The Perilous Self-Delusion Of Energy Independence From Foreign Oil

Below is a message I received from a regular reader of my blog ReturnToExcellence.net that illustrates the arithmetic of the economic foolishness of BO's "Cash For Clunkers" program.  In essence BO's program cost taxpayers over $3 billion & saved only $350 million worth of gasoline.

 

Now I am sure that BO would say that the stimulus effect of producing the additional vehicles resulting from the program would more than offset the disadvantage of considering only the fuel savings cost deficit.  This of course ignores that many people merely moved up their purchase of a new car because of the government sale going on (read subsidy) as well as the fact that such a program is just plain terrible economic policy in that it rewards people who were driving clunkers & needed a welfare handout in order to buy a new car & penalizes anyone, like many people I know, who of their own volition prior to the "Cash For Clunkers" program bought a new fuel saving car - no matter how misguided such a decision is based on never recovering through fuel cost savings the purchase price of the new car that depreciates over 25% in value the minute it leaves the showroom floor.

 

But all of this misses the larger point that all of the government's programs (BO's included) that fall under the "energy independence from foreign oil" goal first presented by Richard Nixon in 1974 is a perilous self-delusion as long as America participates in the global market.  Just ask yourself how energy independent will we be after we reach the point where we do not import any foreign oil if all of our trading partners around the world still rely on foreign oil?

 

CASH FOR CLUNKERS: LET'S LOOK AT THE MATH

A vehicle getting 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.
A vehicle getting 25 mpg and 12,000 miles per year uses 480 gallons a year.
So, the average Clunker transaction will reduce US gasoline consumption by 320 gallons per year.
They claim 700,000 vehicles – so that's 224 million gallons per year.
That equates to saving a bit over 5 million barrels of oil per year. I repeat - per YEAR.
5 million barrels of oil is about ¼ of one day's U.S. consumption.
And, 5 million barrels of oil costs about $350 million dollars at $70/bbl.
Our Government "gave" each Clunker Trader $4,500 per car for 700,000 transactions which cost
US Taxpayers $3,150,000,000 (that would be 3.15 BILLION dollars) - not including Washington's astounding Administrative costs.
So, we all contributed, through our taxes more than $3 billion to save $350 million.
How good of a deal was that for American Taxpayers?
But hey, I'm sure they will do a much better job with health care.