The True Cost of a Liter of Gas

It’s interesting how a small project can develop a life of its own. Take our kitchen. It all started with our latest acquisition, a great deal on a cool second-hand fridge. It was a couple of inches wider than our old fridge, but we figured that we’d ignore that little detail and make it all work.

The old fridge went away, and we put the new fridge in its place, or at least we tried to. It didn’t fit. Not even close. Maggie and I stood in front of the fridge, each with our arms crossed and our heads cocked to one side looking at the conundrum until finally she said, “Well, you’re going to have to do something about that,” turned, and walked out of the kitchen.

I figure by the time I move the window, get new cupboards, move some electrical, upgrade the lighting, and repaint, the money we saved on our second hand fridge will pretty much be gone.  As I sat there totaling up the budget, I commented to no-one in particular that there is always a difference between the price of something and its real  cost.

I sat there, deep in thought, sketch pad, tape measure and the Ikea kitchen catalog in hand. My mind wandered from the task, as it often does. I like to refer to it random cognitive perambulation, which I believe is its technical medical term. Maggie likes to refer to as goofing off, which is the non-medical term, I guess.

Anyway, somehow I got thinking about the price of gas. Does the price of gas reflect its true cost? Is there a way to actually calculate the “cost” of gas? Does the price we pay for gasoline at the pumps reflect the total costs that are associated with the consumption of gasoline? Apparently I’m not the only person that’s let their mind wander over this topic. I found an organization called The International Center for Technology Assessment, a non-profit committed to providing the public with full assessments and analyses of technological impacts on society. According to the ICTA, if you want to calculate the cost of gas, it requires a look at the peripheral effects, and developing a methodology to quantify them.

Let’s start with some simple ones, like subsidies. The Government of Canada provides subsidies for oil companies to the tune of $1.4 billion a year, not including the $1 million dollars a day in Canadian tax payer money that goes to support development of the Alberta oil sands. That works alone out to an extra 5 cents per liter. And we’re lucky, the American government is a bit more generous, with subsidies totaling close to $100 billion per year, which works out to 20 cents per liter in tax donations by American citizens.

And the costs don’t stop there. According to recent North American statistics, the average car travels 19,000 kilometers per year. At an average 11.3 km/liter, each car burns 1681 liters of gas per year, producing 4,035 kilograms of CO2.  Even if you don’t buy into the global warming concept, there are direct correlations between the amount of pollution and cancer, asthma and other diseases. Those are treated with your tax dollars.

When you add the cost of global warming, damage and diseases caused by air pollution, loss of farmland, suburban sprawl, parking lots, new infrastructure initiatives like the Gateway proposal, oil spills, environmental degradation, and other directly attributable costs, the price comes out to between $4.15 and $5.00  per liter.

Like the price of my new fridge and the total cost of the reno, the price and cost of gasoline are quite different; the price of gas is no where near to the real costs that all of us pay for, one way or another.

So the $1.41 per liter you spend right now? Chump change. Don’t worry about it. And don’t worry about the real cost of gasoline. That’s way too scary.

For further reading, try A Thousand Barrels a Second: The Coming Oil Break Point and the Challenges Facing an Energy Dependent World by Peter Tertzakian and Suburban Nation: The Rise of Sprawl and the Decline of the American Dream by Andres Duany et al.