Posts Tagged ‘price of gas’

Bargain Priced Gas

Sunday, April 22nd, 2012

By Shawn Dell Joyce
The price for regular unleaded gasoline has leaped over the $4 a gallon mark, but even at $4, we are not paying the real cost. Our federal government subsidizes the oil industry with numerous tax breaks, price protection, and research and development funding that totals billions of dollars every year. These subsidies help keep domestic oil companies competitive with international producers, and keep gas relatively cheap at the pump.

In some other countries, like Bosnia, you would pay $10.86 a gallon because there are fewer government subsidies. Paris is at $6.52, Berlin at $6.42, and Amsterdam at $7.

That $4 we pay at the pump can be divided into four main categories: taxes, refining, marketing/distribution, and the price of crude, according to a special report by CNN Money.
Crude oil is the most expensive part of a gallon of gas, costing over $2. This money goes straight to big producers of crude, or national oil companies controlled by countries like Saudi Arabia, Mexico or Venezuela.

The U.S. government takes about 20 cents from each gallon, on top of state taxes, which vary greatly, but average about 22 cents a gallon. Most of this money is used to build and maintain roads (which is why removing the gas tax is a bad idea). Refineries, such as Valero, Sunoco, ExxonMobil, Chevron, and ConocoPhillips, eat about 25 cents a gallon.

Transporting the gasoline to retailers and the cost of marketing and distribution also take about a quarter each. Meanwhile, your local gas station gets only about 10 cents a gallon.
But the price we pay at the pump is only the tip of the iceberg of the real cost of gas. Many expenses related to using gas are externalized, meaning we either pay for them through our taxes, or leave them as a balance due for future generations. These “hidden costs” include naval patrols of oil shipping lanes and military presence in oil producing countries, air pollution from auto exhaust, increased carbon dioxide levels in the atmosphere, and environmental devastation caused by drilling, laying pipelines, oil spills, and economic damage caused by importing foreign oil.

If all these hidden costs were actually tallied into the price of gas, we would pay well over $5 per gallon, according to the National Defense Council Foundation. The economic penalties of America’s oil dependence total $297.2 billion to $304.9 billion annually, making the true cost of a fill-up over $100.

Terry Tamminen, author of “Lives Per Gallon: The True Cost of Our Oil Addiction,” estimates that the true cost is actually much higher. Tamminen states that “Americans subsidize the oil and auto industry to the tune of about $6 or more for every gallon of gasoline sold, making the real price at the pump $10 per gallon.”

Tamminen also points out that it is difficult for “alternative fuels to compete against such massive subsidies, until mass-production of alternative fuels (and vehicles that use them) can bring the price down. Such incentives can also be considered an economic stimulus package, because those investments create jobs in America instead of sending more than $650,000 every minute to foreign countries for our addiction to oil (based on $75/barrel for oil).” The current price is over $100.

A side benefit of climbing gas prices is an increased awareness of the need to use gasoline more efficiently. A recent survey showed that American consumers list fuel economy as the most important factor when they purchase a new car (previously, the number of cup holders was most important). If we had to pay the true cost of fuel at the pump, we would all ride bicycles and drive electric cars.

Shawn Dell Joyce is the director of the Wallkill River School of Art in Montgomery.