How Much More Money Would You Have if the Open Fuel Standard Passes?

Tuesday, August 27, 2013

How much would the average American family save if the Open Fuel Standard bill passes into law? Kelly Cook, the National Field Director for ACT! for America, has concluded: "the average family could save between $2500 and $3000 per year" using the following calculations:

The auto experts I’ve been seeing all seem to come in around the 12,000 to 15,000 average miles per year per car and/or pickup in the U.S.

Average family owns: 2.28 cars or pickups (source). The ratio nationwide is 55% cars and 45% pickups (source).

Average fuel mileage nationwide for cars is: 24.6 mpg.

Average fuel mileage nationwide for pickups is: 16 mpg.

Weight the number slightly to the favor of the cars since they have 55% of the total and I come up with an average of 22 mpg for cars and pickups.

13,500 miles per year average divided by 22 mpg =  614 gallons per year per vehicle.

Multiply 614 X 2.28 cars per family = Average U.S. family burns 1,400 gallons per year for all the family vehicles.

Current national average of gasoline / diesel (weighted towards gasoline) = $3.60.

Current price of natural gas refined methanol per gallon is $1.30.  (Raw cost = 30 to 40 cents + profit and taxes).

Plus add in the 60% range of methanol to gasoline = $1.83 equivalent range adjusted price to gasoline.

$3.60 minus $1.83 = $1.77 savings per gallon.

$1.77 X 1,400 gallons per year per family = $2,478 annual savings.

If the price were still at $4 for gasoline, the annual saving would be:

$4.00 minus $1.83 = 2.17 per gallon.

$2.17 x 1,400 gallons = $3,038.00 annual savings per year per family.

So we can reasonably say that the average family could save between $2500 and $3000 per year for their average 2.28 vehicles depending on how “generous” OPEC is at any given time.

Although the math is flawless here, it might not work out exactly like this. It might be not quite as good. It might be significantly better. As Mr. Cook says, "At best, this is a moving target because everything about the variables of my calculation are moving targets. Nothing is static – the price of oil, the price of methanol, MPG of cars and trucks, average cars per family — nothing."

But it's a very good rough estimate, and would create more discretionary income for us all, and that's always good for the economy. Two of the things Mr. Cook didn't try to factor in could also be significant: The continually rising cost of oil, and the petroleum costs on just about every other commodity. Because of the Save the King Foundation and many other factors, it is almost certain that oil prices will continue to rise in the foreseeable future. And since almost every product has been shipped, the rising cost of oil raises the price of everything else.

Each of us could have more money in our pockets every year. Let's pass the Open Fuel Standard and make it happen.


Adam Khan August 29, 2013 at 2:05 PM  

We just got a comment via email:

This math forgets the fact that increased demand for methanol will likely result in a higher market price for methanol. Same for natural gas. You just can't assume that the demand for either will keep pace with production. Yes, you mentioned "moving targets," but as a supporter of the OFS I wish you'd mention obvious variables specifically.

Adam Khan August 29, 2013 at 2:07 PM  

I answered the above comment like this:

I know what you mean. There are many more variables I could mention too. For example, with three fuels competing for so many dollars, and so many possible feedstocks competing within the alcohol fuel categories, each category will be working overtime to bring the price of their fuel down lower than the others. Natural gas is only one. Coal may be able to be done cheaper. Methanol and ethanol from trash should theoretically be able to be sold much cheaper still.

One of the reasons natural gas is so cheap right now is that we are producing more than the market can use. With methanol made from natural gas, the price for natural gas may well go up, but with other sources also competing, the balance could well stay the same or get even better for the consumer because the total amount of fuel available on the market will rise enormously. We will still have all the petroleum we have now, PLUS all the other fuels. So the ratio of demand to supply should significantly favor the consumer.

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