In what could prove a disastrous blow to the US auto industry, a Senate committee has approved a bill that would force carmakers to improve average fuel economy levels of their fleets by 4% a year starting in 2011. At that rate, fuel efficiency levels will average 35mpg by 2020 but no long-term target was set. Reuters has reported that at least two senior Republicans are against the proposal, citing it was unfair to American carmakers, whose sales depend heavily on sales of gas-guzzling SUVs and pickups.

To help solve the problem, part of the proposal suggests that the Transportation Department would set individual mileage formulas for different vehicle classes based on size and weight. A recent surge in gasoline prices and the ongoing concerns about the environment has put pressure on the US government to end the country’s dependence on oil. According to an article from Automotive News, the US currently consumers 20.9 million barrels of oil. Under the new proposal, up to 2.1 million barrels could be saved per year by 2025 and at the same time reduce exhaust emissions by 18%.

The House of Reps is working with the Commerce Committee on developing its own bill that would call for the higher use of alternative fuels rather than fuel saving. The carmakers will obviously be against any such proposal and have already estimated compliance costs in excess of $114 billion. US companies aren’t the only ones worried. Asian manufacturers will also feel the heat as they ramp up production of new V8 models and bigger SUVs and trucks.