Introduction to Energy Issues: The True Costs of Energy in the

United States

Price versus Cost

• THE PRICE WE SEE– Price

– Market Price

– Private Cost

• THE COST WE PAY– Cost

– True Cost

– Social Cost

True Cost = Market Price + External Costs + Subsidies

Components of Gasoline PRICE• Current national average PRICE of a gallon of

gasoline is $2.70

• Of this:– 54% or $1.46 goes to pay for the crude oil– 19% or $0.51 goes to pay for oil refining– 6% or $0.16 goes to distribution and marketing– 21% or $0.57 goes to various taxes (in PA gas

taxes are ~$0.45/gallon with $0.25 going to the state and $0.20 going to the federal government)

External Costs – Health Effects

• Health costs of air pollution include asthma and emphysema. Air pollution is responsible for at least $39 billion/year in additional health costs, perhaps as high as in the hundreds of billions/year

External Costs – Environmental Effects

• Environmental costs such as oil spills, damage to plant life from tropospheric ozone, and the impacts of oil drilling on sensitive habitats is estimated to cost society at least $10 billion/year in damages

External Costs – Global Climate Change• Costs of global

climate change due to severe weather, loss of biodiversity, human health impacts, and the costs of adaptation will be in the trillions of dollars in the next 10-20 years

Energy Subsidies (aka Corporate Welfare)• Tax breaks for oil companies (foreign tax credits,

depletion allowances) – average $10-20 billion/year in recent years

• Military costs to protect Middle Eastern oil supplies – were averaging $50-100 billion/year before the Iraq invasion (recent estimate by leading economists is that current Iraq War will cost Americans $2-3 trillion in the end)

• Highway and road spending – more than $100 billion/year over and above funds raised from existing gasoline taxes

• All of this at a time when U.S. oil companies are earning record profits

In reality, we DO pay for the hidden costs of energy use!!

• Higher taxes – Our taxes go up to cover the revenue lost through corporate tax breaks; to cover the cost of road building and military protection of oil supplies; to cover health care for the uninsured; and for environmental clean-up.

• Higher insurance premiums – We all pay more in insurance to cover the medical costs from pollution.

• Higher prices for other goods and services – crop damage from air pollution leads to higher food prices, respiratory ailments lower worker productivity, etc.

Oil exploration has a fairly small ecological “footprint.” But in sensitive ecosystems, like the Amazon Basin, drilling for oil can have significant impacts.

Prestige oil spill, 2002, off the coast of Spain and Portugal. Twice as large as the Exxon Valdez disaster.

Mining for coal using the “mountain top removal” mining method in West Virginia. Tops of mountains are shorn off and the debris are dumped into surrounding valleys to expose massive coal seams.

But Isn’t Blowing the Tops Off of Mountains Good for the Environment?

• http://www.youtube.com/watch?v=8ahRleExjY4

• http://www.youtube.com/watch?v=_fxsg601tuA

• http://www.youtube.com/watch?v=2wQ3Enjwxis

• http://www.youtube.com/watch?v=69t-8DQSlbY

Photochemical Smog Videos• http://www.youtube.com/watch?v=rpTJYSu1CUs

• http://www.youtube.com/watch?v=f6LHtQRgdII

• http://www.yteach.com/index.php/resources/pollution_air_atmosphere_carbon_dioxide_greenhouse_effect_sulphur_acid_rain_smog_ozone_layer_CFC_t_page_12.html

• http://www.rbolen.com/bio225/downloads/photochemical_anim.swf

Health Impacts of Ozone

• Trigger chest pain, coughing, throat irritations, congestion

• Worsen existing bronchitis, asthma, other chronic conditions

• Reduce lung function, inflame linings

• Repeated exposure-permanently scars lungs

http://cfpub.epa.gov/airnow/index.cfm?action=airnow.main

Western PA air quality – September 4, 2008