Hidden Costs of Pump Prices http://theev.

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The cost of gasoline (unleaded/diesel) is substantially higher than the price consumers pay at the pump, the vast majority of this cost is hidden from the public. The last study to investigate this subject was the International Center for Technology Assessment (CTA) which was published in November 1998. The related costs of using motor vehicles and the internal combustion engine since that time have continued to increase. Consumers need to educate themselves so that they can make the best choice possible when it comes to meeting their energy needs now and in the future. Politicians have the added responsibility of using this big picture knowledge so that

The real cost at the pump

better bills are presented and passed. The CTA study grouped the costs into five broad categories, which are paid by users and nonusers of gasoline by way of higher taxes, insurances costs, and retail prices for items other than gasoline. (1) Tax Subsidization of the Oil Industry (2) Government Program Subsidies (3) Protection Costs Involved in Oil Shipment (4) Other Gasoline Usage Costs (5) Environmental, Health and Social Costs of Gasoline Usage The Executive summary of the 1998 study estimated the annual costs to be under a best case scenario to be 558.7 billion or worse case 1.69 trillion per year. That roughly translated into a per gallon price of $5.60 to $15.14 a gallon and that is on top of an inflation adjust price of $1.36 which is how much a gallon of gas cost at the time of the study! Informal polls have proven that the average consumers have no idea that there are substantial associated costs over and above what they are paying at the pump. Because of this lack of knowledge the USA has been making some poor choices when it comes to: national security, the environment, person health and quality of life in general.

If these costs were at least understood by the general public in the USA, not necessarily paid up front at the pump, there may finally be a shift in their habits when it comes to: alternative fuel vehicles, public transportation and progressive residential and urban development plans. Specifically some of these costs include: (1) Tax Subsidization of the Oil Industry Petroleum companies are the beneficiaries of preferential tax credits and rates which are significantly lower than other businesses. Including Federal subsidies for: Percentage depletion allowance, nonconventional fuel production credit, Expensing of exploration and development costs, enhanced oil recovery credit, Foreign tax credits (FTCs), Deferral of foreign income, Accelerated depreciation allowances, Expensing of tertiary injectants, and Exclusion of interest on industrial development bonds for energy facilities. In 1997 these federal tax subsides for the petroleum industry were estimated to be over 12 billion USD per year. In addition to the federal tax subsidies State and Local tax rates on the sale of gasoline is approximately 1/3 lower than the average sales tax rate on other types of products. Many temporary tax relief reforms such as the The Taxpayer Relief Act of 1997 (TRA) etc cost another 2 billion in 1997 dollars per year that once in place have yet to be removed due to politicians being sympathetic to the wishes of the petroleum

Greener and more sustainable options are available

industry. Not only do these tax provisions distort the real price of gasoline at the pump, but promote the general environmentally unfriendly practices of the oil industry over the development of cleaner alternative green fuels. (2) Government Program Subsidies for the Oil Industry The US Government has programs that subsidize the oil industry at almost every stage of production and consumption, which equates to nothing less than welfare in a free market system. Transportation Infrastructure: The government pays for building and maintaining all roads and highways with more than 1/2 the bill being paid by non transportation sources. Basic R&D: Unlike other industries the US government supplies the oil industry with quite a bit of basic data via the Energy Information Agency (EIA) and the Department of Interiors US Geological Survey, that includes oil field exploration and reserve estimates. Export Financing Programs for the Oil Industry: Oil companies are given low-cost financing, loan guarantees, and breaks on insurance due to political risks of investments in unstable political regions via USfunded multilateral development banks and organizations such as OPIC, US Eximbank, the World Bank and the International Finance Corporation (IFC). These subsidies in 1997 dollars would be over 300 million annually. The Army Corps of Engineers Civil Program: Petroleum products comprise roughly 40 percent of all waterborne tonnage transported annually via coastal and inland waterways and more than half of the nations oil imports are processed through deepwater ports maintained by the Corps of Engineers. The associated cost to the taxpayers is easily over 250 million a year in 1997 dollars. Department of Interiors Oil Resource Management Programs: The Department of Interior typically sells or leases federal land to the Oil industry

below market prices. In addition royalties due the government for leased federal land have routinely been understated by the oil companies as the government for some reason lacks proper oversight in that area.

Government Regulatory Oversight, response to oil contamination, and environmental liability: The environmental liabilities created by petroleum extraction, transport, and refining is almost entirely subsidized. There are costs to the public for continued inspection of depleted and plugged wells, leaking underground storage tanks and shutting down the wells of insolvent operators. The cost of clean-up for refinery accidents and oil spills are paid by taxpayers since even in the case of oil-related accidents there are liability caps which limit the financial exposure of oil companies and without other fuel choices or alternatives the worse offending oil company can eventually pass on the clean-up cost to their consumers at a later date. Depending upon the number of leaks and spills in a given year the cost approximately 1 to 1.5 billion annually.

If oil is being transported it will eventually spill

(3) Protection Costs Involved in Oil Shipment The US government has had to increase military expenditures in oil sensitive areas such as the Persian Gulf to ensure the US has continued supply of imported foreign oil. The oil industry has been able to hide under this umbrella of protection whereas other industries have to pay for their own private security forces to protect their investments, equipment, infrastructure and personnel. Sadly the US government has found it easier to pass budgets for increased military spending rather than alternative energy. Its also difficult to put a price tag on the number of lives lost and the number of naval vessels, aircraft and tanks that are required etc to defend all the assets in the middle east, but it would be significantly less if oil did not constitute something like 75% of the regions exports. However, it seems easy to justify the bulk of the costs for maintaining a military there and the annualized costs of combat in the region over time.

Just to have a single fully loaded Nimitz class aircraft carrier stationed as a police officer in the region costs $530,000,000 per year. However the War in Iraq since 2003 to date has cost the US over $787+ billion dollars and the war in Afghanistan since 2001 has cost $400+ billion dollars.

A single fully loaded Nimitz class aircraft carrier costs $1,450,000 per day

Strategic Petroleum Reserve (SPR) Since 1975 US tax payers have had to pay an annual (oil insurance) fee of about 6 billion dollars a year to reduce the risk of disruptions in the flow of oil by maintaining a 34 day supply or 727 million barrels of oil, which is stored at four sites on the gulf of Mexico. (4) Other Gasoline Usage Costs The Coast Guard spends about 455 million a year maintaining coastal shipping lanes, navigational support, ice clearing and responding to oil spills, with quite a large percentage of the business being done for the benefit of oil farms and oil tankers. Police, fire, emergency response, and other municipal services provide various types of protection for the oil transportation industry. (5) Environmental, Health and Social Costs of Gasoline Usage Use of the ICE (Internal Combustion Engine) causes a variety of environmental and health issues, which historically have never been passed on to the petroleum industry, automotive industry and/or vehicle operators. A variety of noxious air pollutants, including carbon monoxide (CO), nitrogen oxides (NOx), carbon dioxide (CO2), sulfur oxides (SOx), particulate matter (PM) and volatile organic compounds (VOCs). These, contribute to serious health problems including cancer, cardiopulmonary problems, respiratory diseases, including asthma and emphysema, acid rain, crop damage, ozone depletion, building damage and climate change/global warming. The real health costs associated with even a few of these issues could run higher than the entire annual defense budget of the USA in an entire year.