The True Costs of Oil

America has relied on cheap fossil fuels and lots of government funding. Many of the negative externalities associated with fossil fuel burning are not included in the pump price consumers pay. An article written by Chris Nelder explains estimated costs of all the processes involved with oil. “According to a 2000 study for the Department of Energy, there is a significant cost attached to the mere fact of our dependence. Supply disruptions, price hikes, and loss of wealth suffered through the oil market upheavals have cost the U.S. economy around $7 trillion (1998 dollars) over the 30 years from 1970 to 2000” (Nelder 2007). Due to the enormous military cost of protecting Persian Gulf imports, the hidden cost of oil from that region amounts to $7.41 per gallon of gasoline. The cheapest gas out in my part of the Bay Area is $3.11 a gallon for regular. Add them together, and the true cost of my gas is probably around $10.52 a gallon without accounting for government subsidies and environmental degradation. “Government subsidizes the oil industry anywhere between $38 billion and $114.6 billion per year” (Nelder). Environmental costs of oil are devastating to water supplies, soils, air quality, and biodiversity. The Union of Concerned Scientists published an article estimating the total cost in 1991 of environmental externalities to be $54 billion to $232 billion. “Human mortality and morbidity due to air pollution accounts for over three quarters of the total environmental cost and could be as high as $182 billion annually. For the Los Angeles area, one estimates the annual health-based cost from ozone and particulate exposure alone to be almost $10 billion” (Nelder). If carbon costs are accounted for as in a carbon tax of some form, around 30-35 dollars per ton of CO2, then companies would not profit, but loose money. The true cost of oil annually is less than 70 trillion a year.
If Americans consumers were to see pay for the true costs of oil, you could bet that we would transition to creating cleaner energy systems with high efficiencies that would benefit local and global societies. The true costs of oil would cause innovation in new technologies. Some European countries where gas and oil are heavily taxed have already created free markets supportive of new energy technology. America needs to do the same to become energy independent, create new industry, generate revenues, improve the health of the environment, and insure stability and sustainability for future generations.

Nelder, Chris. The True Cost of Oil: $65 Trillion a Year? 2007. Accessed on-line at http://www.energyandcapital.com/articles/oil-gas-crude/461.