Obama proposes oil tax to finance infrastructure

US president Barack Obama wants to take advantage of low fuel pries by levying an oil tax to protect the environment and invest in infrastructure. Republicans and the oil industry want to block this. The nation’s infrastructure is in dire need of investments. John Dyer reports from Boston.

Barack Obama wants to take advantage of historically low fuel prices by levying an oil tax to protect the climate and invest in crumbling infrastructure. (Image credit: Ian Britton, flickr/Creative Commons)

Barack Obama wants to take advantage of historically low fuel prices by levying an oil tax to protect the climate and invest in crumbling infrastructure. (Image credit: Ian Britton, flickr/Creative Commons)

US president Barack Obama is proposing a USD 10 per barrel oil tax to fix crumbling roads and bridges in the United States. The revenues will also be put towards combatting climate change around the world.

The president unveiled details of the tax when he submitted his 2017 budget to Congress last week. Earlier, the White House shared the outlines of his proposal to reporters.

“This new approach to investment and funding is one that places a priority on reducing greenhouse gases, while working to develop a more integrated, sophisticated and sustainable transportation sector,” said a White House statement.

Money for roads, rail and research

The US currently consumes around 19 million barrels of oil a day. At that rate, the tax would raise USD 65 billion a year, said Jeff Zients, director of the White House National Economic Council.

In addition to helping replenish the dwindling funding streams that repair roads and bridges, the tax would devote USD 20 billion a year to new commuter and freight rail lines, USD 10 billion annually to regional transportation planning and USD 2 billion a year for research on self-driving cars and other green transportation initiatives.

Republicans reject the idea

Republicans are adamantly against the Obama proposal, rejecting them even before Obama submitted his 2017 budget.

“Once again, the president expects hardworking consumers to pay for his out-of-touch climate agenda,” said Paul Ryan, the Wisconsin Republican who is speaker of the U.S. House of Representatives in a statement. “The good news is this plan is little more than an election-year distraction. As this lame-duck president knows, it’s dead on arrival in Congress.”

Oil industry representatives indicated they, too, would fight the proposal.

“Make no mistake, this is an energy consumer tax disguised as an oil company fee,” said Independent Petroleum Association of America spokesman Neal Kirby.

Historically low fuel prices

Obama understands that the fee would likely increase the cost of gasoline at the pump, home heating oil and other fuels, said Zients. “This is a per-barrel fee on oil paid for by oil companies. So they’re the ones paying the fee. We recognise that oil companies will likely pass on some of these costs.”

But, at USD 36 per barrel, the cost of oil is now at a ten-year low, Zients said. A gallon of gas — around 3.8 litres — is now very cheap at USD 1.77, he added. The president’s proposed fee would only add around 24 cents to the cost of a gallon of gas.

Infrastructure desperate for money

The American Society of Civil Engineers routinely gives U.S. roads and bridges low scores for their condition. Congestion in densely populated metro areas like New York, Washington, DC and Los Angeles adds hours to drivers’ commutes. Major U.S. airports are also showing signs of their age — many have not been upgraded since the 1970s. And American rail routes are notoriously slow and antiquated.

The president’s concrete plan would address those problems head-on, said Zients. “People call for more transportation investment but never talk about how they’ll pay for it,” he said. “We need major new investments and a long-term funding solution.”

The funds would also replace revenue that has dried up as inflation has eaten into the 18.4 cents federal gas tax, set in 1991, that currently pays for road maintenance in the US.

“We’ve just been bumping along, doing short-term fixes. I give them a lot of credit for laying out this kind of long-term investment,” said Ed Rendell, the former Democratic governor of Pennsylvania and frequent critic of Obama who co-chairs Building America’s Future, a transportation advocacy group. “I also give them credit for having the guts to say how they would pay for it all. That’s very unusual in this area.”

Signal to investors

The fee would also help reduce Americans’ use of fossil fuels in an effort to fight climate change and boost the solar and wind industries.

Jason Kowalski, policy director at 350.org — a group whose name refers to dropping the amount of carbon dioxide in the atmosphere to 350 parts per million — said he hoped the proposal would be convince some people to pull their money out of the oil and gas industry.

“The move should send a clear signal to investors: get out of fossil fuels and start investing in a clean energy future,” said Kowalski.

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