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?
Related Articles on Transportation Fuels:
U.S. Oil Subsidies Need to Go
22 Biodiesel Myths Dispelled
Fuel from Trash Will Power California Garbage Trucks
Poverty is the worst form of pollution and only wealthy countries can afford to practice pollution and climate control. To paraphrase Heroditus: It is better to be envied than pitied.
As the rich trade in their SUVs for hybrids, the car lots overflow with them. Soon, being cheap and plentiful these are the only vehicles the poor can afford. But can they afford to put gas in them.
By not developing Americas domestic resources we reduce the amount of OPEC oil available to other countries and put upward pressure on the prices citizens of Europe and Japan pay at the pump.
FOREIGN WARS OR DOMESTIC OIL
If the US Government spent a trillion dollars over 8 years on domestic oil production from known reserves in the Gulf of Mexico, the Continental Shelf and coal gasification instead of War in Iraq gas would be $2 a gallon or less. America could quit sending billions to countries that sponsor terrorism. And reducing our trade imbalance keeps jobs in America. Every billion of trade deficit costs 13,000 jobs. $400 billion for oil last year: do the math.
America has 1/4th the coal on planet earth. South Africa is producing 300,000 barrels of gas and diesel a day from coal. And synthetic fuel from coal is cleaner burning than gas. And it can be produced cheaper than from $100+ a barrel crude oil.
Harness your anger at the pump. Call you’re US Senators and demand domestic production in this decade. Raise your voice or the oil companies and politicians will assume you are ready to pay even more.
Hey Michael Lewis, You have a great point about the rich trading in their SUV’s for hybrids because I have seen a great deal of SUV’s with for sale signs in the windows lately. And your question of can the poor afford gas for these cheap SUV’s nobody wants to drive anymore is a good one.
My question is how much longer is there going to be gas for them to fill with even if they do have enough money for it. I was reading this article called The U.S. Oil Supply — A Look At Our Future Oil Needs and it helped me better understand why gas is rising and what it means financially. It gave me a glimpse into another side I didn’t really think about, regardless of the ever worsening environmental effects.
[...] 3 Hidden Costs of High Oil Prices [...]