U.S. Cars That Get 54.5 MPG in 2025? It Could Happen

The Obama administration is in talks with General Motors (GM) and Ford (F) for the framework of an agreement that would raise the U.S. fuel economy average to 54.5 mile per gallon (mpg) in 2025.

White House official have altered their proposal to make allowances for light trucks, people familiar with the negotiation said, Bloomberg News reported. The new rule would take effect in 2017.

The new fuel-economy target is a reduction from the 56.2 mpg requirement sought last month, and the new agreement may include credits for selected types of technology.

Exemptions for light trucks are considered to be essential because pickup trucks and similar vehicles for work need more-powerful engines for hauling, and those larger engines typically are less efficient than engines in other vehicle forms.

Transportation/Energy Analysis: The Corporate Average Fuel Economy (CAFE) has long been a contentious regulation.

The goal of CAFE is to increase the average fuel economy of the U.S. fleet to reduce U.S. consumption of oil and related fuels. The United States currently imports more than 50 percent of the oil it uses, and, incredibly, one out of every 10 barrels of oil in the world is used to make U.S. gasoline.

Conversely, auto makers have historically complained that raising the mpg fuel requirement prematurely results in too many smaller vehicle and other vehicles that U.S. consumers don't want to buy.

However, during periods of rapid, large increases in the price of gasoline - such as the current period with gasoline averaging about $3.69 per gallon for regular unleaded-- consumers and other lobbies tend to pressure Congress to increase mpg requirements.

The price of regular unleaded gasoline, mirroring the rise in oil prices, has surged about 35 percent in the past year, with some major U.S. cities registering prices over $4 per gallon for various grades of gasoline. What's more, the outlook for 2012 is not good: the average U.S. price for regular unleaded could top $4 per gallon.