A DEAL on America's debt ceiling remained elusive all this week, but on Friday President Barack Obama did reach another useful agreement, announcing an unexpected compromise on new automobile fuel-economy standards that has both industry leaders and environmentalists offering similar praise.

The new corporate average fuel economy, or CAFE, standard will require that by 2025 the average motor vehicle sold in America get 54.5 miles per US gallon of fuel (65.4 miles per imperial gallon, or 4.3 litres per 100km). That is roughly double what the mandate was when the current White House occupant first took office. To get some idea of the challenge the carmakers face, compare that 54.5mpg average with the 38mpg that GM says its new Chevrolet Malibu ECO (pictured) should achieve on the freeways. It falls short of the 62 mpg that government bureaucrats originally sought, with strong backing from environmentalists and those who saw America‘s guzzling dependence on foreign oil as a national-security issue. But it was well beyond what the auto industry had wanted: their powerful lobbying group had, only days earlier, threatened to take to the airwaves with an anti-CAFE advertising campaign.

Most experts agree the move should save billions of barrels of oil. But beyond that the maths gets fuzzy. Proclaiming the increase, “the single most important step we've ever taken as a nation to reduce our dependence on foreign oil,” Mr Obama asserted that car buyers of 2025 should save about $8,000 on fuel over the vehicle's lifetime. But a study by the Michigan-based Centre for Automotive Research argued that the more efficient vehicles mandated by the new CAFE guidelines will probably cost up to $10,000 more, which will reduce demand and cost hundreds of thousands of jobs. Other studies, including one by the Boston Consulting Group, counter that the cost will be more like $2,000 a vehicle: if so, the fuel savings would more than compensate for this. Yet another research report insisted that by keeping more money at home, rather than paying it to Saudi Arabia or Venezuela for their crude, the $152 billion in added spending power could create 700,000 American jobs.

One thing is clear to all: there will need to be a lot of invention going on at a frantic pace to meet the tough mandate. The latest direct-injection engines and 8-speed gearboxes have delivered more mileage than most engineers might have expected just a few years ago, but the low-hanging fruit has largely been plucked. “There will be no single solution,” cautioned Bob Carter, group vice president at Toyota, who said he expects to see a fragmented mix of advanced gasoline, diesel, hydrogen and electrified powertrains, like the Japanese maker's popular Prius model. Whether American motorists will have to give up the big cars and pick-up trucks they love in favor of more compact, European-style vehicles remains unclear: if so, a public that now overwhelmingly favours radical improvements in fuel economy may go sour on the idea.

Read on: Honda's completely unrealistic expansion plans (from the EIU)

Photo credit: General Motors