Milt Copulos testimony this morning

Milt Copulos, president of the National Defense Council Foundation, testified this morning in front of the Senate Foreign Relations Committee about the hidden cost of oil. A few quotes from his testimony:

“The [oil] supply disruptions of the 1970s cost the U.S. economy between $2.3 Trillion and $2.5 Trillion. Today, such an event could carry a price tag as high as $8 Trillion ? a figure equal to 62.5 percent of our annual GDP or nearly $27,000 for every man, woman and child living in America. [...]

“The principal reason why we are not fully aware of the true economic cost of our import dependence is that it largely takes the form of what economists call ‘externalities,’ that is, costs or benefits caused by production or consumption of a specific item, but not reflected in its pricing. It is important to understand that even though external costs or benefits may not be reflected in the price of an item, they nonetheless are real.

“In October of 2003, my organization, The National Defense Council Foundation, issued ?America?s Achilles Heel: The Hidden Costs of Imported Oil,? a comprehensive analysis of the external costs of imported oil. The study entailed the review of literally hundreds of thousands of pages of documents, including the entire order of battle of America?s armed forces and more than a year of effort. Its conclusions into divided the externalities into three basic categories: Direct and Indirect economic costs, Oil Supply Disruption Impacts and Military Expenditures.

“Taken together, these costs totaled $304.9 billion annually, the equivalent of adding $3.68 to the price of a gallon of gasoline imported from the Persian Gulf. [...] When we revisited the external costs, taking into account the higher prices for crude oil and increased defense expenditures we found that the ?hidden cost? had skyrocketed to $779.5 billion in 2005. That would be equivalent to adding $4.10 to the price of a gallon of gasoline if amortized over the total volume of imports. For Persian Gulf imports, because of the enormous military costs associated with the region, the ?hidden cost? was equal to adding $7.41 cents to the price of a gallon of gasoline. When the nominal cost is combined with this figure it yields a ?true? cost of $9.53 per gallon, but that is just the start.

“Because the price of crude oil is expected to remain the $60 range this year, expenditures for imports are expected to be at least $320 billion this year. That amounts to an increase of $70 billion in spending for foreign oil in just one year. That increase would raise the total import premium or ?hidden cost? to $825.1 billion, or almost twice the President?s $419.3 billion defense budget request for fiscal year 2006. If all costs are amortized over the total volume of imports, that would be equivalent to adding $5.04 to the price of a gallon of gasoline. For Persian Gulf imports, the premium would be $8.35. This would bring the ?real? price of a gallon of gasoline refined from Persian Gulf oil to $10.86. At these prices the ?real? cost of filling up a family sedan is $217.20, and filling up a large SUV $325.80.”

The second part of the testimony is a call to action, including the following:

“I should note that Chairman Lugar and his colleagues Senators Chaffee, Coleman, Nelson and Obama deserve particular praise for their sponsorship of S.2025, the Vehicle and Fuel Choices for American Security Act, which is based on the Energy Security Blueprint of the Set America Free Coalition, of which I was a founding member. It is focused on reducing our dependence on foreign oil, not by compromising the American way of life, but by encouraging fuel choice, utilization of the vast array of America?s domestic energy resources and accelerated deployment of advanced vehicle technologies. It is clear that this sort of bipartisan effort is exactly the kind of action that is required if we are to make any progress on this critical issue. ”

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