3 Hidden Costs of High Oil Prices

May 28th, 2008 by Sarah Lozanova

As a barrel of oil hovers around $130, the news has been bombarding us with the obvious effects of high oil prices. As most people weep at the pump, some environmentalists are rejoicing. Gas consumption is down, but there are additional hidden costs to high gas prices that leave even green minded folks with a frown.

1-Difficult to Extract Oil & High Environmental Impact

High oil prices are making it economically viable to utilize oil that is difficult to extract. One example of this is just north of the border.

In the U.S., our single biggest source of foreign oil is from Canada. Although this may be reassuring from a foreign policy standpoint, much of this oil comes with a steep environmental price tag. Known as tar sands oil, 2 tons of sand are needed to produce one barrel of oil in a very resource and energy intensive process.

One technique that is used is to mine the sand leaves huge holes in the earth and devastates the ecosystem. Another technique involves injecting steam underground, requiring large amounts of energy. Tar sands oil generates 2-3 times the greenhouse gas when compared to conventional oil.

“It is quit alarming from an ecological standpoint,” said David Fields of Greenpeace Canada. “Developing the tar sand will make it impossible for us to effectively tackle climate change.

2-Difficult to Extract Oil is an Unreliable Supply

There are reasons why many sources of oil were overlooked in the past. Some are in areas that are populated, making it difficult to obtain permits. Other oil reserves rely on large amounts of energy, making the operation vulnerable to fluctuating energy costs.

Going back to the Canadian tar sands example, large quantities of natural gas are needed to extract this oil. In the cool Canadian climate, large amounts of natural gas are also used to heat homes. If natural gas prices spike or Canadians prioritize conservation of natural gas reserves over short-term profits, this source of oil could dry up.

3-Oil Companies are More Powerful as Profits Increase

In 2007, Exxon made nearly $1300 a second in profits. With record high corporate profits, Exxon reported annual earning of $40.61 billion. While Americans are spending at the pump, the power of this company is increasing. Unfortunately, some of the companies that are rolling in dough are not necessarily ideal corporate citizens.

Exxon has refused to pay court ordered fines for the Exxon Valdez oil spill in 1989 to help compensate the fishermen for loss of their livelihood. The company has also supported groups that question global warming, a practice that has even been criticized by other oil companies.

The political power of oil companies is staggering and is a special interest that is often not in line with what is best for society. The oil industry has donated $180 million to political candidates since 1989. 89% of political donations made by Exxon went to republican candidates.

As with all complex situations, there are numerous positive and negative aspects. What other hidden factors do you find noteworthy?

Related Articles on Transportation Fuels:

U.S. Oil Subsidies Need to Go

22 Biodiesel Myths Dispelled

Fuel from Trash Will Power California Garbage Trucks









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