Market economies work best when they rely on accurate prices. Yet many of the prices we pay do not reflect the full costs of producing, using and disposing the goods we consume. The most important example of this mismatch may occur in the transportation sector.
The price we pay at the pump for gasoline and diesel bears little relationship to the real cost of petroleum.
To determine the per gallon subsidies given to petroleum the Institute for Local Self-Reliance asked Dr. Jenny Wahl to review the existing literature on the subject. Dr. Wahl is a most fitting person to undertake this task. She is one of the nation’s eminent tax analysts and economists. An Associate Professor of Economics at Saint Olaf College in Northfield, Minnesota, Dr. Wahl has worked in the U.S. Treasury Department’s Office of Tax Analysis and is a member of the Star Tribune’s Board of Economists.
This 1996 report provides her estimate and the methodology she used to arrive at her numbers.