A 1998 study found that the "real" price of gasoline was up to "$15.14 higher than what consumers pay at the pump." Again, these are results of a 1998 study. After reading all this, you may come to the conclusion that $18 per gallon is an under-estimate in today's world.

This report by the International Center for
Technology Assessment (CTA) identifies and
quantifies the many external costs of using motor
vehicles and the internal combustion engine that are not
reflected in the retail price Americans pay for gasoline.
These are costs that consumers pay indirectly by way
of increased taxes, insurance costs, and retail prices in
other sectors.
The report divides the external costs of gasoline
usage into five primary areas: (1) Tax Subsidization of
the Oil Industry; (2) Government Program Subsidies;
(3) Protection Costs Involved in Oil Shipment and
Motor Vehicle Services; (4) Environmental, Health,
and Social Costs of Gasoline Usage; and (5) Other
Important Externalities of Motor Vehicle Use.
Together, these external costs total up to
$1.69 trillion per year, which, when added to the retail
price of gasoline, results in a per gallon price of up to
to $15.14.

TAX SUBSIDIES
The federal government provides the oil industry
with numerous tax breaks designed to ensure that
domestic companies can compete with international
producers and that gasoline remains cheap for
American consumers. Federal tax breaks that directly
benefit oil companies include: the Percentage
Depletion Allowance (a subsidy of $784 million to $1
billion per year), the Nonconventional Fuel Production
Credit ($769 to $900 million), immediate expensing of
exploration and development costs ($200 to $255
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).
Tax subsidies do not end at the federal level. The
fact that most state income taxes are based on oil firms’
deflated federal tax bill results in undertaxation of $125
to $323 million per year. Many states also impose fuel
taxes that are lower than regular sales taxes, amounting
to a subsidy of $4.8 billion per year to gasoline retailers
and users. New rules under the Taxpayer Relief Act of
1997 are likely to provide the petroleum industry with
additional tax subsidies of $2.07 billion per year. In
total, annual tax breaks that support gasoline
production and use amount to $9.1 to $17.8 billion.

PROGRAM SUBSIDIES
Government support of US petroleum producers
does not end with tax breaks. Program subsidies that
support the extraction, production, and use of
petroleum and petroleum fuel products total $38 to
$114.6 billion each year. The largest chunk of this total
is federal, state, and local governments’ $36 to $112
billion worth of spending on the transportation
infrastructure, such as the construction, maintenance,
and repair of roads and bridges. Other program
subsidies include funding of research and development
($200 to $220 million), export financing subsidies
($308.5 to $311.9 million), support from the Army
Corps of Engineers ($253.2 to $270 million), the
Department of Interior’s Oil Resources Management
Programs ($97 to $227 million), and government
expenditures on regulatory oversight, pollution
cleanup, and liability costs ($1.1 to $1.6 billion).

PROTECTION SUBSIDIES
Beyond program subsidies, governments, and thus
taxpayers, subsidize a large portion of the protection
services required by petroleum producers and users.
Foremost among these is the cost of military protection
for oil-rich regions of the world. US Defense
Department spending allocated to safeguard the
worlds’ petroleum resources total some $55 to $96.3
billion per year. The Strategic Petroleum Reserve, a
federal government entity designed to supplement
regular oil supplies in the event of disruptions due to
military conflict or natural disaster, costs taxpayers an
additional $5.7 billion per year. The Coast Guard and
the Department of Transportation’s Maritime
Administration provide other protection services
totaling $566.3 million per year. Of course, local and
state governments also provide protection services for
oil industry companies and gasoline users. These
externalized police, fire, and emergency response
expenditures add up to $27.2 to $38.2 billion annually.

ENVIRONMENTAL, HEALTH AND SOCIAL COSTS
Environmental, health, and social costs represent
2
the largest portion of the externalized price Americans
pay for their gasoline reliance. These expenses total
some $231.7 to $942.9 billion every year. Few people
will dispute that internal combustion engines contribute
heavily to localized air pollution. And while the amount
of damage that automobile fumes cause is certainly
very high, the total dollar value is rather difficult to
quantify. Approximately $39 billion per year is the
lowest minimum estimate reckoned by researchers in
the field of transportation cost analysis, although the
actual total is surely much higher and may exceed $600
billion. When you consider that researchers have
conclusively linked auto pollution to increased health
problems and mortality, the CTA report’s estimate of
$29.3 to $542.4 billion for the annual uncompensated
health costs associated with auto emissions may not
adequately reflect the value of lost or diminished human
life. Other costs associated with localized air pollution
attributable to gasoline-powered automobiles include
decreased agricultural yields ($2.1 to $4.2 billion),
reduced visibility ($6.1 to $44.5 billion), and damage
to buildings and materials ($1.2 to $9.6 billion). Global
warming ($3 to $27.5 billion), water pollution ($8.4 to
$36.8 billion), noise pollution ($6 to $12 billion), and
improper disposal of batteries, tires, engine fluids, and
junked cars ($4.4 billion) also add to the environmental
consequences wrought by automobiles.
Some of the costs associated with the real price of
gasoline go beyond the effects of acquiring and burning
fuel to reflect social conditions partially or wholly
created by the automobile’s preeminence in the culture
of the United States. Chief among these conditions is
the growth of urban sprawl. While monetizing the
impact of sprawl may prove a challenging endeavor,
several researchers have done significant work on the
subject. The costs of sprawl include: additional
environmental degradation (up to $58.4 billion),
aesthetic degradation of cultural sites (up to $11.7
billion), social deterioration (up to $58.4 billion),
additional municipal costs (up to $53.8 billion),
additional transportation costs (up to $145 billion), and
the barrier effect ($11.7 to $23.4 billion). Because
assessment of the costs of sprawl is somewhat
subjective and because study of the topic remains in a
nascent stage, the CTA report follows the lead of other
researchers in field of transportation cost analysis and
reduces the total of the potential cost of sprawl by 25%
to 50% to arrive at a total of $163.7 to $245.5 billion
per year.

OTHER EXTERNAL COSTS
Finally, external costs not included in the first four
categories amount to $191.4 to $474.1 billion per
year. These include: travel delays due to road
congestion ($46.5 to $174.6 billion), uncompensated
damages caused by car accidents ($18.3 to $77.2
billion), subsidized parking ($108.7 to $199.3 billion),
and insurance losses due to automobile-related climate
change ($12.9 billion). The additional cost of $5.0 to
$10.1 billion associated with US dependence on
imported oil could rise substantially, totaling $7.0 to
$36.8 billion, in the event of a sudden price increase for
crude oil.

 

Ok, thats the cost to us, not the cost the Oil companies would have to charge without subsidies. I misunderstood.
I think it would be much higher now as the subsidies remain and we are paying more in taxes and price per gallon compared to 1998.

 

"In testimony before the US Senate, the chairman of DuPont's Pioneer Hi-Bred subsidiary projected a 40 percent rise in corn and soybean yields by 2018, with corn reaching an average US yield of 225 bushels per acre. When questioned about the projection, Dean Oestrich told Senator Tom Harkin of Iowa that "it is a plan, and not an aspiration".

Based on these figures, and assuming an increase in yield to 2.9 gallons per bushel and corn plantings at this year's levels (87 million acres), corn ethanol would utilize 23 percent of the 2018 corn harvest to make 15 billion gallons of fuel and 1.708 billion bushels of distillers grains. This would leave the 18.7 billion bushels of corn for the food and livestock markets (after allowing for dried distillers grains), up from 10.903 billion bushels in 2007.

Meeting the ethanol mandates, AND increasing food and corn exports by 80% in 10 years time. All the while, using less chemical fertilizer than 1980 levels, and the same amount of landmass as today. That's progress.

Each gallon of ethanol displaces about one-third gallon of gasoline, so that's 5 billion gallons fewer of gasoline used per year. A drop in the bucket, but it's a start. Plus there are the social and health benefits as well as the ecomonic ones.

 

It is a start. My opinion is that its merely a temporary alternative. It can help in reducing the use of foreign oil which is good but its far from a clean alternative. I would hope that the Govt. doesn't waste any money on ethanol and goes directly to hydrogen.

 

Hydrogen powered vehicles.
Why would you hope Uncle Sam spends money on hydrogen vehicles when they exist now? Haven't you made a down payment yet on the Honda FCX?

Zero emissions. What else do you need?

 

I know, the faster the better, but I think to get the filling station there might be a need for some federal assistance. I don't think the Oil Companies will move rapidly at making it widely available.

I heard they are offering them in CA. If I was there and could put down a deposit I would.

 

Don't Be Cornfused About Ethanol, Subsidies, Prices
August 21, 2008 Wall Street Journal

Gov. Rick Perry should have waited before his latest attack on corn ethanol ("Texas Is Fed Up With Corn Ethanol," op-ed, Aug. 12). On the day his column appeared, the U.S. Department of Agriculture released its newest estimates for corn supply and demand.

Compared to the USDA's earlier estimate a month ago, corn production is up by more than a half-billion bushels (12.3 billion, the second-highest ever, with a surplus estimated at 1.1 billion bushels). The average farm price of corn dropped to $5.40, a far cry from the $8 Gov. Perry alleges. In fact, contract corn prices for September are below $5 and the cash price of corn in central Illinois as of Aug. 11 was $4.51 -- nearly half the governor's claim. Even at these prices, the corn used for a box of corn flakes costs under a dime and for a pound of beef is about a quarter.

Not only are growers bouncing back after the Midwest floods, the amount going to livestock is up and meat and poultry production are also projected to increase. The Environmental Protection Agency has decided; it's time to move on and work together to address the larger problem of high oil and energy costs, which have a much greater impact on food producers and consumers. onlinewsj.com


Sao Paulo, Brazil, 21 Aug – Biofuel production in Brazil will have no effect on food production or the deforestation of the Amazon rainforest over the next few years, according to a report published Tuesday in Sao Paulo.

Currently, plantations of sugar cane, the raw material used to produce ethanol, occupy just 3 percent of Brazil's total agricultural area.

The rise in production could be carried out by expanding the current planting area, particularly in the central-south of the country, some 2,000 kilometres from the Amazon.

The report showed that world biofuel production, such as of ethanol and biodiesel, was expected to total 90 billion litres this year, or five-fold the amount produced in 2000.

The United States and Brazil are currently responsible for 81 percent of world biofuel production, followed by the European Union, India and China.

Brazil however is the only country with the potential to become and exporter due to an abundance of land and the greater productivity of ethanol made from sugar cane, as compared to ethanol produced from maize.

Brazilian ethanol production is expected to rise from 22.3 billion litres last year to 50 billion litres in 2015, according to the report’s projections.

Consumption, in its turn, will rise to 32 billion litres per year, which would leave Brazil with a surplus of 18 billion litres for export in 2015.

Why the U.S. can't directly use Brazilian Ethanol

Some people proclaim "Let us import $1 per gallon ethanol from Brazil."

A) We can't use Brazilian ethanol in the U.S.
B) That is just relying on another foreign country for our fuel
C) It will cost more than $1 in the end

The U.S. mixes ethanol with gasoline. Brazil does not.
To mix ethanol with gasoline, the ethanol must be absolutly pure.
In Brazil, the ethanol is not pure.
The U.S. standard is: ethanol must contain 0.7% water or less.
U.S. ethanol distilleries produce 199 proof (0.5% water) or higher ethanol.
The Brazilian standard is: ethanol shall contain 10% to 20% water.
20% water = 160 proof ethanol, and that will burn in an internal combusion engine... IF you do not add gasoline. So Brazil, doesn't. Refining, or "dehydrating" the ethanol costs more and takes more time. If we had "ethanol only" cars, and did not switch back and forth, you and I could burn 160 proof as well. And it would cost about $1.50 / gal. at today's corn prices.

The current idea is, the Carribian Isles want to import the "lower proof" Brazilian ethanol, and dehydrate it, and then ship it to the U.S. So now we have extra transport and handling costs, more capitol investment costs, more labor costs, and a "Middle Man" that is also looking to make a profit. Your $1 Brazilian ethanol just became $2.

 

What still confounds me is that supply & demand means nothing when it comes to corn i guess. The article says that prices are low and that Gov. Perry was wrong for attacking the subsidies right?

So then if you want the price to go up then why are you planting enough for a 1.1 Billion bushel surplus? Its not rocket science to know the ballpark yields of the crop.

I agree that oil prices affect grocery prices far more then corn prices. Yet do the corn growers use this as leverage in getting the subsidies?

I could see that arguement going like this: If you pay us per acre to grow corn then we will grow as much as possible. We know the cost will come down as we do this so the price of corn related goods will come down as a result. - Big corn grower.

Do not pay me per acre for corn, let us regulate ourselves in the amount of corn we grow. We want to be able to bring corn prices up to where we can make a good profit and as stated in the past "corn prices do not affect grocery prices very much" - Smart longterm grower. I know they do regulate themselves but when you add in 30/acre fixed govt. payment then you add incentive to grow more.

It just does not make sense to me, it seems so anti-freemarket. Obviously I think that modern dent corn is a wasteful product that is being overused because of its ability to be used cheaply in thousand of products. To see a surplus in this years crop seems incredible to me, as again it could be used in a number of ways to temporarily help out americans.

 

Gov. Perry of Texas was attacking the Ethanol Fuel Mandate.
He petitioned to repeal the mandate of 9 billion gallons of ethanol use this year, and 11 billion gallons of use next year.... - and failed.

 

ok.

Well I understand the mandate and I am for getting rid of oil so I guess its a good thing. It still adds to the problems listed above though.

The Brazil part of the story is interesting though. I'm not for prolonging the life of ethanol in anyway. It should not be imported unless its drastically cheaper which I think it is not. Add the problems you list then I agree its not a good move.