Last month Thomas L. Friedman wrote in the New York Times an interesting op ed on why America should tax more gasoline. This occurs as the United States is the least forceful OECD country regarding gas tax. US drivers pay on average less than ten euro cents of tax per litre when their German, British, Italian, Turkish or French counterparts pay as much as 60 to 70 cents per litre. Even Australia does better with more than 20 cents per litre.

The situation varies from State to State with Alaska only taxing 26.4 cents per gallon of gasoline while California taxing up to 63.9 cents per gallon. Federal authorities already tax 18.4 cents per gallon for gasoline and 24.4 cents for diesel.

Since the United States’ addiction to oil is widely documented and recognized as a threat by both sides of the political spectrum, why shouldn’t it tax oil more to curb the consumption?

This could effectively stimulate efficiency, decrease the amount of oil the country consumes each day and also help to curb greenhouse gas emissions. One dollar per gallon would bring $140 billion to the Federal government each year. One dollar per gallon would amount to 39 euro cents per litre. Even with such a tax, the United States would keep on taxing less heavily gas than most OECD countries.

As Friedman notes in his article :

Such a tax would make our economy healthier by reducing the deficit, by stimulating the renewable energy industry, by strengthening the dollar through shrinking oil imports and by helping to shift the burden of health care away from business to government so our companies can compete better globally.

Such a tax would make our population healthier by expanding health care and reducing emissions. Such a tax would make our national-security healthier by shrinking our dependence on oil from countries that have drawn a bull’s-eye on our backs and by increasing our leverage over petro-dictators, like those in Iran, Russia and Venezuela, through shrinking their oil incomes.

Instead of spending the money on national debt or healthcare, my belief is that the US should spend it on advancing and advocating cleantech, cutting its fossil fuels consumption and stopping to rely so massively on oil imports. It would also prepare itself for higher oil prices and peak oil.

Here are some projects that could benefit from such a tax and decrease oil consumption and exports:

• electric cars research, promotion and incentivesenergy efficiency and smart grid

• road infrastructure

• renewables (research, promotion and incentives)

• nuclear

• high speed rail and mass transit

• any project unrelated to energy

With 15 cents per gallon  each project would bring around $9 billion per year. No doubt that with all this money many things could be achieved.

To exemplify, here are some calculations using the figures given in Sustainable energy – without the hot air:

With $90 billion collected during a decade America could build approximately 45 GW of nuclear capacity or 70 GW of offshore wind.

As for high speed rail, this sum would multiply by ten the amount already allocated by President Obama. With all this money the country could get its ten high speed rail corridors and could even go way beyond.

Of course, if one dollar per gallon was too much, America could enact a fifty cents tax. The duration of the projects would however double.

China recently unveiled massive projects for high speed rail, nuclear power and hydroelectricity. Even if the Chinese government is not all too ready to cut its emissions, it is fully aware how relying on dirty coal and foreign oil could slow down the country’s rapid economic growth. Could the US just do the same ?

[photo credit: Flickr]

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NPR’s On Point never disappoints, and their show with Christopher Steiner, author of $20 Per Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better was no exception. Steiner’s thesis is that as liquid hydrocarbons become all the more difficult to naturally extract and regulation makes them all the more costly to refine and use, prices will inevitably rise. At $20 a gallon, we might not recognize our lives…all for the better, says Steiner.

People will live and buy their locally-grown produce in mixed-use developments clustered around high-speed rail lines. In Steiner’s view, $6 a gallon is an inflection point that begins to redefine the way we live our lives. But, will innovation (or the US government) ever allow prices to remain at that level? Not according to Mark Mills, co-author of The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy.

In Mills’ reckoning, prices will never sustain that kind of climb. Our technology and innovation are too good and governments will unleash incentives to combat that kind of price climb that will result in more production of synthetic hydrocarbons. Moreover, long before we reach $20 a gallon, more expensive natural hydrocarbons (i.e., tar sands) will become competitive. What about Europe, you ask, where gasoline has sustained prices at $7 a gallon? Those prices have not pushed leading oil concerns on the continent dramatically innovate in production or technology and they have triggered a very different lifestyle – including smaller, more efficient cars and much broader use of public transportation. But, much of the gap in price between Europe and the US is tax. The revenue goes to governments, so the companies are not pushed to look for alternate fuels.

But, Mills view of innovation is not universal. According to October’s Esquire, the guys over at the Common Wealth Opportunity Capital are bullish on oil.

“Every ounce of gold ever mined is still here,” the hedge fund’s principal Reagan Silber notes, but “every single barrel of oil ever drilled is gone.” Silber doesn’t see acceptable solutions emerging in time. “If you are long on oil, you are short on ingenuity,” he concludes.

Whether you are an investor planning your portfolio, a futurist predicting the shape of our alternative energy utopia, or an industry insider trying to position your company for more market share, there is a lot up in the air; but, one thing is clear: our energy policy will dictate much about the way we live our lives — $20 a gallon or not.

[photo credit: Paul Garland]

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