Where's My Gasoline Dollar Go?

By Bill Moore

Posted: 24 Jan 2010

Dear American reader, how much of the gasoline or diesel fuel that you put into your vehicle goes to OPEC, in general and Saudi Arabia, in particular? More broadly speaking, how much of the oil that you buy ends of leaving the U.S. and to whom does it actually go?

What sparked these questions in my mind was the issuance of a report entitled, Plug-In Cars, Powering America Toward A Cleaner Future that makes the case that if we Americans switched from gasoline-only cars to plug-in hybrid cars like the soon-to-launch Chevy Volt and Toyota Prius, we could reduce our petroleum consumption by one-third. Now that's not a number to sneeze at by any means.

But it also got me thinking about some of the possible economic ramifications, at least in terms of money not spent on petroleum to run our motor vehicles, especially how much money might be kept in my local economy, instead of being transferred out of state and eventually out of the country. I live in Nebraska, smack dab in the middle of the North American continent, if you don't count Canada, that is. In 2009, consumers and industry -- aviation, farmers, etc -- utilized 43.7 million barrels of oil: 20.2 million for gasoline, 17.2 million for diesel distillates. At an average price of $62 a barrel in 2009, that translates into a not insignificant $2.71 billion dollars.

How much of that flowed out of the local economy? Most of it actually. Here's how the cost of a gallon of fuel broke down in 2005, the most recent figures I could find: 9% goes to distribution and marketing (presumably only a fraction of that actually goes to local wholesalers and retail service station operators); 19% goes to state and federal taxes; 19% covers refining costs (we have no refiners in the state) and 53% covers the cost of the crude oil itself. Now of that 53%, 60% of that is purchased outside of America from a very long list of suppliers large and small. I and my fellow Nebraskans helped facilitate the transfer to some $831 million dollars outside of the U.S. economy. Now fortunately, the lion's share of that went to our neighbors in Canada and Mexico from whom U.S. refiners purchased 1.93 mb/d (million barrels per day) and 1.1234 mb/d respectively. Our relations with the next two countries could be considered tenuous: Saudi Arabia (1.03mb/d) and Venezuela (1.0mb/d). These are both relatively stable countries compared to the next five top sources of U.S. crude oil imports: Nigeria, Iraq, Angola, Columbia and Ecuador.

There is a decal on the module that allows my S10 pickup to run on higher percentages of ethanol that bears the cartoon image of the stereotypical Arab sheik inside a red circle and red bar across his chest suggesting that I am stopping the transfer of my American dollars to Middle Eastern despots and wastrels. To be more accurate, the cartoon could just as easily bear the caricature of Dudley Do-Right or Speedy Gonzales! Thank god for maple syrup and margaritas! Of the $831 million Nebraskans indirectly spent on imported oil, only $50 million went to Persian Gulf oil producers, of which the Saudis received some $31 million.

Now this isn't to say that the Saudis aren't making a killing, but they certainly aren't making it off of Nebraska. No, most of 8 million or so barrels a day they extract goes to the Far East: Japan, South Korea, China and India: 53% to be accurate. The United States is the single largest customer nation, buying 20% of the Kingdom's output. The Mediterranean countries import 7% and northern Europe 5%. Everyone else (15%) buys the rest. If you want to stop the covert and overt funding of Islamic radicals, we need to get these other countries to do their part too.

But back to the question of the economic impact of keeping a third of what the citizens of my state spend on petroleum products in our economy; that works out to be nearly $900 million dollars annually, based on $62 crude oil prices. The U.S. EIA estimates that crude prices will average $80 a barrel in 2010. So, assuming a modest 2% growth in fuel consumption (44.57 million barrels), means my state's oil bill will jump to a whopping $3.566 billion; a 31% hike in just one year. Thirty-three percent of that equals $1.176 billion dollars.

Of course, those plug-in hybrids would have to be charged from the state's public power grid, an estimated two-thirds of which are fired by coal from the fields of Wyoming. However, assuming most of these cars are charged using excess overnight capacity, then there should not be a commensurate outflow of energy dollars, but a more efficient use of the dollars already invested in the infrastructure and imported fuel. It should also be noted that during the month of October 2009, 83% of the state's power, according to the Department of Energy's Energy Information Agency came from coal, presumably because the Fort Calhoun nuclear power plant was off line for refueling.

Finally, if Nebraska wanted to really get serious and reduce its dependence on petroleum, it currently has sufficient production capacity to replace nearly all of the gasoline it currently consumes with ethanol, allowing for biofuels lower energy content and resulting decrease in fuel economy. The state has the capacity to "brew" an estimated 27 million barrels of ethanol versus the current 20 million barrels of gasoline it now consumes. Unfortunately, there are only about 3,000 alternate fuel vehicles registered in the state.

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