Friday, June 18, 2010

You don't pay for everything at the gas pump

Ezra Klein in Newsweek asks the question, "How much does a gallon of gas cost?" The answer isn't simple, because there are a lot of costs that are not paid by the person sticking the nozzle into the vehicle. The costs that can be tallied:
* Air pollution
* Climate change (what is your great-grandchild's climate worth?)
* Traffic congestion and accidents
* Basing transportation on a resource that has wild price swings

Those things would boost the price by at least $1.88 a gallon. But there's more.
* What's the price of a military policy built around securing oil resources?
* What's the price of treating oil-producing despots with kid gloves?
* What's the global price when a poor country chooses oil investment over environmental quality? How about the cost of drilling in a country with lax environmental laws? Importing oil means exporting the damages of oil drilling.
* What's the economic value of keeping oil off a pelican?
* What's the price of pushing oil wells way offshore so we don't have to see the problems?

And what difference does knowing these costs make? Would paying those costs at the pump change our consumption?

Probably not. We need energy. The cost of one source is only in relation to another source. At the moment only oil can satisfy our demand. So the important question is what are the costs of whatever might replace oil and how might we get those costs to be less than oil?

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