Fill 'Er Up: The Hidden Cost of Oil

Discussion in 'Commodity Futures' started by Nolan-Vinny-Sam, Mar 24, 2004.

  1. Fill 'Er Up: The Hidden Cost of Oil

    By Jason Mark, Global Exchange
    January 26, 2004

    How much did you pay per gallon of gas the last time you filled up your car's tank?

    It was probably about $1.75 per gallon, give or take a quarter depending on where you live. In the grand scheme of things, this isn't much – less, in fact, than you would pay for a gallon of milk.

    But the price at the pump is nowhere near the real cost of that oil you put in your car. After you figure in the military expenditures of securing and protecting the petroleum, the cost of lost jobs and misplaced investment capital, and the burden of periodic "oil shocks," the price is much, much higher. According to a recent study by National Defense Council Foundation, the real price of gasoline is somewhere between $5.01 and $5.19 per gallon. That's as much as $93 to fill up a typical gas tank. Our oil addiction is burning a hole in our pockets, and most Americans don't even know it.

    One of the most obvious costs of our oil dependence is the price of maintaining a vast military machine capable of keeping the oil flowing cheaply. Defending the oil that comes out of the Persian Gulf alone costs some $42.8 billion a year. This doesn't include military expenditures in oil-rich Colombia, nor the $87 billion in additional costs for the occupation of Iraq.

    Then there's the damage to the economy. According to the study, the economy loses some $160 billion every year due, indirectly, to our addiction – money wasted on unproductive industries and related health care expenses. Periodic oil shocks – 1973-74, 1978-80, 1991 – have cost American businesses and consumers another $2.5 trillion. It's almost as if we're paying for the dubious privilege of being ripped off.

    The National Defense Council Foundation is a right-of-center think tank, its advisory board packed with people such as Senators Trent Lott and Orrin Hatch. That a proudly conservative group would go through the trouble of calculating the true cost of oil shows that concerns about the United States' oil dependence transcend party lines. It's just common sense: Oil addiction, like any addiction, is dangerous.

    Yet the NDCF's numbers, however stunning, still don't give the whole picture. For example, the study didn't include the tax breaks and subsidies given to the oil industry. According to an investigation by Friends of the Earth and Taxpayers for Common Sense, the federal government gives oil corporations at least $4 billion a year in corporate welfare – money that comes straight from your taxes.

    The costs don't stop there. Oil addiction also contributes to human pain and ecological destruction that are beyond any dollar figure.

    For how do you measure the value of the species wiped out in the course of oil drilling in sensitive rainforest ecosystems? What price do you place on the irrevocable altering of the earth's climate? How can you calculate the pain of a mother and father whose son and daughter has died in a war fueled by our relentless demand for oil?

    There's no price tag big enough to capture the costs of such senseless tragedy. Our oil addiction carries a price that we cannot afford to keep paying.
  2. cable


    Don't forget the time value of money: that if we buy a more fuel-efficient vehicle, or spend less on the gas we DO buy, every dollar we save can go into retirement funds, earning us interest, dividends, or whatever for the next 50 years until we retire. A hundred dollars becomes a thousand, a thousand becomes ten thousand, etc. Buying an SUV right now will probably end up costing us $200,000 extra over a lifetime -- in potential lost revenues. That's an expensive vehicle for something that loses half its value the minute you drive it off the lot.

    Of course, most of us would probably buy Exxon stock with the money we save anyway , so future gains are not guaranteed... due to human nature.
  3. bro59


    Not to sound too liberal, but you haven't seen anything yet with regard to indirect costs. Environmental Economics isn't really recognized by the status quo, because it's too damn scary for the establishment when these folks crunch numbers.

    What kind of dollar values do you think you could place on damages arising from the effects of global warming? What is the coastline of the entire planet worth? The loss of estuarine environments around the world? Fact of the matter is, and it is a fact, we are poisoning the planet with carbon at a rate which is unsustainable for natural systems and it's gonna cost us. Question is only when.

    Getting off the dino-fuel bandwagon is tough. Political systems aren't equipped to handle it without a crisis. That crisis will come, and we'll get our change.
  4. The US state department is not convinced about global warming or the "greenhouse effect" contributing to the melting of the polar caps. It has repeatedly contested scientific findings, and continues to do so. The refusal over the Kyoto agreement was one consequence of this.
    The US consumer might be the biggest contributors to CO2 emissions on the planet - but that doesn't mean that their CO2 is as harmful as other countries' CO2 emissions - so why should US consumers pay for preventive measures - again leading to incresed production costs for US companies ... (ironic)

    In several european countries up to 80% of the price of gasoline are actually taxes, but then they have smaller, more efficient and more modern engines over there.
  5. Feds asked to stop filling oil reserves

    Gannett News Service
    February 19th, 2004
    WASHINGTON -- Lawmakers and the airline industry want the federal government to stop filling the nation’s emergency oil reserves because they say it raises gasoline prices.

    Sens. Carl Levin, D-Mich., and Susan Collins, R-Maine, asked Energy Secretary Spencer Abraham on Friday to stop filling the 700-million-barrel Strategic Petroleum Reserve until oil prices drop.

    A Senate Governmental Affairs Committee report last year showed that filling the reserve in 2002 raised gas prices, Levin said.

    "OPEC has announced plans to cut oil production by almost 10 percent to keep prices high," he said. "It is high time the administration took action to reduce current oil prices, rather than propping them up by taking oil off the market and sending it to the (reserve)."

    The Energy Department disputes that claim, saying the 5 million barrels added each month to the large caverns along the Gulf Coast didn’t affect prices, spokesman Joe Davis said. The United States consumes about 600 million barrels a month.

    The government began filling the reserve in the late 1970s and reached about 600 million barrels in 1995.

    The Energy Department will continue to fill the reserve and expects it to reach the 700-million-barrel capacity next year.

    The stockpile is designed to provide energy to the United States in case of a dramatic supply disruption in the Middle East.

    "We think the Strategic Petroleum Reserve is a valuable national security asset," Davis said. "Professionals looking at this understand that filling it does not have an impact on oil prices."

    But experts are divided on the issue.

    The Air Transport Association, which represents airlines, estimated that filling the reserve increased oil prices by up to 20 percent. Last month, the group called on the Energy Department to stop filling the reserve.

    The Senate governmental affairs report said adding to the stockpile cost businesses and consumers at least $500 million during one month in 2002 when prices already were high.

    On top of that, the Energy Department’s decision to buy high-priced oil costs taxpayers extra money, Levin said.

    The Senate passed an amendment in a federal spending bill directing the Energy Department to purchase oil at low prices, but it was not included in final legislation.

    "We support the filling of the (reserve), but not at any price," Levin said. "DOE, like any prudently managed business, should acquire more oil when prices are low, and less when prices are high."
  6. Via The NY Transfer News Service ~ All the News that Doesn't Fit

    When Bush or Quayle or, for that matter, Clinton get around to
    talking about the Middle East and why they are for a dominant
    U.S. military presence there, they of course profess to be
    defending human rights, democracy, self-determination and all the
    things that are in such short supply in Saudi Arabia and Kuwait,
    their great allies.

    But then comes the clincher. Of course, say these capitalist
    politicians, we must protect our vital interests in the region
    and make sure that the oil that powers our homes, cars and
    economy can never be shut off.

    Now, this is what everyone understands the struggle to be really
    about, no matter the fancy human rights talk. That is why in
    opposing U.S. imperialist aggression against Iraq or Iran, or
    perhaps at some future time Venezuela or Nigeria or Mongolia, it
    isn't sufficient to merely say "No blood for oil." Until there's
    some other energy source readily available, many people will
    consider blood for oil a necessary tradeoff (particularly if it's
    not their blood but the blood of a "volunteer" army of youths
    escaping poverty).

    Twofold character of oil

    What the progressive, working class movement has to make crystal
    clear is that the U.S. government's policy on oil really has
    little to do with the need for oil as a useful product. That
    is in abundance in the world, particularly right here in the
    United States. It is oil as a source of surplus value, of profit,
    that drives the terrible engines of war.

    Anyone who doubts this should have seen the McNeil-Lehrer News
    Hour on PBS on Aug. 19. A bunch of independent oil producers were
    complaining about the Bush administration's handling of the issue
    dearest to their hearts: oil policy. These were not the Seven
    Sisters crowd, the monstrous oil billionaires who sit astride the
    world and make or break whole countries. These were just
    millionaires, who can't run to Kuwait or Indonesia with their
    capital because it's tied up in Texas, Oklahoma and Louisiana.

    They were saying that $20 billion worth of oil drilling
    equipment, offshore rigs and other capital purchases are lying
    idle in this area, not because there isn't oil in the ground but
    because Middle East oil is so cheap they can't compete with it.
    And they more or less accused the Reagan-Bush leaders of
    colluding with Saudi Arabia and Kuwait to keep things that way.

    It should be remembered that before Iraq invaded, Kuwait was
    exceeding its OPEC quota in oil production. This lowered the
    world price of oil and undercut the development programs of
    countries like Iraq that have less money and many more people
    than the little oil-rich emirates and principalities.

    The $20 billion in rusting rigs in the Texas-Oklahoma-Louisiana
    area has meant the loss of countless thousands of jobs and a
    depression in these three states affecting not just the oil
    industry but everything from real estate to public jobs dependent
    on tax revenues. In Louisiana, the economic collapse fueled the
    rise of the fascist David Duke.

    >From Titusville to the Middle East

    As recently as the 1930s, 60 percent of the world's petroleum was
    pumped out of the ground right here in the U.S. The modern
    petroleum industry got its start in Titusville, Pa., in 1859. By
    1901 the world's first real "gusher" was drilled at Spindletop in

    But the giant oil corporations that were already spreading their
    tentacles into banking and other industries soon found they could
    make even bigger profits elsewhere. In 1912 Standard Oil put
    enough muscle on Holland to get a subsidiary licensed in the
    Dutch East Indies (now Indonesia). By the time of World War II,
    the Pacific and the oil-rich Middle East were top on the list of
    regions the giant monopolies wanted under their control.

    After the war, giant oilfields were developed in areas of the
    Middle East that had previously been British and French colonies
    but were now falling increasingly under the economic domination
    of the U.S. By 1979, the OPEC countries produced 66 percent of
    the world's petroleum--but the refining, transporting and
    marketing of the oil has always been under the control of the
    Seven Sisters: five U.S. petroleum giants plus Royal Dutch Shell
    and British Petroleum.

    Who gained from Gulf war?

    The Gulf war put the U.S. firmly in control of Kuwait's vast oil
    wealth. Moreover, the continued Pentagon intervention in Iraq
    that goes on to this day and threatens a renewal of the war at
    any time is directed against those areas in the north and south
    of the country that have the biggest oil fields--all under the
    guise of protecting the rights of the Kurds and the Shiites,

    As should be painfully clear by now, the war won nothing as far
    as workers' jobs in the U.S. are concerned. It didn't turn around
    the stagnant capitalist economy, and it even deepened the
    depression in the domestic oil industry.

    What it did do was secure even greater profits for the biggest
    billionaire corporations. They are the ones who hold the world
    hostage and threaten to choke off the vital life lines of all who
    oppose them.


    (Copyright Workers World Service: Permission to reprint granted
    if source is cited. For more info contact Workers World,46 W. 21
    St., New York, NY 10010; "".)
  7. Does anybody feel a draft?
  8. MRWSM


    I agree we should do everything we can to avoid buying a drop of oil from another country. I'm sure we can increase the 10% Ethynol Alcohol in the gas, we should look to alternatives whenever possible like hybrid vehicles, electric, and solar energy I believe should be big.