"Higher energy prices are needed now to signal the real > scarcity to come. Without higher prices we will not invest in the > alternative energy technologies needed for a smooth transition to the > post-petroleum age. Without higher prices we will not conserve the > fossil energy needed to manufacture those alternative technologies. > Without higher prices, argues petroleum analyst Richard Duncan, the > remaining life expectancy of industrial society may well be less than > 40 years!"
> > http://biz.yahoo.com/rf/981117/bbm.html > > Tuesday November 17, 3:23 pm Eastern Time, 1998 > > Real cost of U.S. gasoline is $15.14 per gallon, report says > > By Tom Doggett > > WASHINGTON, Nov 17 (Reuters) - So you think you're getting a good > deal on a tank of gasoline these days? Not so, if all the oil > industry tax subsidies received from the federal and state > governments and other costs that went into producing that gallon of > gasoline were included in the pump price. > > Such external costs push the price of gasoline as high as $15.14 a > gallon, according to a new report released Tuesday by the > International Center for Technology Assessment. > > ``In reality, the external costs of using our cars are much more > higher than we may realize,'' the Washington-based research group > said in its report. > > The report examined more than 40 separate cost factors the group said > it associated with gasoline production but aren't reflected by the > price of gasoline at the pump. > > These external costs total up to $1.69 trillion per year, according > to the report. > > The group points out that the federal government provides the oil > industry with tax breaks to help U.S. companies compete with > international producers, so gasoline remains cheap for American > consumers. > > The Department of Energy is forecasting that the national price for > regular unleaded gasoline will average $1.02 during the current > quarter, the lowest price on record for any three-month period when > adjusted for inflation. > > Tax subsidies don't end at the federal level, as the group said most > state income taxes are based on oil firms' lower federal tax bills, > which result in companies paying $123 million to $323 million less in > state taxes. > > In addition to tax breaks, the federal government provides up to > $114.6 billion in subsidies annually that support the extraction, > production and use of petroleum, such as research and development and > export financing. > > The federal government also spends up to $1.6 billion yearly on > regulatory oversight, pollution cleanup and liability costs connected > to the oil industry, the group said. > > In addition, U.S. Defense Department spending allocated to safeguard > the world's petroleum resources totals $55 billion to $96 billion a > year, according to the group. > > > Copyright © 1998 Reuters Limited. All rights reserved. Republication > or redistribution of Reuters content is expressly prohibited without > the prior written consent of Reuters. Reuters shall not be liable for > any errors or delays in the content, or for any actions taken in > reliance thereon. See our Important Disclaimers and Legal > Information. Questions or Comments? > > ------------------------------------------------------------------ > > http://www.icta.org/projects/trans/rlprexsm.htm > > The International Center for Technology Assessment > > The Real Price Of Gas > > Executive Summary > > This report by the International Center for Technology Assessment > (CTA) identifies and quantifies the many external costs of using > motor vehicles and the internal combustion engine that are not > reflected in the retail price Americans pay for gasoline. These > are costs that consumers pay indirectly by way of increased taxes, > insurance costs, and retail prices in other sectors. > > The report divides the external costs of gasoline usage into five > primary areas: (1) Tax Subsidization of the Oil Industry; (2) > Government Program Subsidies; (3) Protection Costs Involved in Oil > Shipment and Motor Vehicle Services; (4) Environmental, Health, > and Social Costs of Gasoline Usage; and (5) Other Important > Externalities of Motor Vehicle Use. Together, these external costs > total $558.7 billion to $1.69 trillion per year, which, when added > to the retail price of gasoline, result in a per gallon price of > $5.60 to $15.14. > > TAX SUBSIDIES > > The federal government provides the oil industry with numerous tax > breaks designed to ensure that domestic companies can compete with > international producers and that gasoline remains cheap for > American consumers. Federal tax breaks that directly benefit oil > companies include: the Percentage Depletion Allowance (a subsidy > of $784 million to $1 billion per year), the Nonconventional Fuel > Production Credit ($769 to $900 million), immediate expensing of > exploration and development costs ($200 to $255 million), the > Enhanced Oil Recovery Credit ($26.3 to $100 million), foreign tax > credits ($1.11 to $3.4 billion), foreign income deferrals ($183 to > $318 million), and accelerated depreciation allowances ($1.0 to > $4.5 billion). > > Tax subsidies do not end at the federal level. The fact that most > state income taxes are based on oil firms' deflated federal tax > bill results in undertaxation of $125 to $323 million per year. > Many states also impose fuel taxes that are lower than regular > sales taxes, amounting to a subsidy of $4.8 billion per year to > gasoline retailers and users. New rules under the Taxpayer Relief > Act of 1997 are likely to provide the petroleum industry with > additional tax subsidies of $2.07 billion per year. In total, > annual tax breaks that support gasoline production and use amount > to $9.1 to $17.8 billion. > > PROGRAM SUBSIDIES > > Government support of US petroleum producers does not end with tax > breaks. Program subsidies that support the extraction, production, > and use of petroleum and petroleum fuel products total $38 to > $114.6 billion each year. The largest portion of this total is > federal, state, and local governments' $36 to $112 billion worth > of spending on the transportation infrastructure, such as the > construction, maintenance, and repair of roads and bridges. Other > program subsidies include funding of research and development > ($200 to $220 million), export financing subsidies ($308.5 to > $311.9 million), support from the Army Corps of Engineers ($253.2 > to $270 million), the Department of Interior's Oil Resources > Management Programs ($97 to $227 million), and government > expenditures on regulatory oversight, pollution cleanup, and > liability costs ($1.1 to $1.6 billion). > > PROTECTION SUBSIDIES > > Beyond program subsidies, governments, and thus taxpayers, > subsidize a large portion of the protection services required by > petroleum producers and users. Foremost among these is the cost of > military protection for oil-rich regions of the world. US Defense > Department spending allocated to safeguard the world's petroleum > resources total some $55 to $96.3 billion per year. The Strategic > Petroleum Reserve, a federal government entity designed to > supplement regular oil supplies in the event of disruptions due to > military conflict or natural disaster, costs taxpayers an > additional $5.7 billion per year. The Coast Guard and the > Department of Transportation's Maritime Administration provide > other protection services totaling $566.3 million per year. Of > course, local and state governments also provide protection > services for oil industry companies and gasoline users. These > externalized police, fire, and emergency response expenditures add > up to $27.2 to $38.2 billion annually. > > ENVIRONMENTAL, HEALTH AND SOCIAL COSTS > > Environmental, health, and social costs represent the largest > portion of the externalized price Americans pay for their gasoline > reliance. These expenses total some $231.7 to $942.9 billion every > year. The internal combustion engine contributes heavily to > localized air pollution. While the amount of damage that > automobile fumes cause is certainly very high, the total dollar > value is rather difficult to quantify. Approximately $39 billion > per year is the lowest minimum estimate made by researchers in the > field of transportation cost analysis, although the actual total > is surely much higher and may exceed $600 billion. > > Considering that researchers have conclusively linked auto > pollution to increased health problems and mortality, the CTA > report's estimate of $29.3 to $542.4 billion for the annual > uncompensated health costs associated with auto emissions may not > adequately reflect the value of lost or diminished human life. > Other costs associated with localized air pollution attributable > to gasoline-powered automobiles include decreased agricultural > yields ($2.1 to $4.2 billion), reduced visibility ($6.1 to $44.5 > billion), and damage to buildings and materials ($1.2 to $9.6 > billion). Global warming ($3 to $27.5 billion), water pollution > ($8.4 to $36.8 billion), noise pollution ($6 to $12 billion), and > improper disposal of batteries, tires, engine fluids, and junked > cars ($4.4 billion) also add to the environmental consequences > wrought by automobiles. > > Some of the costs associated with the real price of gasoline go > beyond the effects of acquiring and burning fuel to reflect social > conditions partially or wholly created by the automobile's > preeminence in the culture of the United States. Chief among these > conditions is the growth of urban sprawl. While monetizing the > impact of sprawl may prove a challenging endeavor, several > researchers have done significant work on the subject. The costs > of sprawl include: additional environmental degradation (up to > $58.4 billion), aesthetic degradation of cultural sites (up to > $11.7 billion), social deterioration (up to $58.4 billion), > additional municipal costs (up to $53.8 billion), additional > transportation costs (up to $145 billion), and the barrier effect > ($11.7 to $23.4 billion). Because assessment of the costs of > sprawl is somewhat subjective and because study of the topic > remains in a nascent stage, the CTA report follows the lead of > other researchers in field of transportation cost analysis and > reduces the total of the potential cost of sprawl by 25% to 50% to > arrive at a total of $163.7 to $245.5 billion per year. > > OTHER EXTERNAL COSTS > > Finally, external costs not included in the first four categories > amount to $191.4 to $474.1 billion per year. These include: travel > delays due to road congestion ($46.5 to $174.6 billion), > uncompensated damages caused by car accidents ($18.3 to $77.2 > billion), subsidized parking ($108.7 to $199.3 billion), and > insurance losses due to automobile-related climate change ($12.9 > billion). The additional cost of $5.0 to $10.1 billion associated > with US dependence on imported oil could rise substantially, > totaling $7.0 to $36.8 billion, in the event of a sudden price > increase for crude oil. > > RECOMMENDATIONS > > The ultimate result of the externalization of such a large portion > of the real price of gasoline is that consumers have no idea how > much fueling their cars actually costs them. The majority of > people paying just over $1 for a gallon of gasoline at the pump > has no idea that through increased taxes, excessive insurance > premiums, and inflated prices in other retail sectors that that > same gallon of fuel is actually costing them between $5.60 and > $15.14. When the price of gasoline is so drastically > underestimated in the minds of drivers, it becomes difficult if > not impossible to convince them to change their driving habits, > accept alternative fuel vehicles, support mass transit, or > consider progressive residential and urban development strategies. > > The first step toward getting the public to recognize the damage > caused by the United States' gasoline dependance is getting the > public to recognize how much they are paying for this damage. The > best way, in turn, to accomplish this goal is to eliminate > government tax subsidies, program subsidies, and protection > subsidies for petroleum companies and users, and to internalize > the external environmental, health, and social costs associated > with gasoline use. This would mean that consumers would see the > entire cost of burning gasoline reflected in the price they pay at > the pump. Drivers faced with the cost of their gasoline usage up > front may have a more difficult time ignoring the harmful effects > that their addiction to automobiles and the internal combustion > engine have on national security, the environment, their health, > and their quality of life. > > ------------------------------------------------------------------ > > Why We Should Pay More For Gas > > by William E. Rees, PhD > > Americans enjoy the most energy-intensive economy on the planet. Much > of the country depends, directly or indirectly, on fossil fuel for > heat in winter and for air conditioning in summer. The American way > of life feeds on mainly fossil-fueled transportation that moves > people and everything they need over vast distances within the > country. Oil-fueled transportation also connects the nation > materially to the rest of the world, including to more than 60% of > its oil supplies. Thanks to production agriculture and industrial > food processing, American food now "embodies" more fossil energy than > solar energy. Many products on retailers' shelves, from various > textiles to personal computers are made, in part, from oil or natural > gas. > > The reality is, that for all the paper wealth being generated by 'new > economy' high-tech and internet stocks, the country's entire > post-industrial economy still floats on an "old economy" pool of oil > and gas. No wonder that in recent months Americans have been take > aback by significant increases in the price of gasoline, diesel fuel, > heating oil, and natural gas. Domestic sources are drying up, demand > everywhere is rising, and the Organization of Petroleum Exporting > Countries (OPEC), taking advantage of its increasing dominance in > world markets, has tightened the screws on global supplies. > > The federal government has responded to the price hikes and public > howls by intensively lobbying OPEC to open the valve and let the oil > flow more freely -- with some success. While this is may be good > short-term politics it is bad economics and lousy environmental > policy. And it won't prevent even steeper price increases in the near > future. Indeed, if the US government really wants to seize the > initiative, it should be leading western governments to agreement on > a persistent, orderly, predictable, and steepening series of oil > price increases over the next two decades. > > This argument comes in two parts. The first is neatly summarized in a > 1998 report by the Washington-based International Centre for > Technology Assessment on "The Real Price of Gas". The purpose of this > report was to quantify the numerous external costs associated with > the use of fossil-fueled motor vehicles that are not reflected in US > consumer prices. Such hidden costs range from various tax and direct > subsidies to the oil industry from governments, through publicly > funded infrastructure costs, to the health and environmental costs > associated with burning fossil fuels (e.g., breathing "second-hand > exhaust"). These direct and indirect subsidies seriously distort > energy markets, burden the economy with rampant inefficiencies, and > are wrecking the world's climate. > > Depending on the definition of the subsidies and the quality of > available data, the total unaccounted cost in the US was found to lie > between $559 billion and $1.7 trillion dollars annually. Thus, a > fuller social cost accounting for the use of fossil fuel would result > in a gasoline price per gallon of between US$ 5.60 and US$ 15.14, or > between about four and 10 times recent prices. In other words, even > with the burden of existing taxes, prevailing energy prices do not > "tell the truth" about the costs of using fossil energy -- Americans > are still paying a small fraction of the price they would pay for gas > in a perfectly functioning market. > > In fact, US consumers enjoy the most underpriced fuel available in > any major industrialized country -- with predictable results. As any > economist will tell you, the invariable consequence of underpricing > is overuse. Americans live in ever-larger energy-inefficient houses, > drive ever-bigger and less fuel-efficient vehicles and are generally > squandering in a few decades a non-renewable resource that took tens > of millions of years to accumulate. Even if there were no other > issues at hand, it would be economically rational and ecologically > beneficial for the federal government to intervene in today's energy > market to correct at least the best-documented and non-controversial > market imperfections. This alone would result in significantly > greater taxes and prices at the pump. > > But there is another issue at hand. The world is running out of > conventional oil. Recent price hikes are mere tremors heralding the > real price shock to come. Surely this is not the time to be deepening > our dependence on fossil fuel. > > The evidence? Oil "production" (i.e., extraction) in the US peaked > around 1970 and in North America as a whole in 1984. Non-OPEC > production is peaking even as you read these words. Several recent > studies project global oil production to peak by 2013 or sooner, > possibly as soon as 2007. Even the necessarily conservative > International Energy Agency (IEA) in its World Energy Outlook, 1998 > concurred for the first time that global output could top out between > 2009 and 2012 and decline rapidly thereafter. Indeed, the IEA > projects a nearly 20% shortfall of supply relative to demand by 2020 > that will have to be made up of from "unidentified unconventional" > sources (i.e., known oil-sands deposits have already been taken into > account). Other studies show that by 2040 total oil output from all > sources may fall to less than half of today's 25-26 billion barrels > of oil per year. > > And running out of oil is not running out of just oil. Oil is the > means by which industrial society obtains (and over-exploits) all > other resources. The world's fishing fleets, its forest sector, its > mines, and its agriculture all are powered by liquid portable fossil > fuels. Seventeen percent of the US energy budget, most of it oil, is > used just to grow, process, and transport food alone. (It takes a > gallon of fossil fuel to feed each American every day.) Keep in mind, > too, that petroleum is not just a fuel. Oil and natural gas are the > raw material for thousands of products from medicines, paints, and > plastics to agricultural fertilizers and pesticides. Since oil is > directly or indirectly a part of everything else the coming scarcity > of oil and the attendant price shock means higher prices for > everything else as well. > > But wait a minute. Many analysts will agree with energy economist > M.A. Adelman that rising prices will stimulate "a stream of > investment [creating] additions to proved reserves, a very large > in-ground inventory, constantly renewed as it is extracted". > Unfortunately, this argument is dangerously misleading. The physical > stock of exploitable oil is not being "renewed"; historically, > improved technology has simply made a dwindling finite resource more > accessible. Abundant short-term market supplies then effectively > short-circuit the price increases that would otherwise signal > impending real scarcity, even as finite stocks are depleted. > > Moreover, Adelman's argument ignores the fact that oil exploration is > very much subject to diminishing material returns. Despite increasing > effort, we currently discover less than six billion barrels of new > oil per year, not even a quarter of present consumption. A few > decades ago, oil extractors in the US would discover 50 barrels of > oil for every barrel consumed in drilling and pumping. In the > mid-1990s the ratio was five to one, heading to one for one by 2005. > At that point, there will no point in extracting oil with oil at any > price even though there will still be plenty left in the ground. > > What about substitutes? Concerns over climate change have already > stimulated a growing interest in alternative energy sources. ARCO's > CEO Michael Bowlin is on record as saying, "We've embarked on the > beginning of the Last Days of the Age of Oil." Ford Motors' William > C. Ford, has stated that "[he expects] to preside over the demise of > the internal combustion engine." All very well, but we sometimes > forget that different fuel types are not readily interchangeable. > Wind, photovoltaics, and other forms of solar electricity may be able > substitute for most of the electricity currently generated by fossil > fuels (nuclear fission has failed and commercial fusion reactors are > decades in the future). However, electricity cannot replace many of > the direct uses of petroleum derivatives as fuel nor overcome their > clear advantages in energy storage. There is great promise in > fuel-cell development but the fact is that no suitable substitutes > are yet in sight for the fossil fuels used in heavy farm machinery, > construction and mining equipment, diesel trains and trucks, and > ocean-going freighters. Jet aircraft cannot be powered by > electricity, whatever its source. (While rapid advances are being > made in coal- and other carbon-based synthetic fuels, these > substitutes leave us with the specter of climate change.) Again, > nothing yet can replace cheap hydrocarbons as feedstocks in the > manufacture of myriad industrial and agricultural products. Finally, > it is no small irony that we need high-intensity fossil fuel to > produce the machinery and infrastructure required for most > alternative forms of energy. Sunlight is simply too "dilute" to use > in manufacturing the high-tech devices and equipment required for its > own conversion to heat and electricity. Industrial civilization faces > a paradox: we need oil to move beyond the age of oil. > > The human population has grown six-fold in less than 200 years. The > global economy has quintupled in less than 50. No factor has played a > greater role in the explosive growth of the human enterprise than > abundant cheap fossil fuel. No other resource has changed the > structure of economies, the nature of technologies, the balance of > geopolitics, and the quality of human life as much as petroleum. > Little wonder that some scientists believe that passing the peak of > world oil production will be a shock to the human enterprise like no > other event in history. Population and consumption are still on a > steep trajectory but the rocket is running out of fuel. > > In this light, ordinary citizens and public service organizations > alike should be urging the US government to get real about energy > policy and pricing. Significant price increases are long overdue. > Waiting longer to act will impose an even greater future burden on > those ordinary citizens who will suffer the most from generally > rising prices. (A comprehensive program of ecological fiscal reform > would include lower income taxes -- possibly even a negative income > tax for the poorest families -- to compensate for rising energy and > material costs.) > > The data and trends are no secret. Major governments have known about > the deteriorating supply situation for years yet prefer to allow the > public to wallow in ignorance while hoping something will happen to > halt the downward slide. This in turn creates a political climate in > which a looming crisis remains invisible and corrective action is > impossible. Higher energy prices are needed now to signal the real > scarcity to come. Without higher prices we will not invest in the > alternative energy technologies needed for a smooth transition to the > post-petroleum age. Without higher prices we will not conserve the > fossil energy needed to manufacture those alternative technologies. > Without higher prices, argues petroleum analyst Richard Duncan, the > remaining life expectancy of industrial society may well be less than > 40 years! > > Sources and additional reading > > Adelman, M.A. 1993. The Economics of Petroleum Supply. Cambridge, MA: > MIT Press. > > Bartlett, A.A. 2000. An Analysis of US and World Oil Production > Patterns Using Hubbert-Style Curves. Mathematical Geology 32/1: 1-17. > > Brown, L. R. 2000. The rise and fall of the Global Climate Coalition. > Worldwatch Issue Alert 2000 - 6 (July 25, 2000) > > Campbell, C.C. 1999. The Imminent Peak of World Oil Production. > http://www.hubbertpeak.com/campbell/commons.htm > > Duncan R. C. 1993. The Life-expectancy of Industrial Civilization: > The Decline to General Equilibrium. Population and Environment 14: > 325-357. > > Duncan R. C. and W. Youngquist. 1999. Encircling the Peak of World > Oil Production. Natural Resources Research 8 (3) 219-232. > > Fleming, D. 1999. Decoding a Message About the Market for Oil. > European Environment 9: 125-134. > > Gordon, R.L. 1994. Energy, Exhaustion, Environmentalism, and Etatism. > The Energy Journal. 15:1: 1-16. > > http://www.dieoff.com > > International Centre for Technology Assessment.1998. The Real Price > of Gas. Washington: ICTA. > > International Energy Agency.1998. World Energy Outlook. > > Youngquist, W. 1997. GeoDestinies. Portland: National Book Company > > Youngquist, W. 1999. The Post-Petroleum Paradigm - and Population. > Population and Environment 20(4): 297-315. > > ----------- > > Dr. William E. Rees is an ecological economist and a professor at the > University of British Columbia's School of Community and Regional > Planning, in Vancouver. Dr. Rees co-authored the neat OUR ECOLOGICAL > FOOTPRINT: Reducing Human Impact on the Earth, by Williams E. Rees, > Phil Testemale, Mathis Wackernagel; > http://www.amazon.com/exec/obidos/ASIN/086571312X/brainfood.a > > Aslo see Dr. Rees' excellent REVISITING CARRYING CAPACITY: Area-Based > Indicators of Sustainability at http://dieoff.com/page110.htm > > _____________________________________________________________________ > > > >
