11. THE TRUE COST OF OIL

Executives in a solar energy public corporation in California refute the argument that oil is much cheaper than solar power and provide independent research studies that show the true cost of oil is prohibitively high. In fact, without enormous government subsidies -- hidden costs amounting to some $57 billion a year -- consumers would refuse to pay oil's price.

Following are four areas that contribute to the estimated annual $57 billion hidden cost to consumers for oil:

DEFENSE: Several research groups, including the Rocky Mountain Institute, the Center for Strategic and International Studies, and the Center for Defense Information estimate the cost of defending our supply from the Persian Gulf ranges from $40 to $54 billion annually.

FEDERAL SUBSIDIES: According to a 1978 Department of Energy study, the oil industry has historically received more than $123 billion in federal subsidies. The handout began in 1916 when the federal government sought to boost production for WWI. Many more subsidies have been given to the oil industry since then, encouraging rapid depletion of US oil reserves and contributing to US domestic oil deficits since the 1950s. The full extent of annual energy subsidies is estimated at about $8.58 billion based on a study by the Rocky Mountain Institute. (The Great Tax Reform Act supposedly demolished most tax shelters but the oil lobbies successfully saved their tax write-offs, yet proved that alternative energy tax credits were not need; in 1986, all federal tax credits for solar were eliminated.)

STRATEGIC PETROLEUM PROGRAM: According to the Fund for Renewable Energy and the Environment, a "total of $17.23 billion has been spent on the Strategic Petroleum Reserve program (SPR) since its inception in 1976; $671 million was obligated for FY 1987 and another $270 million was requested for FY1988.

ENVIRONMENTAL COSTS: The Environmental Protection Agency estimates that there are more than 10,000 oil spills each year. In 1987, there were 15,005 spills reported. Although the exact costs of spills are difficult to determine, the Coast Guard uses the figure of $10 per gallon to estimate the costs of cleaning up spills. Based on a ten-year study, the average annual environmental cost of oil spills is estimated at $ 226 million.

Altogether, the total amount of hidden US tax dollars going to support the oil industry annually can be estimated at $57 billion. Some argue that it is in the nation's "best interest" to help the oil industry since the economy is do dependent on oil. But does the oil industry really need the taxpayers' help. According to most oil industry analysts, 1986 was a "bad year." Oil prices were way down and so were profits. Yet seven oil companies ranked among the most profitable companies in the country that year and Exxon, with a net income of more than five billion dollars, was the most profitable company in the country.

Ironically, even as this is being written, the environmental costs, noted above, are being magnified as the cleanup of the worst oil spill in US history, caused by the supertanker Valdez which ran aground off Alaska, is begun. The Valdez is an Exxon supertanker.

SOURCE:

EARTH ISLAND JOURNAL, Summer 1988, "The True Cost of Oil (Or, What the Oil Companies Don't Want You to Know)," by Gary Starr and Susan Bryer Starr, pp 22-23.