Oil Slickers: How Petroleum Benefits at the Taxpayer's Expense

Jenny B. Wahl

EXECUTIVE SUMMARY

How much does gasoline cost? A lot more than what you pay at the pump. If you include the tax subsidies, the costs to taxpayers of protecting oil supplies, and the costs of environmental and health hazards, a gallon of gas costs about 32 cents more than its pump price.

The costs of petroleum unaccounted for in its retail price -- its external costs -- range from $42 billion to nearly $350 billion per year. The costs to Minnesotans range from $469 million to $2.95 billion per year. Translated into cents per gallon, gasoline receives subsidies that range from 21 cents to $1.34 per gallon. Tax subsidies received by the petroleum industry are the easiest to measure and account for $3.3 billion to $10.9 billion of this total. The largest single cost element encompasses the military costs of protecting our oil supplies, which range from $26.6 billion to $70.7 billion. The hardest cost element to quantify, but also potentially the most important, is the environmental and health costs associated with pollution and global warming. Estimates of these costs range from $25.5 billion to $267 billion per year.

This report concludes that a reasonable and still conservative estimate of the external costs of gasoline is 32 cents per gallonor $84 billion per year. This estimate assumes a very low external environmental and health cost.