In an effort to transition the U.S. towards a clean transportation system, President Obama has proposed a tax that would charge $10 per barrel on oil. Phased over five years, the fee would be used to fund several alternative technologies including new high speed rail corridors and self-driving cars. This new tax, which has the support of some oil industry executives, could create an enormous paradigm shift in the private sector with a dramatic incentive for corporations to use oil more efficiently and limit greenhouse gas emissions.

Oil tax, oil rig

The White House said in a statement that $20 billion of the funds will be raised to improve urban, suburban and rural transit systems, make high-speed rail a feasible alternative to flying, explore new rail technologies like maglev, improve the U.S. freight system, and bolster the Transportation Investment Generating Economic Recovery program to support local projects.

Director of the White House National Economic Council, Jeff Zients says oil companies would foot the bill, but it is expected that some of the tax would be passed onto gasoline, diesel and heating oil consumers. The White House said they will help ease the increased financial burden for families in areas such as the Northeast, many to whom use fuel oil for winter heating. One would hope that this will also inevitably provide incentive for consumers, and not just corporations, to use oil more efficiently in the long run.

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President Obama, Obama speech

Fortunately, the timing of the proposal comes at an opportune time when oil prices have been at their lowest in recent years. Paul Bledsoe, a Washington independent energy expert who worked in the Clinton administration, said, “Gasoline taxes haven’t been raised in 25 years, so actually rather than being radical, this proposal is simply returning to standard practice in place since the Eisenhower years of funding of transport infrastructure through small fuel taxes.”

The administration announced the new proposal on Thursday and received predictable political push back. House Speaker Paul Ryan said, “Once again, the president expects hardworking consumers to pay for his out of touch climate agenda.” He warned that it would be “dead on arrival in Congress.”

When and if this legislation is fully in place, the fee would measure out to around 24 cents per gallon. The tax itself, however, would only be applied to foreign crude and petroleum, and not to U.S. petroleum exports, in an effort to prevent U.S. refiners from being squashed in international markets.

Via The Washington Post