America’s oil bonanza: what is the true cost?

Citing The Economist from November 17th 2012 “America’s oil bonanza – A good thing, but it would be better if energy was priced correctly in the United States”.

According to IEA, America could become self-sufficient in energy by 2035, maybe sooner. This is part of the shale-gas revolution, but also due to more costly oil which has spurred prospectors to look for more unconventional fuels deep down in the sea, in shale beds or in tar sand (in Canada).  Plentiful of energy will obviously spur the industry and the economy, but at what cost?

It will be years before renewable energy is cheap and reliable enough to replace fossil fuel entirely. But in the transition phase, the American government should force the users of fossil fuels to pay the full cost, including those of the environment, and at the same time spread the development of alternatives, argues the author.

Well said, I’ve also claimed this before: the best way to move forward is to put a price at externalities, such as the environmental damage, for fossil fuels and let consumers pay the true cost – may it be with taxes or other instruments.

Americans almost got a heart attack when about a month ago facing signs at gas station stating a “fake” gas price of 10 USD per gallon (meant as practical joke, but also as a possible future scenario) – a rather familiar price in Sweden where a CO2 and energy tax on petrol is added. Greater petrol taxes could be used for much-needed investments in infrastructure, and for the development of more public transportation. Paying the true cost, some people may think twice before taking the car to places you could easily walk to, or to choose more wisely when buying a car – a single city person would probably do just fine without a huge van.

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