The national average for unleaded gas hit $3.28 a gallon this week, a 26 percent increase from last year at this time. Yet, the real cost of energy dependence amounts to more than $11.35 per gallon, according to Gal Luft, executive director of the Institute for the Analysis of Global Security.
In Dr. Luft’s opinion piece in today’s Miami Herald, he estimates that the United States is sending $460 billion per year overseas to finance the daily buying of 12 million barrels of imported oil. Luft cites calculations from the late Milton Copulos, an energy economist, who sets the grand total from the cost of oil-related defense expenditures, amortized cost of supply disruptions, and lost economic activity and tax revenues, at $825 billion per year.
“To put the figure in perspective, this is equivalent to adding $8.35 to the price of a gallon of gasoline refined from Persian Gulf oil, making the cost of filling the gasoline tank of a sedan $214, and of an SUV $321.”
According to Luft, this transfer of wealth allows OPEC governments to not only laugh all the way to the bank—but to literally own the bank. He estimates that, with oil at $100 a barrel, OPEC’s oil assets stand at “roughly $92 trillion, equivalent to almost half of the world’s total financial assets and nearly twice the market capitalization of all the companies traded in the world’s 27 top stock markets.” At current oil prices, OPEC could buy GM from six days worth of sales.
Luft’s answer is fuel diversity. He would like to see Congress require that every new car sold in the U.S. be made capable of running on something other than only gasoline. Alcohol-based fuels and electricity top his list. The added cost to make a flex-fuel car is about $100—the cost of one barrel of oil.
Of course, eradicating oil dependence will not be easy or cheap. But, as Luft points out, the path to a recovery from our current economic woes is compromised by our rabid consumption of petroleum. “It’s past time for Congress to recognize that the solution to our economic predicament lies in our garage.”