Environmental Engineering Reference
In-Depth Information
Dollar Costs
An economic factor, the dollar costs to a society for utilizing each energy fuel technology is based
on physical attributes of the fuel and the technologies used in each of several phases of a fuel
cycle. Due to market forces and changes in technology, dollar costs may vary at different points
in time. A fuel cycle includes discovery and exploration to verify the extent of a fuel resource,
development, transportation, utilization, and final dispensation of waste by-products. Several fuels
may be utilized with more than one technology, and each technology entails different dollar costs.
The dollar costs for some energy fuel technologies may change over time based on discovery
of previously unknown or unverified reserves, invention and utilization of new technologies, or
changes in tax policies or those designed to manage and sustain the human environment. The
dollar costs of a particular technology may be determined to some extent by the level of national
security costs and environmental costs deemed acceptable by policy makers.
Dollar costs include the market price paid by consumers plus subsidies paid by taxpayers in a
society to obtain the goods or services desired. Sharp increases in market price due to supply short-
ages, collusion among suppliers, or other factors may have an adverse effect on local or national
economies by shifting expenditures away from other goods and services and slowing activity in
those sectors, as happened during the oil embargo of 1973 and after hurricanes destroyed some
refinery capacity in the Gulf of Mexico in 2005.
Dollars paid by consumers of imported energy resources also may add up to a substantial drain
on capital available for investment in the United States. It has been said that the flow of dollars
from the United States to some countries such as Saudi Arabia to purchase oil constitutes the largest
transfer of wealth from one country to another in the history of the world (Pickens 2008).
Of America's $0.9 trillion oil bill in 2008, $388 billion went abroad. Some of this money paid
for state-sponsored violence, weapons of mass destruction, and terrorism. This wealth transfer
also worsens U.S. trade deficits, weakens the dollar, and boosts oil prices even higher as sellers
try to protect their purchasing power. It's equivalent to a roughly two percent tax on the whole
economy, without the revenues. Since 1975, America's oil imports have sucked well over $3
trillion of cash out of other expenditures and investments. (Lovins and Rocky Mountain Institute
2011, 3)
To the extent such transfers of wealth make investment capital scarcer in the United States and
cause interest rates to rise, they slow growth in the U.S. economy and contribute to higher prices,
unemployment, and increased government expenditures for social services.
Costs additional to market prices may be imposed on taxpayers to provide research and devel-
opment of new fuels or technologies, or tax expenditures to encourage production of a particular
resource. Development of several designs for nuclear fission reactors to generate electricity was
largely funded by the U.S. Congress in the 1950s and 1960s, and exploration for new oil reserves
was subsidized by an “oil depletion allowance” provided to the oil industry for many years through
the U.S. tax code. Long-term management of high-level radioactive waste created by generation
of electricity in commercial nuclear reactors continues to be subsidized by the U.S. government
and its taxpayers.
The market cost to consumers for all energy consumed in 2009 is estimated at a bit over $1
trillion during a recession, and at $1.4 trillion in 2008 (USEIA 2011a, Table 3.5). Total federal
energy-specific subsidies and supports for all forms of energy are estimated at a bit less than
$14.8 billion for fiscal year (FY) 2010, which included most of calendar year 2007 and part of
 
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