Obama to propose $10-a-barrel oil tax to fund rail and highway projects

Fuel taxes have generally been hailed by economists and most energy experts as economically sensible - but politically toxic. Photo / Getty Images

President Barack Obama is proposing a $10-a-barrel oil tax, phased in over five years, to pay for a variety of transportation initiatives, including new rail corridors, highway projects, pilot projects for self-driving cars, and other technologies it said fall under the goal of a "clean transportation" system.

The White House announced Thursday that the budget presented to Congress next week would include an oil "fee" that would raise "the funding necessary to make these new investments, while also providing for the long-term solvency of the Highway Trust Fund to ensure we maintain the infrastructure we have."

Such fuel taxes have generally been hailed by economists and most energy experts as economically sensible - but politically toxic.

The oil tax, which would work out to about 24 cents a gallon when fully in place, would create incentives for the private sector to use oil products more efficiently, thus reducing the amount of climate-changing carbon dioxide released into the atmosphere. Such a tax has even been supported by a handful of oil industry executives.

The timing of the proposal, coinciding with one of the steepest drops in oil prices in the past decade and a half, could make it easier for consumers to digest. The administration also said that it would provide assistance to families to ease energy cost burdens, focusing on households in the northeast where many still use fuel oil for winter heating.

The administration said it would devote $20 billion of the money raised to expand transit systems in cities, suburbs and rural areas; make high-speed rail a viable alternative to flying in major regional corridors and invest in new rail technologies like maglev; modernize the nation's freight system; and expand the Transportation Investment Generating Economic Recovery program launched in the 2009 economic stimulus bill to support local projects.

The budget would also use roughly $10 billion per year in revenues for shifting how local and state governments design regional transportation projects.

Obama would also propose investing just over $2 billion per year in "smart, clean vehicles" and aircraft by expanding research and development into such technologies.