The True Cost of Oil

The recent and ongoing oil spill in the Gulf of Mexico is just one tragic and ugly incident in the history of the world oil industry, as miners’ deaths are to the coal industry. To be fair, most industries have a dark side to some extent.

Usually when the subject of using alternative energies, such as solar or wind, to wean us of our “addiction to oil” comes up, there’s always the complaint that such technologies only work if they are subsidized and can’t be competitive with oil and coal.

The Gulf oil spill is just a small example of the peripheral costs of the oil industry. But wait, there’s more! To get a true idea of the cost of a gallon of gas, we need to look at such things as the cost of oil-related defense expenditures, the loss of jobs and economic activity because of the trade imbalance (foreign oil imports are a significant part of our chronic trade deficits), the loss of government revenues, and the cost of periodic supply disruptions.

The National Defense Council Foundation has estimated that after 2006 the annual cost to defend Persian Gulf oil was approximately $140 billion a year, the loss of domestic employment from sending our money overseas was approximately $118 billion a year, and the cost of spending our industry reinvestment money overseas was close to $400 billion a year. When we spend our dollars overseas, our jobs go with it. The Department of Energy has estimated that every $1 billion dollars of trade deficit costs America 27,000 jobs and that we have spent over $7 trillion dollars on our oil dependency over the last 30 years.

The estimated cost per gallon for our oil dependency would add anywhere between $5.00 to $8.00 per gallon on top of what we pay at the pump. This doesn’t include, by the way, the lives of our soldiers and others who have died protecting our oil supply. So the next time someone, be they Democrat, Republican, Tea Partier or whatever, complains that we shouldn’t support domestic home grown energy technologies because they cost too much, have them do their homework. Maybe they can take their laptop to the beach!