The True Cost of Gasoline

What are you paying for gasoline now? Around $3 a gallon, give or take a quarter? Yeah, us too. Pretty cheap isn’t it? You don’t think so? Think of the effort needed to produce it. The crude oil has to be retrieved, loaded into transport vehicles, and taken to a seaport. Here it has to be pumped into tanker ships, which have to carry it from the middle east (or wherever, Mexico, Venezuela, pick your favorite unstable region) to a US seaport, where it is off-loaded into tanker trucks and taken to a refinery. Here huge amounts of energy are expended refining the crude oil into various products that we can’t do without: gasoline, diesel, kerosene, engine oil, asphalt. Then the gasoline is loaded into trucks and distributed to the network of filling stations around the country. And it’s only $3 per gallon? That’s cheap! How can they sell it so cheap you might wonder. Well, its because the government subsidizes the oil industry. In other words, the government pays part of the price so that the oil industry can sell it cheaply to us. Because of course we wouldn’t buy so much of it if it were more expensive, would we? But the government wants to keep us all trucking along in our vehicles, spewing CO2, because it’s good for the economy for us to be out on the roads. The bottom line here is that the price we pay is artificially low—it is fake.

Suppose the government stopped paying subsidies to the oil industry. The price of a gallon of gasoline might double (just a guess) to $6 or so. Would we still pay it? We’d grumble, but we’d pay it. It would cost about the same as a gallon of fancy bottled water. But we still wouldn’t be paying the TRUE cost of that gallon of gasoline. There are a lot of things that are not factored in to the price we pay at the pump. Some of these are:

1)The cost of environmental damage due to CO2 emissions during extraction of crude petroleum.

2)The cost of environmental damage due to CO2 emissions during transport of crude petroleum.

3)The cost of environmental damage due to CO2 emissions during processing of crude petroleum.

4)The cost of environmental damage due to spills of crude petroleum, either at the drilling station (recent Gulf of Mexico incident) or during transport (Exxon Valdez).

5)The cost of environmental damage due to CO2 emissions resulting from burning gasoline in automobiles.

6)The diminished quality of life for future generations who will have to survive on a diminished, depleted, hot earth. The diminishment/depletion is a direct near-future result of our continued insistence on using gasoline to support our selfish lives of constant consumption. This is a huge economic issue, but is even more a moral issue. We are committing crimes against future humans. If they were living now, we would be subject to a massive class-action lawsuit.

If we were to factor in all of these ignored costs (called externalities by the fossil fuel industry), the price of a gallon of gasoline would probably be 10 (or 20? Or 100?) times higher than it is now. So let’s consider ourselves lucky. We get to keep on ruining the planet and it won’t cost us much at all!