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Stat House
October 29, 2008


Oil's well ends badly
The current annual military cost of securing oil resources for the U.S. economy may be as high as $104 billion in peacetime--$215 billion if a portion of the extraordinary expenses generated by the wars in Iraq and Afghanistan are included. That’s the finding of the National Priorities Project, a Massachusetts-based research organization that analyzes federal data “so that people can understand and influence how their tax dollars are spent.”
NPP research indicates that $97 billion to $103.5 billion of the Department of Defense spending for fiscal year 2009 will be used to secure access to energy, if all spending on wars in Afghanistan and Iraq is excluded. Including a portion of the cost of the Iraq War increases the range to between $209 billion and $215 billion.

High gas prices and a prolonged war in Iraq have made energy security a key issue in the Presidential elections. Despite the rise in gas prices, what Americans pay at the pump does not reflect the true costs of filling up their cars and trucks. Each year, the U.S. military commits resources to securing access to and safeguarding the transport of oil and other energy supplies. These costs do not show up in the market valuation of gasoline, heating fuel or other end uses, but are paid for instead by American tax dollars.

Knowing the military costs of securing energy is important for a few reasons, say the NPP report. “For one, U.S. soldiers’ well-being is put at risk in the pursuit of securing energy. Secondly, the tax dollars spent on enhanced military activities have opportunity costs; in other words, the same tax dollars could be spent on improving education, repairing bridges, or addressing other needs, even other national security needs. Third, since the market price does not indicate the true cost of production and consumption, it results in market failure and overconsumption of energy.

“If the market price reflected the true cost, the quantity demanded by consumers would decrease, leading to more conservation, and making renewable, non-polluting energy alternatives more viable. In short, the true price of energy supplies would facilitate a transition away from fossil fuels, lead to greater energy independence and lessen the impact on the environment.”

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