Governments’ Oil Windfall

We are reading a lot about the windfall coming to consumers due to falling gas prices now that oil is under $50/barrel. But cheap energy also represents a windfall for governments, including governments who are hard pressed for cash.

The US uses nearly 20% of the world’s energy consumption every year. That spending includes households, businesses, industries and governments. Households in the US spend nearly $450 billion on gasoline alone to fuel their 2.28 vehicles. Energy for transportation represents about 50% of US consumer spending on average and climbs to nearly 70% in the summer when there is more driving. Governments spend money on gasoline, too.

Not just the federal government, but government at every level – federal, state, county, city – all of which have fleets of cars and trucks that use gasoline.  We could not locate data on fuel spending by state governments for either gasoline or heating/cooling. The Bureau of Economic Analysis tables lump spending at gas stations in with “Other retail” which includes furniture and appliance stores and places like home depot. We did locate the numbers of cars owned by governments and police. Governments in the United States own about 1.5% of all vehicles on the road. That includes military vehicles, cars and trucks owned by the federal, state, county and local government plus police vehicles.

Data is from www.rita.dot.gov, sourced as www.automotive-fleet.com as of Nov 26, 2013.

Whether we extrapolate from the number of vehicles and use the “per car” savings estimates or estimate the savings based on the governments’ share of vehicle ownership, we guess that governments across the US will be sharing in at least $1 billion this year. And that is just on gasoline alone.

They could also be saving on heating bills for real property. The Federal government alone owns almost 400,000 buildings located throughout the country. According to the Consortium for Science, Policy and Outcomes at Arizona State University, the US Federal government spends up to $610 billion annually on energy consumption. Every 1% drop in the prices could mean a $6 billion windfall for Uncle Sam.

Don’t be surprised if he expands spending instead of using the savings to reduce the national debt or to balance a budget.