Price of gas not as cheap as we think

Josh Chilson

Josh Chilson

Recently I filled up my tank at a gas station whose name had two misspelled words. I brought my trusty pail with me to compensate for the usual gag reflex that occurs when I fill up. To my surprise, the price of gas had gone down over a dollar to $2.69 a gallon. That’s almost free! I was so excited I almost called my mom, but then I remembered that cell phones explode at gas stations.

The price was so low I felt a little guilty, so I poured a little gas onto the ground to help out the oil companies who must obviously be struggling during this economic crisis. I had the urge to go out and buy a large, loud truck that would burn fuel much less efficiently; that way I could buy more gas and reap more benefits from these low prices, which are undoubtedly permanent.

In truth, gas has always been cheap. Extremely cheap. Even when the price was at $4 a gallon, consumers were paying much less than the true cost of the substance. The Real Price of Gasoline, a study by the International Center for Technology Assessment, calculated the true price of gasoline. The study included factors such as oil industry tax breaks and subsidies, oil supply protection (military costs), and environmental degradation.

They found the additional costs amount from $4 a gallon up to $12 a gallon. Add the price paid at the pump to these numbers, the real cost of gasoline is somewhere between $6.50 a gallon to over $15 a gallon. True, there is a large difference between the possible figures due to the ambiguity of factoring in some of the costs to society, particularly environmental and medical factors. Yet, even at the low estimate, we are still paying substantially less than we should.

Someone pays the difference. These are societal costs paid for by the individuals that comprise society. The government covers foots most of the bill, which means American tax dollars. If taxes don’t cover the tab Uncle Sam borrows from the Pay-Day Loan company across the ocean.

It is understandable how prices would need to be subsidized to an extent- society needs to keep moving, and we need gas to move. Yet prices have remained so unnaturally low for so long we have become complacent and completely unaware of how much we are actually paying for gas. Plus, no politician is going to rock this boat. We already complain about gas prices, no sane politician would seek to raise them further. Then again, sane politician is somewhat of an oxymoron.

As for gas prices remaining cheap, consider this: if China’s current oil demand growth holds, by the year 2030 they will need all the oil currently produced in the world today. Experts believe we have reached the peak capability of world oil production. That means demand is going to go way up and supply will not. I failed economics, so I don’t know what this means- I’ll let you figure it out.

So what does all this add up to? We have been paying to keep the gas prices low, thereby allowing us to continue to be comfortable with dependence on a resource that is very finite, environmentally corrosive, and often the mainstay of unsavory nation-states. Our elected leaders allow this to continue to happen to avoid temporary political instability. We are the frogs in the slowly heating water, and it is our hand on the stovetop knob.

I heard something about an election happening sometime here. Keep these factors in mind when heading to the poll and look closely at the candidate’s energy policies. Consider who is going to spend your income tax on hiding the true costs of gas. I am just glad I don’t have to worry about this- I need an income before it can be taxed.