24 Cents A Gallon

Americans currently pay $0.18 per gallon in federal gasoline taxes at the fuel pump. Most states tack on their own fuel taxes, but the federal share is pretty low. It hasn’t been raised in decades and during those decades the quality of our transportation infrastructure has declined dramatically.

Bridge Collapse

Enter (Or should I say exit? It is kind of a swan song for the proposer of this) President Obama’s proposal for the 21st Century Clean Transportation System. (Hat tip to Watts Up With That for their rather disapproving coverage of this. As I am going to come out in favor of this below, if you want the other side of the story check out WUWT.)

It’s actually a $10 per barrel tax on oil, which would translate to about $0.24 per gallon at the pump if it were passed through to consumers, as it most likely would be. The revenue raised from the tax would be used to “make public investments and create incentives for private sector innovation to reduce our reliance on oil and cut carbon pollution from our transportation sector, which today accounts for nearly 30 percent of U.S. greenhouse gas emissions,” “increase the competitiveness of U.S. businesses and the productivity of our economy by making it faster, easier, and less expensive to move American-made products,” and “expand clean, reliable, and safe transportation options like public transit and rail, making it easier for millions of Americans to get to work, access new jobs, and take their kids to school—reducing the 7 billion hours that American waste in traffic each year.”

It also might spur conversion to transportation not reliant on oil, something I’m sure is on the President’s mind as well.

So why not just raise the gas tax? Vox has a good story on this, writing “In theory, there’s not a huge difference between a broad oil tax and a tax on gasoline. An oil tax might sound better — the White House says it will be “paid for by oil companies” — but the costs presumably pass through to consumers anyway. …”A gasoline tax mainly affects drivers; a broader oil tax would hit air travel, home heating, and a few other sectors as well” and crucially, “If you were going to tax oil or gasoline, right now would be the time to do it. The price of crude oil has been plummeting over the past year, down to around $30 per barrel, a level not seen since 2004. A $10/barrel tax would lift that to $40 per barrel, which is roughly the (still-low) price we saw… last November.”

I’ll quote the next part of the Vox article in full: “The oil tax will get all the headlines, but perhaps the most radical part of Obama’s budget proposal is the outline for a “21st century clean transportation system.” Generally speaking, US transportation policy over the last 50 years has largely focused on funding and building new roads and highways, with a smaller fraction carved out for mass transit. That build, build, build dynamic has led to more driving, more suburban sprawl, more gasoline use, and more CO2 emissions.

The White House wants to break that pattern, diverting a greater share of federal funds to transit and rail instead:

The President’s plan invests nearly $20 billion per year above current spending to reduce traffic and provide new ways for families to get to work and to school.

The plan would expand transit systems in cities, suburbs and rural areas; make high-speed rail a viable alternative to flying in major regional corridors and invest in new rail technologies like maglev; modernize our freight system; and expand the Transportation Investment Generating Economic Recovery (TIGER) program begun in the Recovery Act to support high-impact, innovative local projects.

Republicans have already come out against the plan, vowing it will not pass. I guess their limousines can handle the potholes and traffic without disturbing them.

Seriously, although I would prefer a revenue neutral carbon tax to deal with the negative externalities of CO2 emissions, this seems broadly like a good idea. Lord knows American infrastructure needs the work. Lord also knows that American transportation needs an upgrade. Especially the poor (and mostly Democratic) need help getting to work and school. Getting better trains and bus lines will help.

Our President has made some real mistakes regarding climate change and energy. But he was correct, IMO, in starting the big transition away from coal in energy generation and he is broadly correct here in taxing oil to pay for the infrastructure oil-using vehicles depend on.

To those who would oppose it just because it comes from Barack Obama, I ask: Does America deserve to have infrastructure as bad is it has become? How long do you want it to get worse before something is done about it? And finally, what would you offer as a proposal instead?

infrastructure grades




17 responses to “24 Cents A Gallon

  1. In 2004, Minneapolis opened the Hiawatha light rail line. It was built on a route that could not support a single bus line and it cost $700 million, three times the cost of replacing the I-35 bridge that collapsed three years later killing 13 people and injuring 145. The train is not clean, it is powered mostly by coal and the line has never shown a profit.

    One might ask, “why would anyone build a light rail line on a route that could not support a single bus line?”

    Vanity? Perhaps.

    Tax breaks for developers? Only the cynical would believe something like that.

  2. AI has it right.
    The money will simply be fodder for the climate pig trough.
    The magical thinking that tossing tax payer money at the alleged climate crisis will lead to carbon free energy has been the basis for literally hundreds of billions of dollars to the detriment of the people of the world and the benefit of crony insiders.

    • hunter, this idea may be good or bad, but it isn’t throwing money at the climate situation. It’s to put shovels in the ground and people to work repairing infrastructure and finding easier ways to move people and cargo around the country.

      • Tom, this is where you and I profoundly disagree. You see shovels in the ground. I see Solyndra. Whenever you create a pot of government money, you also create a powerful constituency whose only purpose is to put as much of it as they can in their pockets and it becomes very counterproductive. Once these people get their hooks into that money, they will not let go and will corrupt the political process.

        Look at what has happened to Detroit, Chicago and Puerto Rico. The blue model is dead and there is a long line of other cities and institutions standing in line to become the next spectacular failure.

        Government works best by establishing goals and easing the regulatory burden to achieving those goals – not by tossing cash.

        The very worst thing that can happen to government is to separate the entity that spends the money from the entity that raises it.

      • Almost Iowa wrote: “The very worst thing that can happen to government is to separate the entity that spends the money from the entity that raises it.”

        No, the worst thing is to separate the people who decide how the money is spent from the people whose money it is (the electorate).

        In Canada, a big chunk of provincial budgets comes via the federal government. It works pretty well because the spending decisions are made by the provincial governments who are responsible to the voters in those provinces.

        In the U.S. money comes from the feds to state and local government via various agencies whose unelected bureaucrats insert themselves into the decision making process. The result is a mess that can be exploited by cronies.

      • Hi AI, Solyndra failed. I’m sure we wish it had succeeded. However, it was part of a portfolio of VC type investments made by the government with the clear expectation that some would strike out. The portfolio overall was a success.

        But yes, Solyndra failed.

  3. Here is a cautionary tale about green aspirations and government. Dean Zimmerman an outspoken proponent of personal rapid transit (PRT) and the first member of the Minnesota Green Party to be elected to office was convicted for bribery and spent 30 months in jail.

  4. Houston Metro spent something close to $1B just “studying” light rail on repeated studies which all pointed out that light rail in a multi-nucleic flood prone city with low population density is not a good idea. Until they finally bought a study that agreed with the “vision” of light rail.
    We then spent several billions on easements, one of which was abandoned at huge cost, and then spent billions more developing a couple of lines that no one rides. This came at the expense of the best urban bus system in the nation, commuter rail which we desperately need, and closed off lanes of traffic in areas that really need all lanes of traffic. And the trains are shut down when we get typical heavy rains because many of the lines have flood vulnerable sections of track.
    These proposed tax increases are only needed in the sense that corrupt government leaders refuse to do their basic jobs of keeping up with the infrastructure and instead want to expropriate our money and feed it to their cronies.
    The corruption that leads to this is why the climate consensus is so popular- both rely on institutional ignorance and corrupt practices to exist and both justify ever increasing demands on public money.

    • Light rail sure doesn’t seem to work most anywhere. I’m not a fan of it. But why do you think that light rail is the major or even significant destination of these proposed federal dollars?

  5. Reason magazine has been laying into, lambasting and lobotomizing rail transit proposals for years. One of my favorites was this proposed light rail along Detroit’s Woodward Ave.:

    Broke cities are spending billions they don’t have on streetcar lines. You can paint a bus to look like a streetcar and it can do everything a streetcar does with a lot more flexibility:

    Note the cute decorative cowcatcher on the front.

  6. Is this tax going to be applied to imported oil? Will natural gas liquids be considered oil? What about condensate? Does it work the same for light crudes?

    • Hi Fernando, how are you? Haven’t heard from you for a while.

      From what I read, yes to all.

      • I’ve been interviewing Leonardo do Carpio.

        If the tax applies to all crudes, including imported crudes, then it’s a direct pass through 100 % to the customer. Obama lied.

        Taxing NGLs is a bit stupid, most of that is ethane, a chemical feedstock, and propane/butane, hardly used for transport. Furthermore they have a much better hydrogen ratio. This means they are intermediate between methane and natural gasoline.

        My impression is that by now Obama is surrounded by people who don’t think things through. He’s tossing out populist garbage, lying, and in conclusion being a lousy president.

        Such a tax should simply be levied on crude oil and condensate, with a levy graduated to API, to place the heavier crudes at a slight disadvantage. Imported fuels should be subject to a stiffer tax, otherwise they’ll shift refining abroad.

  7. There is an unintended consequence to the “war on coal” in this country. The revenue raised by this tax would be used to “expand clean, reliable, and safe transportation options like public transit and rail”. However throughout the history of railroads a fundamental for prosperity for most railroads has been coal transportation.

    Already the drop in coal production has affected coal shipments. For example, coal shipments are down 9.7 percent year-to-date compared to the same period in 2014. http://oilprice.com/Energy/Energy-General/Railroads-Hit-By-Falling-Oil-And-Coal-Production.html.

    Elsewhere there are stories about railroad plans to re-structure their trackage because of this loss of revenue. As a result, the tracks needed to enable clean, reliable, and safe transportation rail options for passenger rail service or intermodal freight transport will be more limited or prices to maintain those services will have to increase markedly.

  8. This sounds like a cynical attempt to market a gasoline/diesel tax as a tax on Exxon and the Koch Brothers. Only low-information activists will be fooled. And don’t see why non-transportation users of oil should be required to fund transportation upgrades.

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