Saturday, November 20, 2010

Oil shortages will be the biggest problem for our country

While people fret about the Social Security trust fund, they are generally unaware of a much larger problem that faces us in just over 10 years.

What is the true cost of gasoline, diesel, and other oil based products?  Is it the price that we pay at the pump, or is it the total cost which includes the cost of protecting oil producing areas and pipelines that help to feed our hunger for cheap fuel? 

The Highway trust fund went insolvent in 2008; money from the general budget was transferred to the trust fund to pay for upkeep and construction of our highways, waterways and bridges. In short, income taxes and borrowed money are now being used to pay for those things.  The deficit commission has suggested a 15 cent a gallon fuel tax increase.  That may be enough to fund the Highway infrastructure, but it is not enough to pay for protecting our oil supplies.
  
In fact, the price of oil includes, the costs of refining, distributing, and selling fuel, but those costs are just the tip of the iceberg.  The federal fuel tax is 18.4 cents.  Each state has a fuel tax as well.  Those taxes vary widely throughout the United States with the lowest fuel tax in Alaska, a state with few roads and a huge amount of state revenues derived from oil production in the state.  The highest fuel tax at the pump is 32.1 cents per gallon in Wisconsin.  That tax is adjusted for changes in the consumer price index.   Pump prices are the costs that we see, and pay directly, but that’s not all, folks, there is still the cost of providing military might to protect oil producing countries.   As reported in his book BLOOD and OIL, Michael T. Klare spelled out that we have a huge military force dedicated to protecting oil supplies and pipelines in various parts of the world.

With the wars in Iraq and Afghanistan, we realize that there are huge costs for fighting wars in the oil producing areas of the world.  Afghanistan may have no oil but it is in a strategic area and has common borders with countries that produce enough oil for export.   Mr. Klare spells out the fact that our country is involved in arming friendly countries and providing training for local armed forces to protect oil production and pipelines in other countries.  Our naval forces in the Persian Gulf region are there to protect vital waterways through which oil is moved to ports around the world.  Our allies in the region, Saudi Arabia, Kuwait and others depend on those waterways to protect their shipping.  Our navy can also provide air power to protect our allies and support our troops on the ground in Afghanistan and Iraq and the region. 

The military costs of protecting oil sources and transportation add to our budget deficits.  Those costs are paid for by taxation and borrowing.  Money spent to protect our oil sources is an indirect cost of having cheap fuel for our cars and trucks as well as for heating for our homes and factories.  Oil is an important commodity that greases the wheels of our economy and controls our destiny.  Our dependence on oil is the major reason why we need to move to alternative, renewable energy resources immediately.
We are not alone in our dependence on oil.  We face stiff competition for cheap oil from the Russians and the Chinese.  They also have forces and allies in the region to protect their oil interests.  Peak oil production gets closer with each passing day.  Some experts predict that the peak will occur in about 10 years.    At that time, oil production will slow and world supplies will dwindle.  If we do not move now toward a more energy independent future, we will face serious consequences in just over a decade.


Sources for this blog are:  Blood and Oil by Michael T. Klare


A table showing fuel taxes by each state:  http://www.gaspricewatchusgastaxes.com/.asp   See how your state compares. 

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