Noone on this planet can compete with Google on storage prices. I dont want to know how many petabytes of space they have laying around "just in case" another planet comes around and they have to index/mirror all the information.
Overall, I'd say that Google can certainly undercut Amazon on price, but at the cost of reducing the margins that its executives and shareholders are used to seeing. They might see this as a worthwhile tradeoff if they see utility computing as a strategically important space; but personally I don't see that space as a long-term threat to Google in the same way social networks or mobile phones were. But I'm certainly happy to see Google compete here; I benefit as much as any other startup from a price war.
Given that this assertion is mandatory for your argument to hold water, actual numbers to support your claims are required here. And since Google and Amazon don't publicly share this data, where does that leave us?