How good a deal was that ???

"They claim 700,000 vehicles – so that's 224 million gallons / year.

That equates to a bit over 5 million barrels of oil."

Here's the mistake.  The author has assumed that a barrel of oil (42 gallons) is equivalent to a barrel of gasoline (also presumed to be 42 gallons).  It appears that the author has translated the 224,000,000 gallons of gasoline into 5,333,333 million barrels (in actuality of gasoline, not oil), shaved off a pretty hefty 333,333 barrels through rounding, thereby producing the incorrect figure of 5 million barrels of oil.

In truth, oil refineries only yield 19 or 20 gallons of gas per barrel of oil.  Using an average of 19.5 gallons for my estimates, I arrived at a figure of 11,487,179 barrels of oil saved per year.  

(Reference: http://tonto.eia.doe.gov/ask/gasoline_faqs.asp#gallons_per_barrel)

The second error was not computing the savings over the overlapping life-spans of the vehicle.  According to Consumer Reports (Reference: http://www.msnbc.msn.com/id/12040753/ns/business-consumer_news/) the average life span of a new car is 8 years.  If through the "Cash for Clunkers" program, a driver traded just half of those years from the older vehicle to one with higher mileage, the total savings in barrels of oil rises to 45,948,716 gallons. 

Finally, the assumption that oil will remain at $70/barrel is fairly optimistic according to a global survey of geologists conducted this year.  (Reference: http://www.epmag.com/WebOnly2009/item42266.php).  Half of geologists think that oil prices will remain between $50 and $100 within the next 5 years.  The other half think that prices will rise to between $100 and $150 per barrel.  Assuming a very rough median price of $100 per barrel, the total savings in rises to:

$4,594,871,600 over 4 years following a $3,000,000,000 billion investment, essentially earning upon the initial investment at an 11.2469% interest rate.  As a frame of reference, the long term Compound Annual Growth Rate of the S&P 500 is presently 8.80% (Reference: http://en.wikipedia.org/wiki/S&P_500#Total_Annual_Returns_.28b.29).

Then, tack on the benefits of eliminating the emissions derived from burning 224 million gallons of gas, the curtailed need to import 45 million barrels of oil - much of which comes from foreign countries that are less than friendly, and the stimulative effect of spending $3 billion to encourage over $8 billion in consumer spending on vehicles (an estimated 42,000 jobs saved or created, a .3- .4% boost in economic growth, etc.), the program suddenly doesn't seem wholly unreasonable from an economic standpoint. 

Of course, I invite you to check my own math.  Feel free to forward this information to interested parties.

Kind regards,