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9/5/08 Fact: Gas Costs $1-$15/gallon Over Price at Pump |
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By Peter Forman -The taxpayer-funded cost of military expenditures and foreign aid (that would be spent differently if we were not protecting our long-term supplies of oil)
Experts of all different stripes estimate these hidden subsidies or costs to be, as broken down on the accompanying chart: · $1.05 Military/Foreign expenditures: Patrol Middle East oil shipping lanes, specific foreign aid, some war costs, etc.... · $4.26 Economic: From the importation of 4.5 billion barrels of oil per annum, loss of domestic jobs, diminished economic activity, lost tax revenues, weakened currency, and loss of reinvestment. · $1.02 Taxes/Subsidies: Provided directly to oil producers. · $8.13 Environmental: Hard to quantify costs of pollution, etc... ---------------- · $14.46 total hidden costs · $ 4.50 cost of gasoline ---------------- $18.96 Actual cost of gasoline per gallon. What is the real hidden cost? Many would argue that the environmental costs are hard to quantify and often disputed. Even though some are real, let's discount those for this analysis. It is indisputable that there are military, economic, and tax costs which |
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total about $6.33 per gallon. Even if one were to argue away some of the economic drag caused by oil imports and its impact on the trade deficit, the currency, and jobs, one still ends up with a range of between $2.07 and $6.33/gallon over the price at the pump.
So why should we really care? For a few reasons: 1) We are fooling ourselves when we ignore these costs. They cost the taxpayers regardless if they are from the front pocket or back pocket. 2) More importantly, it creates a distortion to the free market. The tax credits and military expenditures alone make oil less expensive than it would otherwise be. 3) And most importantly, it creates a competitive disadvantage for alternatives to oil and perpetuates the dependency that is the cause of the hidden costs.
Both of the Presidential candidates have proposed tax credits or abatements, in one form or another, to offset the spike in oil and gasoline prices. While commendable for the intent, this would only serve to drive demand and perpetuate the cycle of demand, dependence, and hidden costs. We must introduce competition at the fuel pumps with a Flex-Fuel program (Open Fuel Standard Act of 2008). And we must incent the production and purchase of low/no emission (electric) vehicles.
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