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May 04, 2010

The cost of oil and its competitors

Such a well-written note, I couldn't excerpt pieces:

One other way to think about the cost of oil is to recognize what is and isn't in the price of oil. So mega-spills like the Deepwater spill or the spills that happen in other countries are not in the price. Global warming -- which is to say, carbon -- is not in the price. The cost of our military alliance with some petro-states, and military attention to other petro-states, is not in the price. The cost of the pollution is not in the price. All these costs will be paid, but they're not built into what we pay at the pump. Instead, we'll pay them through taxes, or medical bills, or global temperature changes.

But when it comes to immature renewables, there's much more in the price. In particular, 

you're dealing with massive costs for infrastructure and investment. Some of those costs are simply added into the price of what you're buying. Others are part of the relative inefficiency of what you're buying (these industries need to spend money to scale up their operations). Other are in the inconvenience of what you're buying (if we had built the roads to handle electric cars, charging wouldn't be a problem because plugs would be everywhere). These costs have to be paid before the renewables are really competitive, and so they're being paid by the early adopters.

That is to say, where oil escapes many of the prices associated with its impact on the world and benefits from its entrenched position as the fuel that our transportation sector is built to accommodate, renewables are saddled with massive transition and start-up costs that are built into both the price and the user experience. If oil had to pay its true freight, the difference between it and renewables would narrow dramatically, and the new demand for renewables would speed the down payment on research and transition. But that won't happen in the absence of a concerted policy.

via voices.washingtonpost.com


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