West Chester University


Fossil Fuels

As can be seen here, the price of crude oil has dropped from an all-time high but is still expensive compared to historical values. While this causes problems as far as the cost of filling your gas tank, as far as providing an incentive for finding alternative and for the reduction of the impact of burning fossil fuels, this is highly advantageous.

The cost of a gallon of gasoline or a kilowatt-hour of electricity, however, does not fully reflect the cost of that energy source. A recent report from the National Academies of Science concludes that "hidden" costs of energy production and use - such as the damage air pollution imposes on human health - that are not reflected in market prices of coal, oil, other energy sources, or the electricity and gasoline produced from them. The report estimates dollar values for several major components of these costs. The damages the committee was able to quantify were an estimated $120 billion in the U.S. in 2005, a number that reflects primarily health damages from air pollution associated with electricity generation and motor vehicle transportation. The figure does not include damages from climate change, harm to ecosystems, effects of some air pollutants such as mercury, and risks to national security, which the report examines but does not monetize.
Requested by Congress, the report assesses what economists call external effects caused by various energy sources over their entire life cycle - for example, not only the pollution generated when gasoline is used to run a car but also the pollution created by extracting and refining oil and transporting fuel to gas stations. Because these effects are not reflected in energy prices, government, businesses and consumers may not realize the full impact of their choices. When such market failures occur, a case can be made for government interventions - such as regulations, taxes or tradable permits -- to address these external costs, the report says.

You can learn more about fossil fuels at the DOE site and the Office of Fossil Energy.