Here's the link to the article I'll be talking about:
http://www.washingtonpost.com/wp-dyn/content/article/2010/06/12/AR2010061200167.html
To many consumers around the world gas prices seem to be very high already though these prices do not take the external costs into consideration and there are small companies dedicated to calculating these costs. There are many externalities to the consumption of gas for example increased pollution which will lead to higher health costs to those with repository diseases, death of wildlife which cannot cope with changing atmospheric compositions, increase in climate which will again lead to death of wildlife as many plants and animals cannot adapt to changing climates, increase in chances of oil spills like the gulf oil spill (shown in the picture) and increase in harsh weather leading to property damage and death. All these costs will greatly increase gas prices.
http://www.washingtonpost.com/wp-dyn/content/article/2010/06/12/AR2010061200167.html
To many consumers around the world gas prices seem to be very high already though these prices do not take the external costs into consideration and there are small companies dedicated to calculating these costs. There are many externalities to the consumption of gas for example increased pollution which will lead to higher health costs to those with repository diseases, death of wildlife which cannot cope with changing atmospheric compositions, increase in climate which will again lead to death of wildlife as many plants and animals cannot adapt to changing climates, increase in chances of oil spills like the gulf oil spill (shown in the picture) and increase in harsh weather leading to property damage and death. All these costs will greatly increase gas prices.
The graph above represents the social cost and private cost to produce gas. The social cost would include pollution due to refining crude oil into gas and the increase in chance of oil spills. The grey area represents the welfare loss.
The graph above represents the social benefit of the consumption of gasoline and the personal benefit of the consumption of gasoline and we can see that the social benefit is lower than the personal benefit. The grey area represents the welfare cost.
The total social cost of the consumption and production of gasoline will leas to a large increase in its price though due to the inelastic demand of gasoline its price would have to have a