The True Cost of Oil

Driving a plug-in car isn’t just for tree huggers. There are national security and economic reasons for ending our addiction to oil. The United States spends billions every year protecting oil resources through military means.

The United States is the top oil importer in the world, using 9 million barrels of oil every day for transportation.1 Forty percent of our total oil imports come from OPEC countries2, a risky situation at best. How do we ensure that oil from the Middle East arrives on American soil? We spare no expense, and we empty American taxpayer pockets for the unbridled use of military might.

Ensuring U.S. access to Middle East oil by deploying our forces in the Persian Gulf, patrolling its waters and supplying military assistance to Middle East countries, costs an estimated $50 billion per year.3 Supertankers transporting the oil into the United States must navigate dangerous waters to deliver that coveted liquid gold to our shores. In 2003, over 100 oil tankers were attacked around the world, justifying the need for military escorts and security.

These costs don’t include actual wartime expenditures: the 1990-91 Gulf War, which was the result of an oil dispute between Iraq and Kuwait, cost the international community almost $80 billion.4 As of August, 2010, when President Obama announced the end of combat operations in Iraq, the 7 year war - that many believe was really a war over oil control- had cost the United States over 746 billion.5

Clearly oil is a large military expenditure. But the US Government spends money in other ways to feed America’s gas hungry transportation needs by heavily subsidizing gasoline through low taxes and large oil industry subsidies. In early 2010, when gas prices at the pump were only $2.69 in Chicago, they were $6.65 in London, $6.52 in Paris and $6.30 in Hong Kong.

A 2003 study by International Center for Technology Assessment (CTA) on the external costs of gasoline found that federal tax breaks which specifically benefit oil companies include: the Percentage Depletion Allowance ( $784 million to $1 billion per year), the Nonconventional Fuel Production Credit ($769 to $900 million), the Enhanced Oil Recovery Credit ($26.3 to $100 million), foreign tax credits ($1.11 to $3.4 billion), foreign income deferrals ($183 to $318 million), and accelerated depreciation allowances ($1.0 to $4.5 billion). Government (and thus taxpayer) expenditures on regulatory oversight, pollution cleanup, and liability cost $1.1 to $1.6 billion.6

These stats don’t include state subsidies and credits, nor the huge environmental and health costs of our addiction to oil.

Powering battery electric cars with solar, wind, water, waste or geothermal energy* will cost taxpayers something in subsidies. Federal and state governments have already offered generous tax breaks for those first in line to buy plug in vehicles.7 In 2009, the White House granted 2.4 billion in grants to car companies and battery makers. $130 million was extended for charging infrastructure.8 But because all this is domestic, there will be none of the outrageous military expenditures to ensure our transportation needs. No wars will be fought over these clean and domestic energy sources. Not only do sun, wind, water, waste or geothermal energy have fewer environmental and health impacts, they are more peaceful and cheaper fuels in the long run.

*Plug In America and these authors do not consider nuclear energy a clean power source.

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