Gulf Oil Spill Is the Reminder We Didn't Need About the True Cost of Oil

Last Updated May 6, 2010 2:01 PM EDT

If the oil spill in the Gulf of Mexico doesn't remind us, potently, that what we pay at the pump doesn't come close to covering the true cost of oil, then nothing will. A lot of folks at oil companies or automakers would like to gloss over this bitter fact, but the catastrophe on Deepwater Horizon brings it home.

There's a temptation to dismiss people who fret about the true cost of oil as tree-hugging nutcases who cough at the smell of car exhaust, or shell out cash to reduce their carbon footprint. In fact, people who don't generally wear Birkenstocks or eat vegan spend a lot of time on the subject.

A comprehensive study for the Department of Energy in 2000 put the costs to the U.S. economy of turbulence in the oil markets over the previous three decades "in the vicinity of $7 trillion," a number roughly equal to payments on the national debt over that same period.

The authors also tartly alluded to the endless foreign policy quagmires that imported oil brings with it: "These cost estimates do not include military, strategic or political costs associated with U.S. and world dependence on oil imports," the study concluded.

These side effects of our thirst for oil are nasties that economists call "externalities," costs that are not reflected in the price you pay at the pump. Put out of your mind the notion that the cost of gasoline reflects the production costs -- those are pretty manageable, anyway, as the Energy Information Administration tells us.

Small wonder that greater independence from oil imports is at the top of to-do lists of people like Sen. Richard Lugar, the Indiana Republican with a knack for putting his finger on the major foreign policy priorities of the day. Lugar has suggested imposing an oil import tax that is balanced by equal reductions in Social Security taxes.

Then there's the global warming angle. And the lung ailments caused by our reliance on fossil fuels. And so on. Which brings us to the costs of oil-related environmental disasters.

Do you really need to hear about oil-coated birds to appreciate the true cost of oil? Do we need to read the stories of Gulf fishermen out of work? Do we in the media need to interview people who won't be taking a Gulf beach vacation this summer because of the oil?

The answers are no, no and no.

If we have a hard time reaching this conclusion, it's because oil-related interests are (still) firmly entrenched in this country. There are carmakers (Bob Lutz, formerly of GM: global warming is "a crock") and the politicians who defend them. Utilities, add them to the list. Yes, they are many.

They are also wrong.

The true cost of oil has long been clear, and was clear before Deepwater Horizon sank to the bottom of the Gulf of Mexico and BP started cleaning it up. So why not impose a carbon tax? Why not a fee on imported oil to encourage the shift away from crude? Why not systematically promote alternative energies?

The burden of proof is on those who would argue otherwise: Why not?

  • Carter Dougherty

    Carter Dougherty, a former economic correspondent for the International Herald Tribune and The New York Times, is fascinated by the intersection between policy and business, in the United States and abroad. He shared in a Loeb Award, business journalism's most prestigious, while at the NYT. But he still looks back fondly on his days trudging through central Africa, reporting on Congo, Darfur and other rough spots.