President Barack Obama wants to raise gasoline prices. It is about time.
In his new budget proposal, Mr. Obama is proposing a $10-per-barrel fee on oil, which would translate into about 24 cents per gallon of refined gasoline. He would spend the proceeds on the Highway Trust Fund and on “green” transportation: rapid bus lines, electric-car charging stations, big rail projects and so forth. House Speaker Paul Ryan, R-Wis., immediately dismissed the idea as “little more than an election-year distraction.” But the real problem is that the proposal is coming when the political risks for the president are virtually nonexistent.
Repeatedly during Obama's two terms, Congress had to deal with funding the country's roads and rails. Repeatedly, the president shied away from supporting the most reasonable remedy: raising the federal gasoline tax to keep up with inflation and infrastructure needs. Congress patched together a five-year highway plan last year using unsustainable sources of funding. Now that the issue is off Congress's agenda, Obama is backing a new fuel fee. The president is trying to make a point, not policy, with this proposal.
That said, it’s a good point to make: Too bad it's late, but better late than never. The case for taxing crude oil or refined gasoline in order to pay for transportation infrastructure begins with fairness: Those who use the roads should help pay for them. But even if the money were used for something else entirely – debt reduction, energy research, lowering other taxes, rebating directly back to Americans – such a tax still would be worthwhile.
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At $10 a barrel, much of the social harm that burning oil does by contributing to climate change would be built into its price. In fact, the proposal would be better if the fee were higher: Resources for the Future's Alan J. Krupnick says that it should be $15 to fully account for climate harms. Then there are other major social costs – ambient air pollution, traffic gridlock – that could fairly be factored in, too. And Congress should not stop with oil; every fuel should be taxed commensurate with the harm it does to the climate.
When oil prices spiked in years past, Americans cut unnecessary trips and bought more fuel-efficient cars. Now that gas is cheap, Americans are once again buying gas-guzzlers. If it cost more to pollute, Americans would pollute less.
In a rational world, today’s low oil prices would lead Congress to welcome Obama's proposal, or some version of it, because a gasoline price hike would not be as politically risky. We’re not in that world, but at least low prices might leave some room for a real debate.