The new fuel economy standards for cars and light duty trucks, finalized by the Obama Administration today, raise the bar to 54.5 mpg to be achieved by the Model Year 2025.

fuel economy obama

In the press release marking the release of the new  path-breaking standards, President Obama is quoted as saying, “These fuel standards represent the single most important step we’ve ever taken to reduce our dependence on foreign oil. This historic agreement builds on the progress we’ve already made to save families money at the pump and cut our oil consumption. By the middle of the next decade our cars will get nearly 55 miles per gallon, almost double what they get today. It’ll strengthen our nation’s energy security, it’s good for middle class families and it will help create an economy built to last.”

These standards have been issued after the earlier standards issued for Model Years 2011-2016 of 35.5 mpg proved likely to be easily achieved, and the Administration decided that more could be done by setting the standards higher.

The new standards were proposed by President Obama in July 2011, and had the support of Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), Chrysler, Bayerische Motoren Werke AG (ETR:BMW), Honda Motor Co Ltd (ADR) (NYSE:HMC), Hyundai, Jaguar/Land Rover, Kia, Mazda Motor Corporation (TYO:7261) , Mitsubishi, Nissan Motor Co., Ltd. (TYO:7201), Toyota Motor Corporation (ADR) (NYSE:TM), and AB Volvo (STO:VOLV-B), as well as the United Auto Workers, the State of California, and other key stakeholders. The final standards issued today were developed by the U.S. Department of Transportation’s (DOT) National Highway Traffic Safety Administration (NHTSA) and the U.S. Environmental Protection Agency (EPA).

Transportation Secretary Ray LaHood said on the occasion, “Simply put, this groundbreaking program will result in vehicles that use less gas, travel farther, and provide more efficiency for consumers than ever before—all while protecting the air we breathe and giving automakers the regulatory certainty to build the cars of the future here in America. Today, automakers are seeing their more fuel-efficient vehicles climb in sales, while families already saving money under the Administration’s first fuel economy efforts will save even more in the future, making this announcement a victory for everyone.”

These efforts by the Obama administration are expected to save American families almost $1.7 trillion dollars in gas costs, and will reduce the cost of a gallon of gas by about $1 in the Model Year 2025. A total of 12 billion barrels of oil would be saved, and daily oil consumption would reduce by 2 million barrels of oil a day. These standards will also help control carbon pollution and climate change.

For automakers, the new standards mean they have to increase the component of fuel-efficient models in their total production, to match up to the benchmark of 54.5 mpg set in the new regulations. This is also known as the Corporate Average Fuel Economy (CAFE) number.