The real cost of oil: $10 a gallon

[txlibdem]

You're not paying that at the pump because of subsidies, tax breaks, free land giveaways for oil exploration, military assistance to oil, and a total lack of accountability for the medical bills they cause people. I do not think the following study has taken into account all of the freebies and breaks that oil companies get (like paying zero US income taxes)...

http://www.evworld.com/news.cfm?newsid=11520

"Copulos, a founding member of the Set America Free Coalition, presented these figures yesterday at a Senate Foreign Relations Committee hearing on "The Hidden Cost of Oil." In his testimony he released newly updated figures of his 2003 study "America's Achilles Heel: The Hidden Costs of Imported Oil," a comprehensive analysis of the external costs of imported oil. The study computed the externalities of imported oil and divided them into three basic categories: Direct and Indirect economic costs, Oil Supply Disruption Impacts and Military Expenditures in a non-war year.

Adding up the above, the hidden cost of oil imports skyrocketed to $779.5 billion in 2005. That would be equivalent to adding $4.10 to the price of a gallon of gasoline if amortized over the total volume of imports. For Persian Gulf imports, because of the enormous military costs associated with the region, the "hidden cost" was equal to adding $7.41 cents to the price of a gallon of gasoline. When the nominal cost is combined with this figure it yields a "true" cost of $9.53 per gallon.

This year, Copulos said, will present an even higher cost. "Because the price of crude oil is expected to remain in the $60 range this year, expenditures for imports are expected to be at least $320 billion. That amounts to an increase of $70 billion in spending for foreign oil in just one year. That increase would raise the total import premium or "hidden cost" to $825.1 billion, or almost twice the President's $419.3 billion defense budget request for fiscal year 2006. If all costs are amortized over the total volume of imports, that would be equivalent to adding $5.04 to the price of a gallon of gasoline. For Persian Gulf imports, the premium would be $8.35. This would bring the "real" price of a gallon of gasoline refined from Persian Gulf oil to $10.86. At these prices the "real" cost of filling up a family sedan is $217.20, and filling up a large SUV $325.80."

"It is important to understand that even though external costs are not be reflected in the price at the pump, they are very real and we pay for many of them through our income tax," said Anne Korin, chair of the Set America Free Coalition. "Copulos' study is a disturbing reminder that the U.S. economy is bleeding and that hundreds of billions of dollars that could have stayed in the U.S., producing jobs and investment opportunities, are finding their way to the coffers of those who wish us harm."

[villager]

1. all the true costs are "externalized" -- i.e., socialism for them, paid for by us

n/t

[txlibdem]

5. Socialism for the Arab Princes - ever see their palaces

and the expensive sports cars they drive around in?

Meanwhile, the citizens of those countries live in poverty and beg for a menial, low-paying job. Do not hate your Arab brother. Hate their Capitalist masters.

[toddwv]

17. A favorite tactic of corporations these days

Privatize the profit
Socialize the risk

Then complain when anybody suggests that you should be taxed at a fair rate.

[txlibdem]

21. Not just "complain" but threaten widespread mayhem if even a penny of tax be levied.

[notadmblnd]

2. So you are telling me that a $120.00 barrel of oil of which there are

42 gallons, that we should be paying $10.00 per gallon? Doesn't that make the cost of turning the oil into gasoline 300.00 per barrel? That sounds pretty expensive. Isn't that just as high as other power sources? If yes, then why are we still using it? I thought the whole point of using oil was because it was cheap?

[txlibdem]

3. Who are your congress critters, and how much money did they get from fossil fuel lobbyists?

Find that info and I think you'll have answered your question.

I definitely agree with you that oil, coal and natural gas are not cheapest. Not when you take away all the lax enforcement of environmental regulations, never force them to pay the medical bills that their product causes, etc.

Coal, for instance, gets to dump Uranium, Radium and Thorium radioactive materials into open pits for the wind to blow wherever they may. While the nuclear industry has to account for each and every ounce of their Uranium, Thorium, Radium, etc., and go to expensive and extraordinary lengths to make sure they are always under tight control. Is that a subsidy to coal? Sure seems like it to me.

[Old and In the Way]

4. I've been saying this for years.

We pay a hidden tax to Big Oil by way of military muscle to get their product to market. How may hundreds of billions of our defense budget over the past 30 years have we paid via taxes to support Big Oil's bottom line?

[txlibdem]

6. About $50 Billion per year... so over 30 years that's... wow!

[leveymg]

7. The production cost of oil at the wellhead in Saudi Arabia is less than $3 a barrel.

There are 42 gallons to a barrel, by the way. The post-refining yield from that is about 20 gallons of unleaded regular gasoline. At current retail prices, that is more than $80/b. The shipping costs average about $5/b. The rest is profit. Almost all of the cost of gasoline is profit to producers and speculators, and less than .20 a gallon is federal taxes, with total taxes ranging up to .64/gal in CA. There's about $75 profit in each barrel of gasoline for a vertically integrated oil company.

The US imports 8 million barrels of crude oil and refined product a day. That equates to a profit of $600 million a day for the oil companies and producers.

Of course, that's a very different concept from what the OP is pointing to, which is the true social costs of a hydrocarbon-based economy, a cost that falls disproportionately on the poor and middle-class, while the profits mainly accrue to a tiny minority that hold substantial equity in the oil industry.

Oil In A Nutshell/What it Really Costs 01/25/2009
http://kultureamerika.weebly.com/1/post/2009/01/oil-in-a-nutshellwhat-it-really-costs.html


SAUDI ARABIA - Costs to Produce Oil


The cost of producing oil in Saudi Arabia has been the lowest in the world. In the 1950s, the net well-head cost of production was less than 7 US cents/barrel. In early 1990, the net well-head cost of production from 14 operating fields, with the Ghawar axis of fields taken as one unit, was estimated to average between 50 and 63 cents/barrel. This was calculated on the basis of output then ranging from 5.38m b/d, which was Saudi Arabia's OPEC quota for the first half of 1990, to 7.2m b/d. At present, the average of wellhead costs is a little over $1/barrel (95 cents/barrel in 1997), and experts predict higher costs in the coming years in view of declining reservoir pressure in some of the Ghawar fields. The wellhead cost in the Najd fields is relatively high, in view of technical problems encountered there in the past six years.

The estimates until early 1990 were used as a base in calculating the minimum per-unit capital cost of additional capacity for Saudi Aramco's expansion programme. It was then indicated that, at additional capacity above 7.2m b/d, production costs would be considerably higher. Total costs up to the loading of the crude oils for export, including Saudi Aramco's administrative costs, piping and terminalling, are now said to average about $2/b (as in 1997), compared to almost $2.50/b in 1993. Costs were reduced as a result of reorganisation and cost-cutting measures since Saudi Aramco's absorption of Samarec in the past eight years. Until 1987, total costs used to be over $2.50/b, due to high wages for US staff and various social programmes.

It might be possible to cut total unit costs to less than $1.80/b, the level estimated in the case of Iraq in early 1990. But the final outcome of further cost-cutting measures could be "lower quality personnel and inefficiency across the board", as one Saudi Aramco official puts it. These costs exclude field maintenance and other items, such as mothballing and de-mothballing costs in the fields, and the maintenance of gas-oil separation plants (GOSPs), pipelines, storage tanks, terminals, etc. The maintenance element is important, as Saudi Aramco adopts the approach of the US oil majors which is thorough and expensive.

[GliderGuider]

8. The USA gets only 12% of its oil imports from Saudi Arabia.

The great majority of it comes from places with wellhead costs much higher than SA: places like Canada, Mexico, Venezuela and Nigeria. A recent discussion on the Oil Drum had comments from oil industry workers who said that $40-$50/bbl was the approximate world average cost of production.

Not only are you not "funding your enemies", your imports aren't providing many places besides some Middle East OPEC countries with eye-watering profits.

And on the subject of eye-watering profits, I have to ask: "Qhat is the appropriate market price for an essential but finite resource that is entering the final stages of extraction?" My gut tells me that $100/bbl may be just a tad low...

[leveymg]

9. I think the $40-$50/bbl estimate is way too high. That would translate into

a crude cost for a barrel of unrefined stock for gasoline of $80-100/bbl. Think about it.

[GliderGuider]

12. Break-even costs are higher than wellhead production costs.

Here is the cost breakdown of a gallon of unbranded gasoline, from from http://energyalmanac.ca.gov/gasoline/margins/index.html

Crude Oil Cost:     $2.61 (about $110/bbl) 
Refining Cost:      $0.34 
Taxes:              $0.67
Distribution,
Marketing, Profits: $0.50
Total price:        $4.12

To a first approximation a barrel of oil gets refined into half diesel and half gasoline. The price and cost structures are about the same for both fuels. So the $110 barrel of oil returns a value-added profit to an oil company making and selling refined product of somewhat less than $20.

The original producer makes a profit based on their break-even price. Here is s selection of break-even prices from around the world as of 2006, compiled by the Bank of Kuwait:

Oil Break-Even Prices
Nation     US$/Barrel
Bahrain          40
Kuwait           17
Saudi Arabia     30
U.A.E.           25
Oman             40
Qatar            30
Canada oil sands 33

The average in that group (excluding the outlier of Kuwait) is $33/bbl. These were from 5 years ago, so an increase in break-even to over $40 by this time seems very reasonable to me.

I don't know of any fully vertically integrated oil companies (i.e. companies that lease all the fields and pump all their own oil as well as refine and distribute it), at least in the USA. The fact that almost two thirds of your oil is imported indicates that there can't be many. Can you identify one? Because otherwise, most of the oil that feeds the refineries is bought at market prices, whether it comes from the USA or Saudi Arabia.

[n2doc]

10. How much does gold cost to mine?

I'll bet not $1500 /oz
All this means is that oil makes a company a lot of money. And water is wet, too.

The price of oil is set by what people and companies are willing to pay for it (including speculators). If one eliminated speculators you would still see a price far higher than $10, a barrel, as many counties would cut back on production to drive the price higher. And many would be happy to buy it at $70, 80, or 100 a barrel. If they had no other choice.

Cutting demand is the only way the price will go down. Eliminating demand will make the price irrelevant.

[txlibdem]

11. How many (fill in the blank) could we buy with the wasted dollars we're sending to our enemies???

How many schools? How many bridges could we build (or rebuild since our infrastructure is falling apart all around us).

The article quoted $800 Billion as the cost. How many miles of high speed rail could we build with that amount of money?

[GliderGuider]

13. Who are your enemies?

Here are the top 15 nations you import oil from:

CANADA
MEXICO
SAUDI ARABIA
VENEZUELA
NIGERIA
IRAQ
COLOMBIA
RUSSIA
ALGERIA
ANGOLA
KUWAIT
BRAZIL
ECUADOR
NORWAY
UNITED KINGDOM

Other than SA and maybe Russia, who are your "enemies" on that list? Brazil, Canada, Ecuador and Mexico sure aren't. Is Iraq? You bought them, after all, with blood and treasure. Angola? What has Angola ever done to the USA? Kuwait, with its bankers? Venezuela, forgodsake?

What exactly constitutes an "enemy" in your mind, and who are they, specifically?

That $800 billion is in hidden costs, and much of it is "sent to your enemies" not as money but as as depleted uranium tank rounds. Everyone would rather your didn't send that kind of foreign aid.

[txlibdem]

14. Yes. Those guys.

They all hate us. Especially Canada.

[GliderGuider]

15. Cool. I was afraid we missed the cut.

The Canadians are coming. Be afraid. be very afraid.

[Gregorian]

16. Haha.

Text on pictures ordinarily doesn't make me laugh. But that is pretty good.

[txlibdem]

18. This is even more dangerous than the other photos I've seen

They've added the tiny electric motor onto the boat. Aaaaw Hell. I'm outta here.

[txlibdem]

22. Avro Canada's aircraft, the CF-105 Arrow and the Avro Jetliner

http://www.avroland.ca/ccaft-105.html

"The Avro Jetliner was destroyed to allow the Americans to introduce their Boeing Jetliner, eight years after the Canadian Jetliner had first flown. Just as the Mark II was about to fly, and in all likelihood bring the world's speed record to Canada, thirty­seven supersonic aircraft were scrapped. To make sure no new aircraft would rise from the cuttings of the blow torches, a free­trade agreement in defence supplies, the Canada­U.S. Defence Production Sharing Agreement of 1959, was signed. That agreement integrated the defence industries of the two countries. Canada agreed to rely on the United States for defense technology, and has never again tried to be self­reliant in the aerospace and defense industries."

[Yo_Mama]

19. Have you read the original report and testimony?

http://www.ndcf.org/

Original report (153 pages):
http://ndcf.dyndns.org/ndcf/energy/NDCF_Hidden_Costs_of_Imported_Oil.pdf

Testimony:
http://ndcf.dyndns.org/ndcf/energy/NDCF_Hidden_Cost_2006_summary_paper.pdf

Basically this is a long sustained plea to increase internal energy production. Much of the costs he cites are due to the loss of domestic investment and the problems importing energy creates for our trade balance.

This organization is not "green". Basically, they are saying "drill, baby, drill".

[txlibdem]

20. Thus my first paragraph

I read enough to see that the "report" doesn't take into account even half the giveaways, freebies, tax breaks, and other tax payer losses. I mentioned medical costs that the fossil industries never have to pay for yet are a direct cause of. I read a (different) report that says between 25,000 and 40,000 people die each year because of fossil fuel pollution. The rest of us are paying for their hooker and cocaine parties (literally, google it).