Friday, February 25, 2011

Hidden Costs of Gasoline: Military Protection of "US Oil"

This study was published in 1998, but its significance is great because it shows that over a decade ago scientists knew the truth about warming and its causes and were denouncing our leaders for their failure to act on the knowledge. Dick To read the entire study go to:
“The Real Price of Gasoline”
This report by the International Center for Technology Assessment (CTA) represents the third in a series of studies designed to assess the environmental and social impacts of transportation technology.These reports are meant to aid policy makers and the public in their ongoing deliberations concerning thefuture course of transportation in the United States.This particular report contains an in-depth analysis of the many external costs associated with the
consumption of gasoline. This report found that these costs fall into four broad categories and are passed on to both gasoline users and nonusers by way of higher taxes, insurances costs, and retail prices for items other than gasoline. Effectively, the cost of gasoline is substantially higher than the price consumers
pay at the pump, even though the majority of this cost is hidden from the public.
The CTA was formed in 1994 in order to assist the general public and policy makers in betterunderstanding how technology affects society. The CTA is devoted to fully exploring the economic,ethical, social, environmental, and political impacts of technology or technological systems. Using thisholistic form of analysis, the CTA provides the public with independent, timely, and comprehensive informationabout the potential impacts of technology. The CTA is also committed to initiating appropriatelegal, grassroots, public education, and legislative responses relevant to its assessment findings.
Andrew Kimbrell
Executive Director
International Center for Technology Assessment
Washington, D.C.: November 1998
[I excised a long section of the beginning in order to go straight to military costs of gasoline. As you read, remember the 1998 date.]

The United States military plays a crucial role in
ensuring the free flow of oil on the world market.
It is important to realize that the cost of defending oil
infrastructure around the world is not cheap. Although
historically low gasoline prices at the pump have encouraged
many US consumers to embrace trendy gas
guzzling light trucks and sport utility vehicles, forsaking
conservation efforts for wasteful convenience, all
Americans foot the bill for increasing foreign oil dependence
and the military costs (both in monetary and
social terms) associated with securing a steady supply
of oil.
The United States economy remains heavily
dependent on oil and is likely to become increasingly
dependent on foreign oil as domestic production
dwindles over the next decade.
In recognition of the country.s overwhelming dependence
on the free flow of foreign oil, the US government
has enacted measures designed to insulate
the country against future supply shocks. Painful lessons
learned during the oil crises of the 1970s led to
the creation of institutions like the Strategic Petroleum
Reserve (SPR) and the International Energy Agency
(IEA), which would, in theory, act to ensure the continued
supply of oil. Most notably, the United States
maintains a military presence in oil-sensitive areas.
However, the United States has done astonishingly little
in the way of demand-side management (DSM) to
curb America.s growing appetite for oil (which can
only be satiated by an increase in imports). The vast
amounts of money spent on capital, infrastructure, and
security for what is in reality a .quick fix. dwarfs the
meager investment being made in alternative energy
resources and technologies.

The full military costs of defending petroleum
resources are quite difficult to estimate due to the
nature of global security and the synergy between energy
supplies and economic security. While most industries
operating in volatile parts of the world are
responsible for arranging for private security forces to
protect their investments, infrastructure, and personnel,
the petroleum industry is able to externalize the
costs of protection.
Obviously, the entire annual budget
for US military operations of approximately $260
billion cannot be attributed to the costs associated with
energy security.51 There are other strategic interests
at play, even in oil rich regions like the Persian Gulf or
former-Soviet Central Asia. The number of soldiers
or the amount of military firepower present in a given
region does not necessarily reveal the actual cost of
protecting petroleum resources. However, it does not
take a genius to recognize that if the main product
shipped out of the Persian Gulf consisted of carbohydrates
and not hydrocarbons, America.s strategic interests
in the region would be vastly different.
Many researchers have attempted to accurately
determine the cost of America.s defense of oil production
and shipment throughout the world and specifically
in the Persian Gulf. In the aftermath of the
Gulf War, several analysts have also estimated the annualized
cost of combat. In some years, the cost of

Up to $96.3 billion in US defense spending each year may go
directly towards protecting overseas oil sources.
defending oil interests could be quite low, while in other
years, tens of billions of dollars were spent on combat.
Wahl of ILSR estimates a plausible (and rather
conservative) range of annual expenses devoted to routine
protection of oil resources at 10 to 25 percent of
the annual defense budget ($26 to $65 billion).52 Most
studies on the subject tend to estimate costs at the
high end of this range. Based on a survey of literature
on the subject in 1992, the Congressional Research
Service found a range of estimates from $56 to $73
A recent report prepared for Greenpeace byKoplow and Martin, provides a rigorous examination
of oil protection costs associated with the Persian Gulf
region. They estimate the cost of oil defense for the
Middle East at $10.5 to $23.3 billion (1995 dollars).
However, it should be noted that these figures are relatively
conservative. They assume that the cost of protecting
oil interests is equal in value to preserving regional
stability and preventing the emergence of regional
hegemonic powers. It is not unrealistic to attribute
a majority of Persian Gulf defense costs to oil,
which would result in an estimate closer to $70 billion
(the total annual cost of defense commitments in the
Middle East is approximately $80 billion).54
In addition to the costs of maintaining the US military
presence in the Middle East, it is necessary to
factor in the cost of combat. The Persian Gulf War,
otherwise known as operations Desert Storm and
Desert Shield, is estimated to have cost over $100
billion.55 The United States did persuade its allies to
help pay for the cost of the war. However, out of ally
commitments to contribute $54 billion only about $37
billion has actually been paid.56 If one assumes that
combat on the scale of the Gulf War will keep things
relatively quiet for about ten years, then the annualized
cost of combat is approximately $4.6 to $6.3 billion.
Estimated annual cost of oil defense
$55 to $96.3 billion in 1997 dollars57
The Strategic Petroleum Reserve (SPR) has
been a flawed and little-utilized insurance policy of last
resort for the oil-dependent American economy. Created
in 1975 in response to the turmoil associated with
the oil price shocks of 1973 and 1974, the SPR is
Operations Desert Shield and Desert Storm in 1990-1991, in which the United States and its allies defended oil-rich Kuwait following a
hostile invasion by Iraqi military forces, cost upwards of $100 billion. US allies have pledged to pay $54 billion of the Persian Gulf War.s
cost, but the US has only managed to collect some $34 billion of this total to date.
intended to protect the United States from interruptions
in the flow of oil caused by political, military, or
natural causes. American taxpayers contribute an annual
.premium. of up to $5.7 billion to reduce the risk
of oil-shock-induced economic devastation. Given
the United States. growing appetite for imported oil
(as domestic reserves continue to steadily shrink), the
SPR may be a wise investment for American oil consumers.
The petroleum industry has little incentive to
provide safeguards against price hikes and supply
shocks. It is unlikely that an apparatus like the SPR
would exist without government intervention.
The SPR has roughly 590 million barrels of crude
oil stored in underground salt caverns along the coastline
of the Gulf of Mexico. Oil from the SPR has been
used for emergency purposes only once, during the
Persian Gulf War in 1991 (there was some controversy
at the time as to whether it was necessary to sell
off some of the reserve). The Department of Energy
(DOE), which administers the SPR, spends $200 million
annually on management and operation costs.
Taxpayers currently face the additional liability of financing
over $100 million for decommissioning and
moving part of the reserve because of problems with
water intrusion and contamination (annualized cost of
$5 to $10 million).58
By far, the largest cost associated with the SPR
results from forgone interest on the value of stockpiled
oil. Billions of taxpayer dollars are invested in
stores of oil, rather than ready for use in sustainable
and environmentally friendly energy programs. Some
of this loss could be recouped if oil were to increase
dramatically in value. However, a large percentage of
SPR oil was purchased at a much higher price than
the oil is presently worth. The average acquisition cost
per barrel of oil stored in the SPR between 1976 and
1995 was $27.30.59 The average market price of
that oil was $17.20 in 1995, representing a capital
loss on acquisition of almost $6 billion.60 With the
current market price of oil below $12 per barrel, the
loss increases to more than $9 billion. However, it is
possible that prices will be higher at the point when oil
from the reserve might be sold.
The DOE itself notes that .the United States is
unique among oil stockpiling in assigning all of the cost
of the reserve to the general taxpayer. Most other
stockpiling countries partially shift the cost burden to
the oil industry by requiring their oil companies to maintain
inventories in excess of working needs..61 The
Greenpeace report estimates the total taxpayer loss
of the SPR from 1976 through 1995 at $57.5 billion
and estimates the total annual cost at $5.4 billion in
1995 dollars.
Estimated annual cost of the SPR:
$5.7 billion in 1997 dollars62
The Weeks Island Storage Site, located 95
miles southwest of New Orleans and formerly
used as a salt mine by the Morton Salt Co.,
now serves as an integral part of the Strategic
Petroleum Reserve, with the capacity to store
up to 70 million barrels of oil. The graph on
the following page represents SPR funding
totals for 1976 through 1997.
There are other protection costs associated
with gasoline usage in the United States that are picked
up by general taxpayers rather than oil producers and

For example the Coast Guard spends
about $455 million (with offsetting collections taken
into account) annually on programs that benefit oil firms,
such as maintaining coastal shipping lanes, providing
navigational support, clearing ice, and responding to
oil spills………

No comments:

Dick's Wars and Warming KPSQ Radio Editorials (#1-48)

Dick's Wars and Warming KPSQ Radio Editorials (#1-48)