Obama’s $10 a barrel oil tax to fund clean transportation system is bad idea, worse policy

Let market develop new transportation technologies – like self-driving cars – to create clean transportation system

President Barack Obama has picked a very odd time to float a very bad idea: A $10 a barrel tax on American oil production, intended to finance a “21st century clean transportation system.”

clean transporation
8 self-driving cars have been approved for testing on the streets of Austin, TX.

Obama has no illusions the measure, included in his budget request to Congress, will pass the Republican-dominated Senate and House. But he’s all in on his climate change agenda, so why not propose a big tax certain to spark plenty of political drama during his last year in the Oval Office?

Let me count the reasons.

One, Obama wants to make “bold new investments” in 21st century transportation, like public transit and rail – which are firmly rooted in the 20th century or, depending on what the President has in mind, the 19th. Transportation is poised to be transformed by rapid technology change, like electrification and driverless vehicles, and new trends like car-sharing.

clean transportation
President Barack Obama during a recent tour of Alaska.

This hardly seems to be the time to invest in costly fixed infrastructure that could be rendered obsolete by one technical breakthrough. Or a number, as seems likely to be the case.

Two, the President wants to invest in a few of those impending innovations, like driverless cars and trucks. But why put public dollars at risk in a field already teems with private capital?

Heavy corporate hitters like Google hope to have models ready to sell to customers by 2020. If the technology is that far along, what can Washington accomplish that investors haven’t already?

Piling on seems to be a poor use of taxpayer money.

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Three, the President’s war on coal is going to succeed because there is a substitute, a combination of mostly natural gas and smaller amounts of wind and solar energy. Transportation is nowhere near ready to ditch gasoline and diesel.

clean transportation
Electric vehicles are getting close to being competitive.

The number one constraint to electric vehicle is high purchase prices, sometimes twice that of an equivalent internal combustion engine car. The number two constraint is the low energy density of batteries, which leads to limited ranges and “range anxiety.”

But the private sector is hard at work on those economic and technical challenges. Elon Musk of Tesla Motors fame is perceived to be leading the pack, but don’t count out venerable automaker GM, which recently introduced the $35,000 Chevy Bolt that has a 200 mile range. Or Japanese carmaker Nissan, which is shortly set to launch a revamped Leaf EV.

Four, is this really the time to burden the American oil industry with an onerous tax? The Shale Revolution has created tens of thousands of jobs and new business opportunities around the nation. Congress just voted to end the 40-year old ban on crude oil exports and Obama signed the bill after resisting GOP pressure for months.

Is this his way to re-hobble the American oil industry after reluctantly trading oil exports for five more years of renewable energy subsidies?

One has to feel bad for Democratic frontrunners Hillary Clinton and Bernie Sanders after Obama’s announcement. They will wear the political consequences of a new big energy tax looming on the horizon. Even though the American Petroleum Institute estimates the impact of the tax would only be 25 cents a gallon at the pumps, Republicans will be gleefully explaining to American voters how Clinton or Sanders would gladly continue Obama’s tax and spend ways if they are elected.

The political danger is that the $10 tax will be associated with “clean transportation” in voters’ minds. Given American antipathy to taxes, the connection won’t help as legislators navigate their way through the transition from fossil fuels to new energy technologies.

Instead of serving to start a conversation on clean transportation, the proposal will further polarize an already partisan debate.

What is needed are pragmatic and sensible policies, regulations, and investments that advance better technologies. Neither America nor the rest of the world can outrun the technologies it will need to transition to a “clean transportation.”

The tax is a bad idea because it encourages eco-activists and ideologues – and perhaps politicians and lawmakers – to reach too far, too fast.

Slow down, President Obama. Energy transitions are a marathon, not a sprint.

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