.

The clerk charges them $30 for the room (very old problem).

He realizes that that's a mistake, the room is only $25.

So he sends the bellhop up with $5 refund.

The bellhop figures there's no way three guys can split $5, so the bellhop pockets $2 and returns $3 to the salesmen.

So they spent $27 on the room, the bellhop kept $2 making $29, where's the extra dollar?

#1 rhhardin (Link) on 2010-02-06 20:17 (Reply)

rh noted correctly that those new cars will save gas for many years. Ten years seems about right.

But since the $3 billion is spent now while the gas is saved slowly that calculation will always be imprecise.

So again rh is right. The question is not about gas or barrels but about whether we should have spent $3B to subside the car sales.

Ah, the salesman and the bellboy again. One way to explain is this:

The salesmen did not end up paying $27 for the room. They paid $25 for the room but thought they paid $27. The bellboy has the $2 difference.

The initial $30 is a red herring. Forget it. It became void when the clerk realized his mistake and corrected the rate to $25 for the room.

Restated in terms of function. The bellboy could not change what the salesmen paid for the room. He could however mislead them and pocket $2.

#2 KTWO on 2010-02-06 21:23 (Reply)

I don't want to do the math here as you should really do it for yourself, but use 12,000 miles per year as a baseline and 15 mpg for the clunker and say 30 mpg for a state of the art relacement. Assume that gas goes to $5/gal. It will still take years to just break even on the new car.

#3 Hrothgar on 2010-02-06 21:23 (Reply)

Its worse than that.
The example assumes an even increase of 10 mpg. I believe the criteria was a vehicle that rated 2 miles per gallon of increase over the vehicle you owned.
There were different level for different amounts you could get in the cfc program.

#4 Dale on 2010-02-06 21:37 (Reply)

I have been driving a 1939 Ford everyday for 16 years.
Somebody do the math on that!

#5 bruce wayne on 2010-02-06 23:05 (Reply)

The Cash for Clunkers program was stupid as well as a waste of money. It makes me angry every time I think about it. The free market system already had in place and excellent way to deal with assets of diminishing value, like used cars. Depending on the cars' viability [ability to still be operated] older cars are taken in trade by dealers and either resold by them, or bundled into car auctions where they are sold to buyers, both American or Central or South American, who repair them and resell them to the general populace of their countries. So the remaining value of the used car is not thrown away, as the Administration did, using our hard-earned tax money to give the owners 'cash for clunkers', but allowed to diminish naturally until it no longer has a value as a car, but as scrap metal. During the Administration-induced uproar of the Cash for Clunkers program, employees of car dealers are shown in videos having to deliberately destroy functional engines of cars which still had many years of life in them. And the workers were angry that they had to do so. It showed in their faces on the videos.

This is just one more example of how remote from the real world the democrat progressives are.

My car, a 1991 Volvo, is still functional and after a reworking in 2007 [at a cost of $1500], still runs like a spotted ape. I said to my husband when the Cash for Clunkers program was initiated, "Don't these damn academics know anything about the free market system?

Obviously not.

Marianne

#6 Marianne Matthews on 2010-02-06 23:21 (Reply)

Maybe the real policy objective was to prop up the automakers and saving gas was ancillary?

Of course Cash for Clunkers is a very inefficient method of subsidizing the auto industry as well...

#7 Gail on 2010-02-07 07:49 (Reply)

Well, my unemployed sister in law got a job processing chunker claims for a short while then went back on unemployment. Which is almost like saying she dug holes and filled them back up.

#8 grant1863 on 2010-02-07 12:15 (Reply)

Aaaarrrrrgh! Where did the dollar go?!

#9 Gene51 on 2010-02-07 19:51 (Reply)

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Saturday, February 6. 2010

What a deal