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March 24th was the 20th anniversary of the massive Exxon Valdez oil spill in Alaska's Prince William Sound. Unfortunately, most Americans didn't recognize that "accident" as the blaring wake-up call for our oil-thirsty way of life that it was. Instead of moving quickly to wean ourselves off of oil--especially for transportation--most Americans continued to increase their consumption by driving more and more from one year to the next and by choosing bigger, heavier, and more powerful models when they purchased new autos.
As much as I wish people had responded differently, I think I understand why they didn't. The problem was that the Exxon Valdez spill occurred many thousands of miles away from most Americans, far out of direct sight, and it was soon displaced in the news by the next crisis of the day. At the pump, where we should've been getting feedback on the true costs of our oil habit in the price we paid, the message we kept getting (except for the occasional price spike, such as when Iraq invaded Kuwait in 1990) was that fuel was now and always would be cheap and readily available, which left many Americans thinking cheap gasoline was their birthright.
When the things we buy haven't been priced to reflect their full, true costs, it's pretty damn hard to make wise decisions about how much to buy or use. Even though evidence of the consequences of our oil use was available, you had to spend time and energy to go looking for it after you worked and did everything else necessary to sustain yourself. And, even if you did go out of your way to find that info, the true cost of things still didn't pinch you where you could feel it directly, repeatedly, in your wallet.
I've been talking in general terms about the externalized ecological and social costs of our way of life for years, but I haven't had any studies to refer to that put these true costs into dollar terms for a specific product, which would make it a lot easier for people to understand what I meant. Recently, though, I began reading Lester Brown's latest book, Plan B: Mobilizing to Save Civilization, and I happened across this passage in the 1st chapter:
The market is in many ways a remarkable institution. It allocates resources with an efficiency that no central planning body can match and it easily balances supply and demand. The market has some fundamental weaknesses, however. It does not incorporate into prices the indirect costs of producing goods. It does not value nature's services properly. And it does not respect the sustainable yield thresholds of natural systems. It also favors the near term over the long term, showing little concern for future generations.
One of the best examples of this massive market failure can be seen in the United States, where the gasoline pump price in mid-2007 was $3 per gallon. But this price reflects only the cost of discovering the oil, pumping it to the surface, refining it into gasoline, and delivering the gas to service stations. It overlooks the costs of climate change as well as the costs of tax subsidies to the oil industry (such as the oil depletion allowance), the burgeoning military costs of protecting access to oil in the politically unstable Middle East, and the health care costs for treating respiratory illnesses from breathing polluted air.
Based on a study by the International Center for Technology Assessment, these costs now total nearly $12 per gallon ($3.17 per liter) of gasoline burned in the United States. If these were added to the $3 cost of the gasoline itself, motorists would pay $15 a gallon for gas at the pump. In reality, burning gasoline is very costly, but the market tells us it is cheap, thus grossly distorting the structure of the economy. The challenge facing governments is to restructure tax systems by systematically incorporating indirect costs as a tax to maker sure the price of products reflects their full costs to society and by offsetting this with a reduction in income taxes.
For those who want more details on how these calculations were made, the ICTA study Brown referred to in that passage was published in November, 1998 and titled "The Real Price of Gasoline: An Analysis of the Hidden External Costs Consumers Pay to Fuel Their Automobiles." The ICTA has published 2 updates since then, one in September, 2004 titled "Gasoline Cost Externalities Associated with Global Climate Change" and the second in January, 2005 titled "Gasoline Cost Externalities: Security and Protection Services."
Having skimmed the 3 papers, I know that the ICTA gave ranges for each of the true cost categories they calculated, which is typical for a study like this because of the uncertainties involved. Even if the figure Brown settled on for the book--$12 per gallon--overestimated the externalized true costs of gasoline by two-thirds, that would still mean every gallon of gasoline sold is underpriced by $4. Internalizing $4 of true costs would put us in the price range people have been paying for years in Europe and Japan.
So, let's run a thought experiment: Imagine an alternative history in which people had the foresight to not only acknowledge the true costs of mining, refining, and burning oil as they became apparent over the years but to internalize them in retail prices through true cost fees. If you've seen the film There Will Be Blood, you have a pretty good idea of how dirty and dangerous pumping oil out of the ground was in the early days of the industry. Though the film's plot, very loosely based on Upton Sinclair's 72-year-old novel Oil!, is fictional, my understanding is that its depiction of the hazards and consequences of drilling for oil in that era is accurate. Even today, after roughly 150 years of polluting the air, water, and soil, of explosions and other accidents which maim and kill workers, oil production is still far from "clean and safe." What if we, as a society, had regulated oil drilling to ensure that the surrounding water and soil weren't polluted and workers were kept reasonably safe, and then internalized the costs of regulation and enforcement in the price of everything made from oil, including fuel? Later, after the harm caused by air pollutants from automobiles became apparent, what if we'd imposed an air pollution fee through the Clean Air Act in addition to requiring emissions control systems? What if we'd imposed some kind of oil dependence fee when the geopolitical costs of ensuring the free flow of oil--including support for repressive governments in oil-producing countries, the stationing of U.S. armed forces around the world, and the ongoing Persian Gulf War, which continues today through the occupation of Iraq--became apparent? What if we'd imposed additional water and soil pollution fees after it became apparent that oil platforms, tankers, pipelines, and other infrastructure inevitably ruptured and leaked? What if we'd imposed a carbon dioxide fee after it became apparent that the burning of fossil fuels was contributing to a dangerous rise in atmospheric carbon dioxide levels? In short, what if we'd actually internalized those $12 (or $10, or $8, or $6, or $4) in true costs, incrementally, over time, instead of allowing the oil companies to externalize them onto the whole living world?
If we'd done that, how differently would the world have developed over the 150 years since the petroleum era began? In particular, how different would countries like the United States--which developed an extremely-autocentric way of life in the real world--be? Would we have shut down most of our intracity streetcars and intercity rail services and switched to automobiles, buses, and planes? Would our cities have sprawled across the croplands, pastures, and habitat that once surrounded them? Would automobiles have ever developed into the hulking, gas-guzzling behemoths America was known for at the time of the 1973 Arab oil embargo? And, after a brief embrace of smaller, more fuel-efficient vehicles in the late-'70s and '80s, would we have gone back to ever-bigger and more-powerful automobiles after the price of oil came back down? Would there have ever been a boom in SUV and truck sales? Would we have developed a food system that was highly-dependent on oil to run farm machinery and mine synthetic fertilizers, that relied on the routine use of biocides made out of oil, and that shipped food an average of 1200 miles from farm to plate? How many of your choices would've been different over the course of your life? Where would you have chosen to work and reside and play? I can safely say that I would've lived very differently if gasoline had been priced to reflect its true costs.
We cannot, of course, remake the past, but we can still change the path we're on. It doesn't seem feasible to me to phase $12 of true costs into the price of gasoline now--at least not quickly enough to save us from the twin crises of peaking global oil production and climate disruption--but we can internalize a significant chunk of those costs to foster greater conservation and efficiency. At the same time, I think we need to embark on a crash program to drastically reduce our use of oil as an energy source. We need to relocalize our way of life so we move us and our stuff around a lot less, invest in transit, switch to various kinds of partially and fully-electrified vehicles, switch to regenerative agriculture, and so on.
Of course, gasoline isn't the only product we use frequently that isn't priced to reflect its true costs. Similar calculations could be made for electricity generated by coal; natural gas for home heating, electricity generation, and ammonia fertilizer synthesis; wood products; seafood; metals; and on and on. Heck, off the top of my head, I can't think of anything we buy that is priced to reflect the true costs of its production, which goes a long way in explaining why we're in such an ecological mess.
I recently happened across a quote attributed to Paul Hawken, and author (The Ecology of Commerce: A Declaration of Sustainability, Natural Capitalism: Creating the Next Industrial Revolution with Hunter and Amory Lovins, and Blessed Unrest: How the Largest Movementin the World Came into Being, and Why No One Saw It Coming) and sustainability advocate, which aptly sums up the inherently destructive nature of our way of life: "We have an economy where we steal the future, sell it in the present, and call it GDP [gross domestic product]."
I'm convinced that, one way or the other--by choice or catastrophe--that must and will change. I bet we'd all prefer the former, in which case we'd best start implementing a new, ecological economics with all possible speed. Let's get busy.
For more info on these issues, go to Oil Change International's Price of Oil website.
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