The True Cost of Gasoline, and What to Do About Energy

The news media has been writing a lot about energy and oil addiction lately.  One particularly noteworthy package of reporting highlights the hidden problems of oil addiction. Another searches for ways it could be alleviated but misses the most critical one. The first is The Chicago Tribune’s enormously important four-part series by Pulitzer-winning reporter Paul Salopek called A Tank of Gas, a World of Trouble published July 29. 

Is $3 gasoline expensive? Only when compared to its former price. Taxpayers — nondrivers included — subsidize gasoline purchases in a huge way. Here is a particularly critical passage from Chapter 3 of Salopek’s report, on the Iraq war.

What are the hidden costs of America’s imported oil? The answer is complex. It may ultimately be unknowable. But this hasn’t daunted the likes of Milton Copulos.

A tenacious economist with the National Defense Council Foundation–a right-of-center Washington think tank–Copulos spent 18 solid months poring over hundreds of thousands of pages of government documents, toiling to fix a price tag on America’s addiction to global crude. He parsed oil-related defense spending in the Middle East. He calculated U.S. jobs and investments lost to steep crude prices. He even factored in the lifelong medical bills of some 18,000 U.S. troops wounded in Iraq as of March. (About $1.5 million each.)

Copulos is a highly respected analyst in Washington. And his exhaustive findings flabbergasted the Senate Foreign Relations Committee this spring.

The actual cost of gasoline refined from imported oil, according to Copulos?

Eight dollars a gallon.

When he isolated the hidden costs of Middle Eastern crude in particular, the price jumped to $11. This included a war premium that swelled the Pentagon’s spending to protect all Persian Gulf oil to $137 billion a year. In a truly transparent economy, by Copulos’ math, filling up Rodriguez’s Jeep would run about $230.

Consumers don’t dodge the bill for all these masked expenditures. Instead, they pay for them indirectly, through higher taxes, or by saddling their children and grandchildren with a ballooning national debt–one that’s increasingly financed by foreigners. The result: Unaware of the true costs of their oil habit, U.S. motorists see no obvious reason to curb their energy gluttony.

Outside of Saudi Arabia, the United States has among the lowest gasoline taxes in the industrialized world. After decades of this car-promoting policy, the average American now emits as much carbon dioxide in a day as the average non-American emits in a week. But if Scientific American’s package on global warming is correct, we can lose that dubious distinction by applying our technological prowess to the problem.

Disappointingly, the article on transportation (behind a paywall) acknowledged the problem of greenhouse gas emissions caused by the United States vehicle fleet and listed out some alternatives.

  • Improve or change vehicle technology
  • Change how we use our vehicles
  • Reduce the size of our vehicles
  • Use different fuels

Nowhere was the option of driving less promoted. The article did hint that there is a connection between land use patterns and driving habits, or mention the enormous energy savings that comes from subways, light rail and buses, all of which become feasible at urban residential densities. At best, the article’s second option, "change how we use our vehicles," obliquely gets at the concept of reducing vehicle use (without using the "R" word), but this option wasn’t really discussed, except to note that VW is developing some kind of "urban" car that does better in city driving.  An accompanying article on efficiency (also behind a paywall), does highlight the importance of efficient design, but fails to mention basic facts, including that apartment buildings are inherently much more efficient than detached single family houses.

Reducing energy use needs to be part of any discussion about how we end our oil addiction, and the best way to do that is to build transit-oriented, residentially dense places (i.e., rebuild our cities). As David Owen noted in his October 2004 New Yorker article "Green Manhattan," if New York City were a state, it would be ranked 51st in energy use. If more places were like New York City, the many problems the Chicago Tribune describes in so much detail would not exist.

  • H. Tuttle

    Will this ax of “if more places were like New York City, the many problems the Chicago Tribune describes in so much detail would not exist” even be completely grinded? It’s a truism, not a solution.
    Look let’s face reality, all else being equal, every single time people are given a choice between living in an apartment/condo/coop and living in a one-family detached house 90% of families will choose the house. I certainly would. NYC is 8-9 million people; the country is close to 300 million. NYC’s solution for 9 million are never going to be applicable to the other 290 million in a one-to-one fashion. There ain’t going to be anymore NYC’s and any plan to adddress this needs to get off the high house of “more subways” “more buses” “more New York cities”, etc. My 2 cents worth.

  • While this may be true, its also not a solution (nor constructive) to say that “people want houses not apartments”… “cars not subways”…

    People’s personal desires are of small importance in relation to the earth’s ecosystem and of civilization as a whole.

    Its either change or nature will make you change. Its pretty simple.

    Humans are smart enough to know that they cannot continue making the choices they are making. If they refuse to change, then they are simply inviting the problems that this excellent post presents.

  • and what about Portland, Oregon?

  • Nicolo Macchiavelli

    H.Tuttle protesteth too much. How is the price of gas automatically countered by “not everyone wants to live in NYC”?

    1st – the price of gas is not high historically. It is about 70% of its high when adjusted for inflation which is the only fair way to price it.

    2nd- it is no where near as high as it is going to get

    3rd- life in the near suburbs, far suburbs and exurbs is only “desired” when gas is cheap.

    4th – the price of gas is only a part, some would say, a small part, of the price of auto dependence, both the individual price which seems to be Mr. Tuttle chief concern and the social price. The space and opportunity costs of individuated transportation that are externalized make urban life (not just NYC) much more affordable (sustainable?)

  • Before cheap oil, we were a country that lived almost exclusively in rural agricultural area (they work at home) or large cities, small-medium sized towns, very dense walkable downtowns and most connected to rail.

    It’s not that New York City is an oddball, it’s that the rest of the country lives in an completely different manner than any other civilization in the history of mankind.

  • AD

    Well, the whole thing about sustainable planning (ax grinding, if you will), could be a solution if it were applied to other places. NYC is an extreme example of urbanism that has no rival in the U.S., but there are plenty of places that offer energy savings. Perhaps we should admit that there won’t be more New Yorks, and instead, say, “If more places were like Newark.” That would be fine too.

  • Anon

    Or Philadelphia, or Boston, or Pittsburgh, or Chicago, or Wash DC . . .

  • Although I might once have agreed wholeheartedly with the claim that people will always choose single-family homes over high-density urban living, I’m more skeptical about such seemingly intuitive wisdom these days.

    When you look at the underlying reasons why people choose suburban homes, I think you may find some hope for promoting higher-density (and more sustainable) housing patterns. Chief among those reasons are:

    (1) Good schools

    (2) Access to *safe* greenspace (especially for children)

    (3) Convenience of parking & guests

    (4) Proximity to highways

    The problem, as a lot of suburban residents see it, is that high density urban living often doesn’t offer those four amenities. Schools in urban areas are often poor (Cleveland, where I live, is one of the worst!). Greenspace, if available at all, is concentrated in city parks and not well patrolled for children’s safety. And the latter two items (parking accessibility & highway accessibility) are also not so great in urban areas.

    I’ve recently changed my mind a bit about this issue, though. I think that there are viable ways that high density urban areas can address these issues:

    (1) Cluster housing: By ensuring that there is a certain amount of greenspace (think mini city parks) for all residential construction, you can help satisfy the desire for greenspace. Also, you have to make sure that you have neighborhood groups watching over those mini parks, so that the neighborhood kids can hang out there and have (safe) fun.

    (2) Magnet schools & special school districts: you can carve out portions of a city and allocate special school districts to them. So let’s say you want to attract middle-class residents to a poor city (like Cleveland). Then you zone a special school district in the middle of the construction zone and ensure that people moving in there can be assured of having a decent school. Alternately, you make sure that the city has at least a few merit-based magnet schools so middle-class residents have somewhere to send their kids. Sure, it’s gentrification, but it’s a viable economic development strategy.

    (3) Cars & parking: this is obviously the hard one. Suburban residents do indeed see cars as central to their lifestyle; urban living fundamentally cannot fully accomodate that perspective. But what about providing secure parking lots on the outskirts of neighborhoods? Residents could use public transportation most of the time, but still own their own cars and use them for longer trips…?

    –Steve (grossreport.blogspot.com)

  • g

    I also think the revival of downtown areas across the country – think Providence, RI; loft apartments in Milwaukee, WI; etc. – shows that there is a general trend away from suburbs and that condo-style living is gaining traction. Even car-dependent cities such as Atlanta and Las Vegas are seeing a huge spurt in vertical development. Left and right, people are trading 40-minute commutes and home maintenence with the convenience of city-style living.

  • J:Lai

    The whole country can’t be urbanized, there is and should be a healthy mix of people whose preferences lead them toward urban areas, suburbs, and rural areas.

    However, I think it is fairly obvioius that the public choices made in this country over the last half-century have subsidized and favored suburban living over other forms, thereby influencing many people at the margin to move to suburban communities. If the public spending on highways and roads vs. rails and public transit were switched, the landscape would look very different.

    It’s true that people have expressed a preference, and for majority that preference is to live in lower density suburban communities. However, it’s also true that the costs of that lifestyle are increasing, and allowing the costs to be borne by those who are in the position to make the choice of where to live can only help achieve a more rational distribution of population.

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