Cost / Benefit Analysis of Energy Independence

Ah, energy independence.  It’s not only a dream.  America the Prisoner goes into a fairly indepth analysis of costs and benefits.  First, let’s talk costs.  The industrial capacity to produce fuel from biomass would require investment of about $3.85 per gasoline equivelent gallon of annual output, based on 2008 import usage, just short of $692 billion.  Establishing enough energy crops to provide sufficient feedstock would require investment of another $168 billion.  In total, the effort would require $860 billion of capital investment, ideally over a 10 year period.

Meanwhile, if you look at operating or production cost, you will quickly discover the entire process is much cheaper than buying oil in today’s market.  If you include the cost of operating the plants, the cost of producing and transporting biomass, and even the cost of depreciation and amortization of the capital and establishment costs, the cost of a gallon of gasoline equivalent is $1.23, roughly equal to oil at $45 per barrel.  This figure should be compared to the WHOLESALE cost of unleaded gasoline.  I should note that these cost estimates do not include profit for either the farmers or plant operators.  It is a break even cost only, and a profit margin would increase it.

Relatively inexpensive, stable, sustainable, domestic fuel in quantities sufficient to supplant all foreign oil imports.  Seriously?  Absolutely!  Why not?  The facts support it.  But what would it mean?

For starters, it would mean no more massive annual transfer of wealth (on the order $453 billion in 2008).  It would mean no more distortion of US financial markets from the influx of petrodollars.  The political ramifications are too numerous to fathom as the need for political and military entanglement in the Middle East becomes obsolete.  The book outlines the full slate of economic benefits, but, in short, Americans could expect as many as 14 million new jobs, and the combined effect of the construction effort and plant output could contribute as much as $550 billion each year to US GDP.  We are talking big time impact here.  There is simply no other conceivable way that the US economy could get an equivalent shot in the arm.