April 1, 2010 / 8:10 PM / 10 years ago

New US vehicle fuel standards to cut oil imports

* New standards save 1.8 bln barrels oil over two decades

* Half to come from less imports, half from US refining

By Tom Doggett

WASHINGTON, April 1 (Reuters) - The U.S. government’s higher fuel economy requirements for new vehicles are expected to reduce gasoline consumption and cut fuel imports, the government said on Thursday.

The vehicle fuel efficiency standards will be phased in starting with the 2012 model year, raising vehicle fuel economy to an average 35.5 miles per gallon by the time the 2016 models are in showrooms — up 42 percent from the current level.

Over the two-decade life-span of the better-mileage cars and trucks, the government expects about 1.8 billion barrels of oil will be saved. [ID:nN01242702]

That’s about a quarter of current annual consumption of oil. The Energy Department forecasts U.S. oil consumption at 6.9 billion barrels for 2010.

“The new standards, coupled with the shift in consumer preferences induced by the 2008 oil price spike, are likely to limit U.S. gasoline demand and overall petroleum use to an extent last seen in the early 1980s,” said Tim Evans, analyst at Citi Futures Perspective in New York

“There is a chance that the 2007 U.S. peak in gasoline demand may hold up as a record for quite a long time, even a decade or more, particularly if we continue to see periodic oil price spikes that would reinforce the message to conserve,” Evans said.

About half the reduction in gasoline consumption caused by the new standards will be reflected in lower U.S. imports of refined fuel, and the other half will come from reduced domestic fuel refining, the Environmental Protection Agency and the National Highway Traffic Safety Administration said.

In turn, about 90 percent of that reduction in U.S. oil refinery output is expected to result in lower crude oil imports as a refinery feedstock, while the remaining 10 percent will reduce U.S. oil production, the agencies said.

“Each gallon of fuel saved as a consequence of improved fuel efficiency standards and (greenhouse gas emission) standards is anticipated to reduce total U.S. imports of crude petroleum and refined fuel by 0.95 gallons,” the agencies said in their technical documents supporting the new standards.

Automakers will meet the fuel efficiency requirements by selling cars and trucks that use less fuel, but also by selling more vehicles that don’t run solely on gasoline, such as plug-in hybrid electric vehicles or cars and trucks that operate with clean-diesel engines, the government said.

These alternative vehicles also will help shave U.S. gasoline demand.

Car owners will save an average $4,000 in fuel expenses over the life of a model-year 2016 vehicle, according to agencies’ estimates.

“It does have an impact on gasoline consumption. It will go down. There’s no doubt about it,” said Phil Flynn, an analyst with PFGBest Research in Chicago.

The government consider the life-span of a passenger car to be a maximum of 26 years and about 195,000 miles, and a truck or SUV to be a maximum of 36 years and almost 226,000 miles.

The agencies said the world price of oil will “fall modestly” in response to the lower U.S. fuel demand. Cheap fuel prices could spur oil and gas demand in other countries, which will create new greenhouse gas emissions.

Editing by Lisa Shumaker

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