Real Cost of a Gallon of Gas: $11.35 plus
Published March 20, 2008
The national average for unleaded gas hit $3.28 a gallon this week, a 26 percent increase from last year at this time. Yet, the real cost of energy dependence amounts to more than $11.35 per gallon, according to Gal Luft, executive director of the Institute for the Analysis of Global Security.
In Dr. Luft’s opinion piece in today’s Miami Herald, he estimates that the United States is sending $460 billion per year overseas to finance the daily buying of 12 million barrels of imported oil. Luft cites calculations from the late Milton Copulos, an energy economist, who sets the grand total from the cost of oil-related defense expenditures, amortized cost of supply disruptions, and lost economic activity and tax revenues, at $825 billion per year.
"To put the figure in perspective, this is equivalent to adding $8.35 to the price of a gallon of gasoline refined from Persian Gulf oil, making the cost of filling the gasoline tank of a sedan $214, and of an SUV $321."
According to Luft, this transfer of wealth allows OPEC governments to not only laugh all the way to the bank—but to literally own the bank. He estimates that, with oil at $100 a barrel, OPEC's oil assets stand at “roughly $92 trillion, equivalent to almost half of the world's total financial assets and nearly twice the market capitalization of all the companies traded in the world's 27 top stock markets.” At current oil prices, OPEC could buy GM from six days worth of sales.
Luft’s answer is fuel diversity. He would like to see Congress require that every new car sold in the U.S. be made capable of running on something other than only gasoline. Alcohol-based fuels and electricity top his list. The added cost to make a flex-fuel car is about $100—the cost of one barrel of oil.
Of course, eradicating oil dependence will not be easy or cheap. But, as Luft points out, the path to a recovery from our current economic woes is compromised by our rabid consumption of petroleum. “It's past time for Congress to recognize that the solution to our economic predicament lies in our garage.”
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This outdated report shows the true cost to be double what Dr. Luft says.
http://www.progress.org/gasoline.htm
While the website I link to does not show its date, if the factored in costs of gas at $1.02/gallon are truly $15.14, I don't see what could have changed to lower the cost since that time.
Perhaps the International Centre for Technology Assessment also includes the cost of pollution cleanup and damages from gasoline. I don't know if either study includes the taxpayer cost of building and maintaining the roads needed for private car use.
External economies are hard to pinpoint, but it is undeniable that we pay much more than the price at the pump.
Flex fuel is the wrong approach. Statutory limitation on GVW is a much more workable solution.
The arms race on the nations roads and highways needs to stop. We do not need 5000 pound behemoths with 400 horsepower... to take junior to soccer practice.
I don't know that flex fuel is the "wrong approach", but I definitely agree about the extreme waste of resources on oversized vehicles.
Diversifying our fuel requirements is just as necessary as diversifying our power industry with renewables that we can create at home.
The fact that we rely so heavily on oil as our primary means of transportation and energy production is going to cost the US economy more in the next 10 years than most people realize.
Between said rise in oil, you're going to see a increase in food costs, manufacturing, construction, etc., it's a trickle down effect from the fact that all of these industries rely on varied forms of tranportation to meet the needs of most Americans. You add that with increased competition from China and India for the worlds resources, as well as our deflating dollar, and that spells some big trouble in our near future.
What would relieve the economic bleeding until a conversion to other renewable resources could compelete would be to allow for oil drilling in alaska. We have the technology to safely drill for oil now, so it is best we use it.
You are absolutely right about the oversized tanks people drive these days. I wonder just how many people realize that by driving gas guzzlers, they condemn our kids to the "100-year" war Bush-Cheney has us in.
ooops - this was a reply to "jim from the foothills"
A little bit of funny math is going on here... the US doesn't get all of it's oil from OPEC. A lot of oil is produced by the US and Canada (Canada is the US' largest supplier), although if you combine all of the OPEC countries OPEC is the largest supplier.
Anywho, the math is disingenous.
"To put the figure in perspective, this is equivalent to adding $8.35 to the price of a gallon of gasoline refined from Persian Gulf oil, **making the cost of filling the gasoline tank of a sedan $214, and of an SUV $321**."
Uh.. no. Unless you fill up at the "Persian Gulf Oil Only" station (PGOO?).
Don't people realize that when you make ridiculous hyperbolous statements such as these that are so easily countered that you hurt your argument instead of aiding it?
Raise gas taxes to a level that accounts for the damage it does to the enviroment ("full cost"). But don't make the argument based on specious reasoning.
Flex fuels means Diesel, Kerosene, Jet fuel, (all really the same stuff anyway), gasoline, Ethanol, bio-diesel. It is a great military specification but if you are looking to limit greenhouse gas emissions then this does absolutely nothing.
Ethanol is complete nonsense. Only a Republican would say "hey, I have an idea, lets start burning the food". What is next burning kittens puppies and children for fuel?
"Ethanol is complete nonsense. Only a Republican would say "hey, I have an idea, lets start burning the food". What is next burning kittens puppies and children for fuel?"
That is utter nonsense. The last time I checked, meat, fish, milk, cheese, all dairy products, and components of baked goods are all food----derived from the end product of corn ethanol production. The ethanol is simply an added bonus. The original intent of ethanol production was to convert mountains of excess grain production in the 1970's to high grade animal feed---and is still the main production of that production. It kept farmers in business. Without farmers you have NO ethanol OR food!!!
Ethanol can also be derived from sugar beets and sugar cane, currently FAR under utilized because sugar production capacity exceeds market demand many times over. The US has huge areas where sugar cane is a viable and desirable crop, and sugar beets which are just as productive if not slightly more so than cane can be grown in all areas of the US with the except of arctic tundra.
Germany and the US had commercially operating plants producing ethanol from cellulose waste, primarily wood waste from timber and logging operations from the 1890's to 1920(when the US operations were put out of business by the Volstead Act(Prohibition--making ethanol production illegal). Many home appliances were powered with ethanol, it was quite common in this period before monopolized electrification, stoves, irons, curlers, just about anything requiring heat to operate.
Cellulosic ethanol can be made from any type of plant material with cellulose---the whole plant---including stover, the parts of the corn plant that are simply waste at this time, cobbs, stalks and leaves.
For further information and discussion, come to the forum Breaking The Chains, http://groups.msn.com/BreakingTheChains/_whatsnew.msnw
Get the whole story. Ethanol is pure solar energy in liquid form.
We had a car that would run on just about anything back in the 60's. Chrysler's gas turbine. See Wikipedia's article. They even gave 50 people cars to drive and comment on. People loved them so much they decided it was too good and shelved it!
Ethanol and E-85 are not pie in the sky unproven technologies. It has been around for centuries. It is clean, safe, efficient and non-monopolistic. It can be made anywhere from raw materials that are widely varied and cheap, or free for the taking. The end results of ethanol production are valuable products in themselves, besides getting the ethanol.
Technology moves in steps. By switching to E-85 and hybrids we set the stage for the most radical changes is transportation since the first automobiles were invented. It could be possible to have a sleek sports car one week, and a plenty roomy SUV the next from the same vehicle. I explain how on Breaking the Chains.
There is nothing weak, wimpy, or second choice about ethanol as a motor fuel. It has several clear advantages over gasoline in that respect. Indy class racing cars are required to run on ethanol and have run on alcohol for about 30 years. If it can run the fastest racing cars in the world better, it can run your car down the highway better.
Ethanol also has many clear and overwhelming advantages environmentally and for the economy. It is produced by plants from sunlight, water and CO2--which is converted to sugars, starches and cellulose through the process of photosynthesis.
Ethanol is pure solar energy in liquid form.
Here is the link to the report published by the ITCA if you wanted to see how the prices were arrived at. Also the range of prices was from 5 to 15 and not just the 15 you saw in the ad.
Also, to inject my thoughts . . .
Market efficiency has been diluted by the subsidies of the tax code for big oil and the lack of measured externalities. If consumers were to pay the "real" price of gas, then our behaviors would change. In my opinion, the true cost of gasoline, as measured by many of the studies, is much lower than it should be if you take into account loss of innovation and productivity. Without the efficient allocation of capital to products and processes that create positive externalities (solar is good example), new technologies go undiscovered. Imagine if the eight track had been subsidized-we likely would not be enjoying our music on cds, much less ipods and other mp3s. Also, alternative energy sources (more specifically solar, again) are easier to install in third world countries that lack the infrastructure to transport electricity. By installing electricity in places that have never had the luxury can greatly increase productivity and fuel further innovation. I can't put a number on the true cost of a gallon of gasoline but I can imagine that (sadly) it is higher than we will pay in our lifetimes.
Whoops!
The real price of gasoline
www.ethanol.org/pdf/contentmgmt/The_Real_Price_of_Gas.pdf
Chrysler's turbine car program was appropriately scuttled in the 70s because the cars got abysmal fuel mileage. Also, they were positively slugs in acceleration unless you revved them to high rpms before taking off, drag-race style. Oh, and the amount of heat their huge exhaust systems put out was unbelievably unsafe. Their (regenerative) exhaust heat exchangers were a good idea, though.
Ben,
While agreeing with your points about market inefficiency, I did want to point out something important related to your statement that the "real cost" actually lies between $5 and $15 per gallon (not the "headline" number), according to the ICTA report: that report was written in *1998*. Which of the cost elements mentioned therein can possibly have moved *lower* since then? I'd say none. So the current number, or even the range, must actually be much, MUCH higher.
Steve,
Your comments WRT mileage and exhaust heat re: the Chrysler Turbine car are accurate, though curiously your mention of slow acceleration highlights one American mindset that could be discarded or at least modified in favor of better fuel economy, even while driving same car: the stop-light Grand Prix (a misnomer in itself). In Europe, even some of the bigger luxury cars are offered with smaller displacement engines than they are here, as more motorists are less concerned over the ability to zoom to highway speeds quickly (often legally and safely higher than here, BTW), as opposed to getting there then and cruising with the best fuel economy possible at a given speed. People in Germany must be buying the six-cylinder, diesel, or small-displacement V8 BMW 7-series cars, or they wouldn't be offered for sale. Probably the cost of a gallon of gas over there is closer to the "real cost".
I think a lot of people don't realize what really goes on with our industrial agricultural machine and HOW dependent we have made ourselves on oil. This has been going on for several years, at least since the end of world war 2. After that, we had numerous excess materials for war and nothing to put them toward.....except for chemical fertilizers for crops, specifically corn. To put it in simple terms, we have traded the sun for oil, and oil is not going to last that long...
I will agree that ethanol it is "solar energy" because solar energy is anything that contains energy that was produced by the sun at some point, which is a LOT of things, but pure? And how does ethanol treat your typical automobile engine? It is very easy to be for a specific cause and not consider anything else, but this world does not work like that.
I don't agree with ethanol if it is produced from industrial corn, an extremely unsustainable venture that is already over produced as a "food", and now a fuel.
You can't do just one thing, everything must be taken into consideration.
Just one book to consider reading, The Omnivore's Dilemma
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