[sustran] fwd: The Real Price Of Gas

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[forwarded from the kabelvag list on sustainable consumption]

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From: "Nat" <drnat at tm.net.my>
To: "kabelvag" <kabelvag at egroups.com>
Date: Tue, 11 May 1999 14:16:57 +0800
Subject: [kabelvag] The Real Price Of Gas

The Real Price Of Gas
Executive Summary 
----------

This report by the International Center for Technology Assessment (CTA)
identifies and quantifies the many external costs of using motor vehicles
and the internal combustion engine that are not reflected in the retail
price Americans pay for gasoline. These are costs that consumers pay
indirectly by way of increased taxes, insurance costs, and retail prices in
other sectors.

The report divides the external costs of gasoline usage into five primary
areas: (1) Tax Subsidization of the Oil Industry; (2) Government Program
Subsidies; (3) Protection Costs Involved in Oil Shipment and Motor Vehicle
Services; (4) Environmental, Health, and Social Costs of Gasoline Usage;
and (5) Other Important  Externalities of Motor Vehicle Use. Together,
these external costs total $558.7 billion to $1.69 trillion per year,
which, when added to the retail price of gasoline, result in a per gallon
price of $5.60 to $15.14.
  

TAX SUBSIDIES

The federal government provides the oil industry with numerous tax breaks
designed to ensure that domestic companies can compete with international
producers and that gasoline remains cheap for American consumers. Federal
tax breaks that directly benefit oil companies include: the Percentage
Depletion Allowance (a subsidy of $784 million to $1 billion per year), the
Nonconventional Fuel Production Credit
($769 to $900 million), immediate expensing of exploration and development
costs ($200 to $255 million), the Enhanced Oil Recovery Credit ($26.3 to
$100 million), foreign tax credits ($1.11 to $3.4 billion), foreign income
deferrals ($183 to $318 million), and accelerated depreciation allowances
($1.0 to $4.5 billion).

Tax subsidies do not end at the federal level. The fact that most state
income taxes are based on oil firms' deflated federal tax bill results in
undertaxation of $125 to $323 million per year. Many states also impose
fuel taxes that are lower than regular sales taxes, amounting to a subsidy
of $4.8 billion per year to gasoline retailers and users. New rules under
the Taxpayer Relief Act of 1997 are likely to provide the petroleum
industry with additional tax subsidies of $2.07 billion per year. In total,
annual tax breaks that support gasoline production and use amount to $9.1
to $17.8 billion.

  
PROGRAM SUBSIDIES

Government support of US petroleum producers does not end with tax breaks.
Program subsidies that support the extraction, production, and use of
petroleum and petroleum fuel products total $38 to $114.6 billion each
year. The largest portion of this total is federal, state, and local
governments' $36 to $112 billion worth of spending on the transportation
infrastructure, such as the construction, maintenance, and repair of roads
and bridges. Other program subsidies include funding of research and
development ($200 to $220 million), export financing subsidies ($308.5 to
$311.9 million), support from the Army Corps of Engineers ($253.2 to $270
million), the Department of Interior's Oil Resources Management Programs
($97 to $227 million), and government expenditures on regulatory oversight,
pollution cleanup, and liability costs ($1.1 to $1.6 billion).

  
  
PROTECTION SUBSIDIES

Beyond program subsidies, governments, and thus taxpayers, subsidize a
large portion of the protection services required by petroleum producers
and users. Foremost among these is the cost of military protection for
oil-rich regions of the world. US Defense Department spending allocated to
safeguard the world's petroleum resources total some $55 to $96.3 billion
per year. The Strategic Petroleum Reserve, a federal government entity
designed to supplement regular oil supplies in the event of disruptions due
to military conflict or natural disaster, costs taxpayers an additional
$5.7 billion per year. The Coast Guard and the
Department of Transportation's Maritime Administration provide other
protection services totaling $566.3 million per year. Of course, local and
state governments also provide protection services for oil industry
companies and gasoline users. These externalized police, fire, and
emergency response expenditures add up to $27.2 to $38.2 billion annually.
  

ENVIRONMENTAL, HEALTH AND SOCIAL COSTS

Environmental, health, and social costs represent the largest portion of
the externalized price Americans pay for their gasoline reliance. These
expenses total some $231.7 to $942.9 billion every year. The internal
combustion engine contributes heavily to localized air pollution. While the
amount of damage that automobile fumes cause is certainly very high, the
total dollar value is rather difficult to quantify. Approximately
$39 billion per year is the lowest minimum estimate made by researchers in
the field of transportation cost analysis, although the actual total is
surely much higher and may exceed $600 billion.

Considering that researchers have conclusively linked auto pollution to
increased health problems and mortality, the CTA report's estimate of $29.3
to $542.4 billion for the annual uncompensated health costs
associated with auto emissions may not adequately reflect the value of lost
or diminished human life. Other costs associated with localized air
pollution attributable to gasoline-powered automobiles include decreased
agricultural yields ($2.1 to $4.2 billion), reduced visibility ($6.1 to
$44.5 billion), and damage to buildings and materials ($1.2 to $9.6
billion). Global warming ($3 to $27.5 billion), water pollution ($8.4 to
$36.8 billion), noise pollution ($6 to $12 billion), and improper disposal
of batteries, tires, engine fluids, and junked cars ($4.4 billion) also add
to the environmental consequences wrought by automobiles.

Some of the costs associated with the real price of gasoline go beyond the
effects of acquiring and burning fuel to reflect social conditions
partially or wholly created by the automobile's preeminence in the culture
of the United States. Chief among these conditions is the growth of urban
sprawl. While monetizing the impact of sprawl may prove a challenging
endeavor, several researchers have done significant work on the subject.
The costs of sprawl include: additional environmental degradation (up to
$58.4 billion), aesthetic degradation of cultural sites (up to $11.7
billion), social deterioration (up to $58.4 billion), additional municipal
costs (up to $53.8 billion), additional transportation costs (up to $145
billion), and the barrier effect ($11.7 to $23.4 billion). Because
assessment of the costs of sprawl is somewhat subjective and because study
of the  topic remains in a nascent stage, the CTA report follows the lead
of other researchers in field of transportation cost analysis and reduces
the total of the potential cost of sprawl by 25% to 50% to arrive at a
total of $163.7 to $245.5 billion per year.
  

OTHER EXTERNAL COSTS

Finally, external costs not included in the first four categories amount to
$191.4 to $474.1 billion per year. These include: travel delays due to road
congestion ($46.5 to $174.6 billion), uncompensated damages
caused by car accidents ($18.3 to $77.2 billion), subsidized parking
($108.7 to $199.3 billion), and insurance losses due to automobile-related
climate change ($12.9 billion). The additional cost of $5.0 to $10.1
billion associated with US dependence on imported oil could rise
substantially, totaling $7.0 to $36.8 billion, in the event of a sudden
price increase for crude oil.
  

RECOMMENDATIONS

The ultimate result of the externalization of such a large portion of the
real price of gasoline is that consumers have no idea how much fueling
their cars actually costs them. The majority of people paying just over $1
for a gallon of gasoline at the pump has no idea that through increased
taxes, excessive insurance premiums, and inflated prices in other retail
sectors that that same gallon of fuel is actually costing them between
$5.60 and $15.14. When the price of gasoline is so drastically
underestimated in the minds of drivers, it becomes difficult if not
impossible to convince them to change their driving habits, accept
alternative fuel vehicles, support mass transit, or consider progressive
residential and urban development strategies.

The first step toward getting the public to recognize the damage caused by
the United States' gasoline dependance is getting the public to recognize
how much they are paying for this damage. The best way, in turn, to
accomplish this goal is to eliminate government tax subsidies, program
subsidies, and protection subsidies for petroleum companies and users, and
to internalize the external environmental, health, and social
costs associated with gasoline use. This would mean that consumers would
see the entire cost of burning gasoline reflected in the price they pay at
the pump. Drivers faced with the cost of their gasoline usage up
front may have a more difficult time ignoring the harmful effects that
their addiction to automobiles and the internal combustion engine have on
national security, the environment, their health, and their quality
of life.