Averting Disaster of Our Own Design
So, where does that leave us?
In 2003, as noted, we estimated that the "hidden cost" of imported oil totaled $304.9 billion. When we revisited the external costs, taking into account the higher prices for crude oil and increased defense expenditures we found that the "hidden cost" had skyrocketed to $779.5 billion in 2005. That would be equivalent to adding $4.10 to the price of a gallon of gasoline if amortized over the total volume of imports. For Persian Gulf imports, because of the enormous military costs associated with the region, the "hidden cost" was equal to adding $7.41 cents to the price of a gallon of gasoline. When the nominal cost is combined with this figure it yields a "true" cost of $9.53 per gallon, but that is just the start.
Because the price of crude oil is expected to remain the $60 range this year, expenditures for imports are expected to be at least $320 billion this year. That amounts to an increase of $70 billion in spending for foreign oil in just one year. That increase would raise the total import premium or "hidden cost" to $825.1 billion, or almost twice the President’s $419.3 billion defense budget request for fiscal year 2006. If all costs are amortized over the total volume of imports, that would be equivalent to adding $5.04 to the price of a gallon of gasoline. For Persian Gulf imports, the premium would be $8.35. This would bring the "real" price of a gallon of gasoline refined from Persian Gulf oil to $10.86. At these prices the "real" cost of filling up a family sedan is $217.20, and filling up a large SUV $325.80.
But, can anything be done about this enormous drain on our economy?
The answer to that question is yes.
Solving the Problem
The simple truth is that we do not suffer from a lack of energy resources. Rather, what we suffer from is a lack of the political will and public consensus to use them.
As Pogo said, "We have met the enemy and they is us."
What then can we do?
The first step is to recognize that we face a two-fold problem. The first part entails assuring adequate fuel supplies for the 220 million privately owned vehicles on the road today. These vehicles have an average lifespan of 16.8 years and the average age of our vehicle fleet is 8.5 years. Therefore we will require conventional fuels or their analogs for at least a decade, even if every new vehicle produced from this day forth runs on some alternative.
The second part of the problem is how to affect a transition to alternatives to conventional petroleum. This transition will take much longer than a decade – perhaps a generation or more – but the longer we delay beginning to make the change, the longer it will take to accomplish.
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