Obama’s new oil fee idea and the increase in miles driven

February 5th, 2016 at 12:17 pm

Readers know I’ve long called for an increase in the federal gas tax. I’m not trying to piss anybody off–believe me, I was initially pleased earlier this week when I filled my tank up for under $20! Then, I thought about how fossil fuels are truly under-priced.

I mean this in two senses. First, we cannot realistically maintain our highway and transit systems on an 18.4 cents a gallon federal gas tax that hasn’t been increased in over 20 years. Not only have the costs of maintaining public transportation gone up but the auto fleet is more fuel efficient. Obviously, that latter point is a plus, but it means less revenue into the highway trust fund.

Second, there are sound environmental reasons for increasing the price on carbon. But because of a uniquely timed collision between increased supply and weakened demand, the prices of oil and gas are extremely low right now. From the perspective of the environmental damage they cause–the¬†transportation sector accounts for 30 percent of our greenhouse gas emissions–they’re too cheap.

That’s why I like the new idea from the White House to phase in, over five years, a $10 fee per barrel of oil, both domestic and imported. Here’s a useful explainer from Vox. As you’ll see, they’re thinking of this as far more than just another way to boost the federal gas tax. It’s part of an agenda to clean up transportation writ large.

To be clear, I’m totally cognizant of the distributional burden of higher energy costs on low and middle-income families. I’ll get back to that.

But my point here is that for awhile there where it looked like Americans were driving a lot less, even as the recession was in the rear view mirror and gas prices were letting up a bit. But as the figure below shows, that’s over. If anything, the slope of the “miles driven” curve–and it’s a 12-month average–looks steeper than in the past, which is what you might expect given how cheap gas is right now.

Now, the fact that the statutory incidence is on the oil companies doesn’t tell you much about who pays the proposed fee. They’ll pass it forward to consumers, and that will disproportionately hurt the least advantaged. To offset this, the administration has proposed that 15% of the revenues be used to relieve this disproportionate burden.

No, this isn’t going anywhere in this Congress. Hard to see it getting too far in the next one either. But the problem exists, and as the figure shows, it’s getting more serious, not less. At some point, we either deal with this threat or it deals with us.


Source: FHWA

Source: FHWA


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