3 Hidden Costs of High Oil Prices
As a barrel of oil hovers around $130, the news has been bombarding us with the obvious effects of high oil prices. As most people weep at the pump, some environmentalists are rejoicing. Gas consumption is down, but there are additional hidden costs to high gas prices that leave even green minded folks with a frown.
1-Difficult to Extract Oil & High Environmental Impact
High oil prices are making it economically viable to utilize oil that is difficult to extract. One example of this is just north of the border.
In the U.S., our single biggest source of foreign oil is from Canada. Although this may be reassuring from a foreign policy standpoint, much of this oil comes with a steep environmental price tag. Known as tar sands oil, 2 tons of sand are needed to produce one barrel of oil in a very resource and energy intensive process.
One technique that is used is to mine the sand leaves huge holes in the earth and devastates the ecosystem. Another technique involves injecting steam underground, requiring large amounts of energy. Tar sands oil generates 2-3 times the greenhouse gas when compared to conventional oil.
“It is quit alarming from an ecological standpoint,” said David Fields of Greenpeace Canada. “Developing the tar sand will make it impossible for us to effectively tackle climate change.
2-Difficult to Extract Oil is an Unreliable Supply
There are reasons why many sources of oil were overlooked in the past. Some are in areas that are populated, making it difficult to obtain permits. Other oil reserves rely on large amounts of energy, making the operation vulnerable to fluctuating energy costs.
Going back to the Canadian tar sands example, large quantities of natural gas are needed to extract this oil. In the cool Canadian climate, large amounts of natural gas are also used to heat homes. If natural gas prices spike or Canadians prioritize conservation of natural gas reserves over short-term profits, this source of oil could dry up.
3-Oil Companies are More Powerful as Profits Increase
In 2007, Exxon made nearly $1300 a second in profits. With record high corporate profits, Exxon reported annual earning of $40.61 billion. While Americans are spending at the pump, the power of this company is increasing. Unfortunately, some of the companies that are rolling in dough are not necessarily ideal corporate citizens.
Exxon has refused to pay court ordered fines for the Exxon Valdez oil spill in 1989 to help compensate the fishermen for loss of their livelihood. The company has also supported groups that question global warming, a practice that has even been criticized by other oil companies.
The political power of oil companies is staggering and is a special interest that is often not in line with what is best for society. The oil industry has donated $180 million to political candidates since 1989. 89% of political donations made by Exxon went to republican candidates.
As with all complex situations, there are numerous positive and negative aspects. What other hidden factors do you find noteworthy?
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Thank you for pointing out some of the environmental hazards of excessively high energy prices. Others include a renewed desire to exploit oil bearing shale rock in the US - a source that has similar environmental impacts as oil sand exploitation.
I also worry very much about the increased use of biofuels as oil substitutes. The effort is leading to increased deforestation in places like Southeast Asia and Brazil as big businesses recognize that they can make a quick profit by burning down large areas of forest and planting crops like soybeans and palm trees for palm oil. http://seattletimes.nwsource.com/html/nationworld/2003612448_palmoil11.html
Even the non commercial use of wood for heating can cause significant long term problems as many people who are already economically stressed move away from cleaner burning fuels like propane towards cheaper alternatives like gathered firewood. In places like Haiti, essentially all burnable wood has been gathered without replacement, causing soil depletion and turning what was once a lush tropical island into a moonscape.
If we want to discourage energy use, high taxes on energy fuels would be a better long term solution than allowing fossil fuel companies to capture all disposable income.
Fascinating. I had no idea there was so much involved. The question is though, what are they doing different now at $4 a gallon that they were doing when gas was $2 a gallon? Nothing! Except of course doubling their profits!
JJ
http://www.Ultimate-Anonymity.com
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Seems like a bit of a half truth to be talking about the large profits of the oil companies doesn’t it? Can anyone tell me the profit margin for an oil company? That would be ~8% - 9%. That means they make $.08 - $.09 on every dollar we spend. How much does the government take in taxes? ~11%, how about your water authority, what do they make….Anyone? That would be ~10% - 11%. Given that we are attacking the oil companies for their excessive profits logic dictates we attack the water authority for their high profit margins and we attack the government. We can’t attack the government, they use that money for good things right…?Right? Before you decided to attack an industry that is doing well perhaps you should do that math. If you factor in inflation, supply and demand, and speculation you come up with the current price of gas. Even OPEC says that they think the market should be around $60 - 70$ a barrel. Looking at net profits of a company is a silly way to understand how things work. Any industry that sees its market expand will see its profits grow. Wake up, do the math, and stop looking in the wrong direction.
He’s a little factoid the writer of the article just happened to conveniently forget including. It costs $13 a barrel, to extract oil from the mud. Hardrock mining can be economic if there’s as little as $20 worth of metal in solid rock.
ummmmm how about the fact that no refineries added into the untied states since the 70’s because of the EPA? so blame your own tree hugging selves over the gas prices (which I’m not against tree hugging in fact i love trees but the problem is the ability to turn it from crude oil into refined unleaded gas. we have plenty of crude but no way to process it.
any other questions?
Fuel, food and enmvironmentally friendly plastics and oil can all be manufactured FROM THE HEMP PLANT. Hemp is 4-5x more efficint for fuel and oil than trees and grows much quicker and easily, since it is technically a weed. It can also be used for healthy medicine with no harmful side effects. So WHY is HEMP illegal? Other countries have removed their dependence on foreign oil by farming hemp. Why not The US? Corrupt politicians, perhaps?
You forgot a few, like the steps that would be most important and that would have the most impact on gas prices:
1. Allow drilling of untapped oil supplies at home (ANWR, Gulf of Mexico, etc.)
2. Reduce or remove the 15% gas tax.
3. Reduce or remove taxes on oil companies.
4. Reduce the amount of different gas blends the oil companies are required to refine (at least 60 currently) due to strict environmental restrictions.
5. Reduce environmental and bureaucratic barriers for building new refineries and expanding existing ones.
Unfortunately, I can’t say I’m surprised these items are missing from your list of supposed “hidden costs” since most practical scenarios involving the lowering of prices run counter to the agenda of this site. While you do bring to light some legitimate reasons that drilling for oil in certain scenarios would be cost prohibitive, there are many other scenarios where overly protective government environmental restrictions are the only thing prohibitive.
The political power of environmentalists is also staggering and is a special interest that is often not in line with what is best for the planet. Don’t forget that either. Yes, as oil prices go up, it does make going after those last few oil resources economically feasible. So what? Oil prices are still going up. As oil prices go up, oil consumption goes down. I don’t understand why you insist on attacking oil companies. Many other industries have bigger profit margins than the oil industry. They just happen to be in an industry that supplies a very important resource. Your cause would be better served if you focused on alternatives. What would you do if oil companies didn’t exist by the end of today? How would you power the world? What is the alternative? Focus on those alternatives if you want to stop pollution and oil companies. You can probably change more by doing positive than negative. I’m not a republican or somebody who works for oil companies. Just using some logic here.
Oil will come to an end. The American Southwest is the best place to build desert solar thermal electric power plants. It is the cheapest, fastest, known technology path to putting renewable, ultimately sustainable power to the existing grid. Barring a tech breakthrough in fusion, when the curve for oil running out crosses the curve for cost to build the desert plants, predatory and rogue capitalism will take over and things will happen. Right now, the best deal in town is to keep oil prices high and get suckers to over-use it in SUVs, unnecessary flights, etc and let the cash flow in. The money boys will say when, and the environment will play no bigger part in the action than it does now.