Roody

The International Center for Technology Assessment said gas really costs well over $5 a gallon. This report was written in 1998, when the pump price was just over $1 a gallon. A couple years ago, National Geographic magazine figured that the "real" cost of gasoline was over $9 a gallon, IIRC. (If anybody has more recent figures, or figures they think are more accurate, please post them.)


What are your general thoughts on the real costs of gas? Can they be determined accurately? Who should pay these external costs? Who pays them now?



Note: This link was posted in another thread, which I didn't want to hijack. Thanks UberGeek!

DX-MAN

Despite all the talk of government subsidies to oil companies, I find this hard to swallow; oil companies record obscene profits, WELL above subsidy levels, that just couldn't BE if gas cost more per gallon to make than what they charge.

It's well known that by the time the gas reaches the station, a gallon of $3.62 out of the pump is costing the station owner at least $3.50. If it cost the oil company $5 to MAKE that gallon, the problem we have of too many cars would solve itself pretty quickly.

UberGeek

It doesn't cost them more to make the gasoline, as they do not have to absorb the externalities, like environmental cleanup, or the health impact costs of inexpensive gasoline causing more driving and less walking.

Roody

Very good point. But what are the costs that are not paid by the producers or the consumers? What are the "external costs" such as pollution, health damage, wars, government price stabilization, and so forth? Who is paying those costs now and who should be paying them?

UberGeek

Right now, the general public is paying for them, through various taxes spread about the entire tax code and federal (And state and local budgets).

It should be shifted entirely to the users of the petrol products, through a single gasoline and diesel tax, so the people who use less gasoline shoulder less of the burden of environmental cleanup (For example), and those who use more shoulder it more.

Smallwheels

The entire cost of anything related to driving or transportation should be put into fuel prices. Roads, bridges, airports, environmental clean-up, pipelines, military protection, medical costs caused by polluted air (impossible to calculate), disposal of old vehicles and their parts, and numerous other things related to mass transit, should all be paid for by fuel taxes. Everybody would share their part of the burden of the transportation infrastructure. As a car free person I'd pay the little bit of fuel tax added on to the prices of the goods I purchase at local stores. That will be much less than the taxes I would pay as a car owner.

This is the only way society will know the true cost of the automobile focused culture. Doing this will remove the hidden costs that are spread out in other areas.

sauerwald

One of the issues is that our transportation system has fixed costs such as the building of highways and bridges, and variable costs - such as maintenence for those structures, health effects from pollution, health effects of crashes, etc. In our system today, the only variable cost that most motorists see is the fuel, which is artificially low. Several of the variable costs are covered through things that for the consumer are fixed - insurance, registration, and property taxes (which pay for much road maintenance) do not change if you drive 1 mile per year, or 50,000 miles per year. The net effect is a system which encourages the average person to drive more - just like at an all-you-can-eat buffet restaurant, the effect is to have people eat more.

If we wanted to make the system more efficient, we would try to allocate fixed and variable costs to fixed and variable expenses - one example of how to do this would be to pay for new road construction with a tax levied on the sale of vehicles, and then to put sufficient tax on the fuel to pay for all road maintenance, all health costs (chronic like lung cancers, as well as acute like broken arms from crashes). If you were to do this, my guess is that there would be close to a 100% premium on the cost of purchasing a vehicle, and gas would cost over $10 per gallon, with the net result being that there would be less personal vehicle use, and greater demand for public transportation, bicycling and walking.

One country that works more this way than the US does is Singapore - they have a very high tax on vehicles, high fuel prices, and additional charges to use your personal vehicle in the central core of the city. The net effect is a system with well maintained streets, that are not overcrowded, and a good public transit system.

Nightshade

The cost of oil is well beyond mere dollars.

The cost of oil should really be measured in the blood of those who die because of it.

JeanSeb

^ Agreed.

I've been a car enthusiast for quite a while, and now it just despises me to think about taking the car because of what oil has taken away from people in certain countries.

Roody

I see you're from Alberta. What is the oil boom costing the peopple and the einvironment in your region?

JeanSeb

Well besides the fact that gas isn't cheaper here, the environment has been the worst hit. The tar sands exploitation is incredibly damaging, a lot of money in the province means a LOT of people have a big SUV, truck, motorhome, and keep finding ways of polluting more. I can't really put numbers on that, but it looks grim.

s5fskzfv

Most of what you buy at the store gets there by truck. If the price of fuel skyrockets so will the cost of food and other necessities. The hardest hit will be the poor. By funding things like environmental cleanup, road and bridge construction through general revenue, they are funded through a progressive tax. How do you implement a tax exmption for low income tax payers at the gas pump?

UberGeek

It will promote cheaper, more efficient ways of getting goods to market, like rail, or it will promote more buying of local goods, such as fruit and veggies.

Other than food, housing, and clothing, nothing is a "must have". And those three things can be produced, and bought locally.

Booger1

I could tell you EXACTLY if I knew what price to put on every cubic yard of ozone we open up.....(for arguments sake)

This is silly,nobody can calculate this.....I don't care what letters you have behind your name.

Roody

I agree with your main line of thinking, but I have issues with some details.

First the price of consumer goods won't skyrocket if fuel prices go up. Since fuel prices are only a portion (`7% IIRC) of the final consumer price, that price would go up some if fuel prices doubled, but not a whole lot.

Second, the infrastructure projects you mention are not durrently funded with a progressive tax. These projects are typically funded through gasoline taxes, which are regressive.

Third, it would be possible to give everybody an exemption for fuel taxes paid at the pump, and still encourage lower fuel consumption. One way would be to institute a revenue-neutral gas tax where everybody receives a tax rebate equal to the average fuel tax paid. This would not make fuel taxes totally progressive, but it should at least make them neutral as opposed to regressive.

cycleobsidian

As a fellow Canadian, I always thought that it must be rough to live in Alberta and to hate the tar sands exploitation. How would you say most Albertans feel about the tar sands?

s5fskzfv

Right, but for people who earn minimum wage and live pay check to pay check, a small increase in the price of food is a lot.

Is this true in all cases? What about local roads and bridges not part of the interstate highway system? They repaved the road near my home in a residential neighborhood. Asphalt roads are really only needed for modern cars and trucks (actually they are dangerously slippery for horses) so they are part of the cost of gasoline. Are all the roads in residential neighborhoods across the country maintained with gasoline tax dollars? What about salting and plowing in winter? You need cleaner roads to go fast in a car than you do if you are walking or riding a horse or wagon.
Again, this is not helpful if you live paycheck to paycheck. You can get your rebate once a year but you and your children can't make up missed meals once a year.

UberGeek

People can make do, with buying local food and goods. Most on minimum wage collect WIC which also allows for farmer's markets in most states.

More local roads are maintained with property taxes. Again, salting can be shifted to the local and county gasoline tax.

No, but you can spend less by buying locally produced food.

Roody

Agreed, and this is even more true for people on a fixed income and/or food stamps.


Yes, local roads are build and maintained mostly with general revenue which probably comes from income taxes, property taxes and/or other revenue sources. But these taxes aren't very progressive either.




I think the rebates could be weekly or monthly, maybe disbursed on paychecks, EBT cards, and disability checks. And the rebates would be the same amount for everybody, regardless of how much fuel they used. A poor (or rich) person might get paid $100 a month to buy gas, or they could use the $100 for anything else they wanted to.

Rich people usually spend more dollars on gasoline, but poor people spend a larger portion of their income on gas. So this rebate plan would be a very progressive tax scheme.

wahoonc

The funds to build and maintain roads comes from a variety of sources depending on the locale. In NC state roads and county roads are primarily paid for and maintained by state gasoline taxes, sometimes they will issue bonds to pay for some projects, those appear to be repaid from the general fund. However several governors in the past have raided the NC Highway Trust Fund to balance the general fund. Local roads are paid for by bond issue and local property taxes and special assessment. Some roads are maintained better than others.

Aaron

RVD72

regarding all of the people who live paycheck to paycheck, etc...i don't think we should do anything different for them. when gas prices went from $1/gallon to $4/gallon, i still saw people driving all over the place and the roads and freeways have just as much gridlock now as they did back in the day. many people live paycheck to paycheck but they all seem to make it work out.

what you really want to do is raise the price of gas to whatever the true cost is for gas including what the gas companies pay and what is needed for environmental cleanup, etc. no need for government subsidies...if that means gas cost $9/gallon then life will be more like the UK.

i have always been one who said that the price of gas is too cheap in the US. go to europe, japan, korea, etc. and see how the live with $8-$10/gallon gas.

I-Like-To-Bike

How much does locally grown tuna fish, lettuce, citrus fruit and bananas cost in Buffalo? How much does fresh locally grown anything cost in Buffalo in the winter?

palmersperry

That only applies in the first 6/12 months of such a system operating though. After that they will have received a rebate payment which they can use to supplement their income until the next rebate payment.

(Or alternatively they can go "Yay! We have a cheque for $$$ from the government lets buy that big TV we wanted!" and then wonder why their children are starving later in the year. Alas there's no chance of legislating stupidity out of the gene-pool, and I doubt I'd want to live in any country which tried.)

palmersperry

... and the way to achieve that, from a political POV, is to use the boiling frog model. If you suddenly wack a huge amount of tax on petroleum you'll be remembered (and despised) for eternity. If however you where to, for example, increase the amount of taxation by 3% above inflation then you could get away with this for 7 years before people really start to notice. And from a cynical standpoint, the chances are you'll be in opposition by then and it'll be the other lot who get blamed for the situation! :-)

RVD72

Lol, boiling frog model. Nice.