The Real Costs of Fossil Fuels

Arguments against sustainable energy sources always include the fact that they are taxpayer subsidized and so more costly than they appear. These kinds of claims have been expressed before, but it is always worth reviewing the subject. How about the subsidies for fossil fuels? The direct cost of a gallon of gas, the cost at the pump, is currently about three bucks a gallon. The indirect costs can add as much as another $10 or more to the real price of a gallon of gas, bringing the total to something like $15 a gallon.
The direct costs are easy to calculate and include the cost to find produce, transport, refine and distribute the gasoline. These costs will continue to rise as crude oil becomes more scarce. It is increasingly harder to find the oil. And what oil is found is in smaller fields, deeper in the ground, farther out to sea, or all of the above.
As an example of the extremes taken to find and produce crude oil, the BP oil spill in the Gulf occurred at a well in 5,000 feet of water,

BP oil spill

BP oil spill

which was to be drilled another 18,000 feet below ground for a total depth of about 23,000 thousand feet. That is more than 4 miles below the surface of the ocean. Existing leases in the Gulf will necessitate drilling in water twice that deep.
The real run-up on the price of a gallon of gasoline comes from the indirect costs which include, but are not limited to military, environmental and healthcare costs.
Military costs to secure access and transportation of foreign oil are difficult to calculate, but the Congressional Research Service estimated well over $100 billion per year. These cost estimates do not include the direct cost of two wars in the Persian Gulf region. Estimated addition to the cost of that gallon of gas: $4.
war for oil

war for oil


Indirect costs for healthcare come about from burning that gasoline. Much asthma, chronic obstructive pulmonary disease (COPD), lung cancer and heart disease can be attributed to air pollution from automobile exhaust. Additional healthcare costs in Los Angles due to air pollution are put at about $1,200 per person, per year. Nationwide, the estimate is $75 billion dollars per year. Estimated addition to the cost of that gallon of gas: $3.
What is hardest to calculate, but in the long term the most damaging is the cost to the environment.
Obvious costs include everything from lost profits and wages for tourism and fisheries in the gulf due to oil spills to various global phenomena. Some are quantifiable — others not. Insurance companies are at the forefront in trying to put a value on property losses due to climate instability.

global warming is triggering more severe storms

global warming is triggering more severe storms


Here is one example. The estimate to mitigate a one-meter sea level rise from global warming is about $250 billion. Increased droughts, floods, hurricanes and tornadoes are all costly and the predicted result of global warming. This is admittedly a guess — but, estimated cost to that gallon of gas: several more dollars per gallon.
Finally there is the incalculable cost of environmental degradation – loss of habitat and biodiversity. What is the value in dollars to maintain a stable environment for our children’s future?

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