Amid all the high-stakes debt-ceiling talks of the past couple of weeks, Barack Obama has managed to push through one of the most dramatic and effective bills of his administration — the doubling of fuel economy targets for cars.

In the presence of 13 leading carmakers, the US President announced an historic agreement — forged in consultation with said carmakers — to increase corporate average fuel economy (CAFE) standards for new cars and light trucks from 27.5 mpg (11.69 kilometres per litre) for the 2011 model year to 54.5 mpg (23.17 kilometres per litre) for the 2025 model year.

Obama himself described the deal as “the single most important step we’ve ever taken as a nation to reduce our dependence on foreign oil”. And with $1.7 trillion in fuel cost savings expected to flow directly to consumers, Seeking Alpha‘s John Petersen says that might be an understatement. “I believe Friday’s agreement will ultimately be seen as the biggest economic stimulus event in human history,” he says.

And while some may think this development could be parlayed into a win for the electric vehicle sector, there are those — such as Chrysler CEO Sergio Marchionne — who think nothing of the sort.

On the contrary. Marchionne, who sees the deal as a stimulus for the US car industry, told a conference in Michigan last week that EVs were over-hyped as the fuel economy solution, and that carmakers would find ways to squeeze more miles out of internal combustion engines to meet the tough new standards. “You will see incredible results even out of what I consider to be absolutely plain-vanilla technology,” Marchionne said. “Between the combination of transmissions and engines, you will find huge benefits going forward.”

And he’s not alone. A recent Boston Consulting Group report quoted by Petersen found that advanced internation combustion engine (ICE) technologies — which it said would likely become standard equipment worldwide during the next decade — could reduce petrol consumption by 40%. It also suggested that electric cars would face stiff competition from ICE and would not be the preferred option for most consumers.

“In my view,” says Petersen, “the BCG report is a must read for investors who want to profit from this fuel efficiency mega-trend and avoid heavy losses in vehicle electrification schemes that will become increasingly uneconomic over time.”

So what are carmakers doing to get their conventional engine vehicles up to standard? After all, it’s going to be quite a task. As GreenTech Media‘s Michael Kanellos points out, the current fleet average mileage for new cars coming off the line is 28.3mpg (12.03 kilometres per litre) and will have to jump to 34.1 MPG (14.4 kilometres per litre) by 2016 (about the time when Marchionne is planning to retire, incidentally).

Here’s a look at some of the car engine technology that’s getting folk such as Marchionne and Petersen excited: from the plain vanilla, through to the double-chocolate fudge.

Diesel: Diesel engines are already known to get better mileage than their petrol counterparts, and new and even cleaner diesels are almost certain to migrate from Europe to the US, says Paul Eisenstein on MSNBC.com’s Driver’s Seat — such as Ford’s European Focus model. Chevrolet hopes to get more than 50mpg (21.2 kilometres a litre) with its diesel-powered Cruze sedan, announced last month. Volvo also has a diesel hybrid in the works — due for release next year — a V60 that produces 49g/km on the hybrid setting.

Alternative engines: Some experts believe the new CAFE rules may force the industry to migrate towards alternatives to the internal combustion engine, says Eisenstien. And one of the more promising possibilities is the opposed piston/opposed cylinder (OPOC) model, versions of which are being developed by the likes of Detroit-based (Bill Gates-backed) EcoMotors International, as well as Pinnacle Engines. This engine can run on a wide range of fuels — including petrol, ethanol and diesel — and proponents claim it can yield markedly improved fuel economy — 30%-50%, according to Pinnacle — from an engine a fraction the size of its conventional counterpart.

And there are several other alternative engines being touted, says Eisenstein, but they all face the same hurdle: the reluctance of carmakers to change having invested so heavily in the development of conventional gas and diesel powertrains. “There’s still a lot of juice left to get out of the orange,” says AutoPacific analyst Dave Sullivan, of the current internal combustion engine. “But being able to spread the cost around,” as makers consider alternatives, may open the door to alternative powertrains.

Microhybrid/Stop-start technology: As the name suggests, these hybrids have very small electric motors that allow a car to get started quickly, and then allow its engine to shut down seamlessly when idling — a feature that can reduce fuel consumption and emissions by up to 12% in conventional petrol-powered vehicles. They’re also relatively cheap to install, at an estimated $1500, versus $5900 for an advanced “clean” diesel engine and $6000 for a full hybrid system. And they’re also useful in that they can be retrofitted micro-hybrid onto vehicles such as buses. Johnson Controls has predicted that the number of vehicles equipped with stop-start idle technology will at least triple within five years, becoming standard issue in 52%-55% of vehicles built in 2016, up from 8% in 2010 — a call that was made last month, before Obama’s new deal.

General Motors recently announced a 2012 Buick LaCrosse that will come with its eAssist micro technology, that will get 37mpg (15.7 kilometres a litre) on the highway. In Europe, three new Citroen C3 models are available with an e-HDi 90 micro-hybrid powertrain with second generation Stop & Start, and fuel economy of 78.5mpg (33.3 kilometres a litre) for one and 76.3mpg (32.4 kilometres a litre) for two, with CO2 emissions of 93g/km and 98g/km respectively.

Waste Heat: Waste heat is one of the unsung hero’s of the global energy efficiency drive and, as Kanellos points out, car engines are particularly attractive sources, with estimates that 85% of the energy injected into engines gets wasted. Thermoelectrics, semiconductor materials that convert heat into electricity, could capture this waste heat, and reduce a vehicle’s fuel needs, while also improving fuel economy by at least 5%. Low efficiency and high cost of existing thermoelectric materials has kept them from becoming practical in vehicles, but according to Technology Review, researchers are assembling the first prototype thermoelectric generators for tests in commercial cars and SUVs. “The devices are a culmination of several advances made independently at thermoelectric device-maker BSST in Irwindale, California, and at General Motors Global R&D in Warren, Michigan,” says TR. “Both companies plan to install and test their prototypes by the end of the summer — BSST in BMW and Ford cars, and GM in a Chevrolet SUV.”

Creative transmissions: Automatic transmissions will continue to add more gears, says Eisenstien, such as the nine-speed V6 Chrysler’s developing. And others will switch to “manumatic”, or clutchless manuals. Despite its failed IPO, Fallbrook Technologies’ invention, the NuVinci, is also intriguing, says Kanellos: “a highly variable transmission that relies on balls instead of gears“. At this stage it is mostly geared at light electric vehicles, although the company claims it can improve mileage by 12% to 15%.

Hydrogen: “Perhaps the most radical powertrain solution would migrate the nation’s automotive fleet to hydrogen power,” says Eisenstein. “Fuel cell vehicles have the added advantage of producing nothing but water vapor as their exhaust.” But as Kanellos points out,  there are a few good reasons why carmakers aren’t rushing to this as a solution. “Hydrogen is dirty to make, you can’t transport it easily and the cars cost a ton of money,” Kanellos says. But he adds that “hydrogen cars are incredible to drive — better than other all-electrics — and Honda and Mercedes continue to research the concept.”

Aerodynamics: As Eisenstein says, “even the most advanced engines will require other significant engineering changes.” That means wind-cheating designs capable of boosting a vehicle’s fuel economy by between 5% and 20% (goodbye side mirrors? And hello grill shutters); innovative tyre materials and designs that reduce rolling resistance; green audio systems that cut the weight of accessories; and ultra-light carbon fiber for ultra-light chassis, such as BMW has on its new i3 and i8 models.