Falling gasoline prices have sparked a comeback among gas guzzlers, and the Obama administration wants to stop it in its tracks.
The White House last week proposed making crude oil more expensive by imposing a new tax of US$10 a barrel. The money would go toward improving the current highway infrastructure and invest in regional transportation systems to reduce road congestion and pollution.
The proposal comes just days after the average U.S. gasoline price fell below $2 per gallon for the first time since 2008.
Cheap gasoline raises the perennial question over how the U.S. funds its transportation infrastructure – a key rationale behind Obama’s proposed oil tax. And it makes electric vehicles (EVs) and biofuels less competitive on price, hindering U.S. efforts to reduce greenhouse gas emissions and oil consumption.
Can the U.S. continue to fund upkeep of its infrastructure and reduce emissions from transportation?
Less Appeal to Cleaner EVs
Consumers have a growing number of electric vehicles to choose from, but cheap gasoline means the payback period for electric vehicles – the time it takes to recoup the higher upfront cost in fuel – is now much longer than a few years ago, sometimes as long as 10 years. Consumers have responded by buying more gasoline and trading in their electric vehicles for SUVs.
Americans are also driving more and recently set a new record for miles driven, the first since 2007.
The big reductions to electric vehicle battery costs – considered a cost barrier to broader sales – seen in recent years have been overwhelmed by cheap gasoline. A McKinsey analysis calculates that electric vehicles are competitive with current gasoline prices only once current battery prices are cut in half – something that could take up to a decade.
A tax on every gallon of gas or diesel funds highway upkeep – and cheap gas is leading to an increase in gas sales. viriyincy, CC BY-SA 2.0
