What we Don’t Pay for at the Pump

Posted on June 22, 2011. Filed under: News | Tags: , , |

While we’ve already passed the longest day of the year, summer’s just getting started.  ‘Tis the season of road-trips, weekend jaunts to the shore, and enjoying the outdoors.  But most summer plans require some form of fossil fuel to get you there.  And as the average price for a gallon of gasoline tips over $4 , transportation costs are beginning to weigh more on Americans minds.   


However, a gallon of gasoline in the US is still far cheaper than in any industrialized country.  While many may think $4 is expensive, this price does not take hidden costs into account.

Hidden or external costs are costs that are not transmitted to the final retail price of a product and are incurred by a party who did not agree to the action causing the cost.


In the case of gasoline prices it’s the environment and human health that bear the burden of these external costs resulting from increased smog and air pollution and ecosystem damage from drilling and oil spills.  A recent study estimated that the cost of air pollution for the greater Los Angeles region adds up to more than $1,250 per person per year.  These are costs that are shouldered by individuals and not reflected in the price we all see at the pump.


Many European countries levy an “eco-tax” on gasoline sales in an attempt to account for external costs.  Proceeds from these taxes go towards supporting social programs and renewable energy development.  Arguments exist on both sides of the political spectrum with regard to adding additional costs to already painful prices at the pump –  but one thing is undeniable: the true cost of producing and consuming gasoline is much higher than what we’re paying.



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