What's the real cost of a gallon of gasoline?

In “Billions and Billions,” Carl Sagan claims,

He was writing sometime before 1997, and doesn’t cite his sources. I realize the question may be unanswerable, but how much does a gallon of gas really cost, when you account for all the externalities?


Are you asking about the price of a gallon of gasoline or the price of oil? While they are related, their respective prices don’t always follow a linear relationship.

Your quote from Sagan says nothing about the price of a gallon of gasoline. He is talking about oil.

If you want to know how much a gallon of gasoline costs, just look at the commodity page in the Wall Street journal. I think that 87 octane regular is trading at about 87 cents/gal or so right now(from memory). That approximates cost. Sometimes it can be lower or higher depending on supply and demand, but it quickly evens out to reflect actual cost.

Sagan’s weird quote about the true cost of a barrel of oil is beyond me. I could Google and try to figure it out, but it probably isn’t worth it.

That Carl Sagan quote seems odd and a bit of a stretch. How does the military affect the cost of oil? They buy a lot which might lower the overall price some but not much (they increase the economy of scale for oil to some extent). Is Sagan suggesting we wouldn’t need a military if oil wasn’t an issue? Even if you magically came up with a free substitute to oil tomorrow such thta we wouldn’t need another drop of the stuff I doubt our military would decrease in size much if at all.

You can play this game with just about anything. What is the real cost of a Beanie Baby? We need a government to negotiate trade relationships, we need a military to protect allies who might be manufacturing the things and protect trade routes, there is an environmental cost (mining of resources such as oil for plastic, growing food for sheep for wool [or whatever the fabric is made from]), pollution caused by electrical use in the factory plus exhaust from vehicles for shipping, disposal of chemicals used in the manufacturing process, etc… You could go on like this all day but I don’t see the point.

Here’s a couple links:



I’ll give a great big caveat emptor. Note that there may be a discrepancy between the true cost of gasoline and the true price of gasoline. Since optimization, e.g. profit maximization, happens on the margin, lump-sum & sunk items won’t be reflected in the price. So our military involvement in the Middle East in and of itself, for example, may not be reflected in the price since sending an extra carrier group to the Persian gulf, let’s say, probably won’t affect how much gasoline I buy. So military spending may be a cost that isn’t reflected in the price.

Samclem, I thought the relationship was very close, thank you for correcting me. I’m more interested in the price of gasoline, but I suspect there isn’t enough data to choose.

The full quote is

Whack-a-mole, while we can do this for anything, it makes more sense for some products than others. Steel was recently protected by tarriffs. Corn is heavily subsidized. In principle, we should be able to approximate a price for these goods that accounts for the intervention. Sagan believed that oil was closer to corn or steel than to Beanie Babies. I don’t think it’s an unreasonable position, and would like to know if there’s more analysis I could see.

Thanks js_africanus, I haven’t had time to read them, but they look like what I want. Your distinction between cost and price is important, and I failed to make it.