Gas Pump

Sen. Lindsey Graham, R-S.C., John Kerry, D-Mass., and Joseph Lieberman, I-Conn., are planning to release a plan for a climate and energy bill by Earth Day on April 22. In a rare occurrence, these leaders are considering a new tax on gasoline to help win Republican and oil industry support for proposed legislation. In fact, the tax—probably about 15 cents a gallon—was conceived with input from a number of oil companies.

The long-term potential for hybrid and electric cars to become mainstream consumer options depends, to a large degree, on gas prices. Despite professing a desire to end America’s dependence on oil, the country’s political leadership—Republican and Democrat—have historically steered away from higher gas taxes. Instead, the US government has preferred mandates and incentives—much less direct and less effective methods of shifting US drivers to more efficient vehicles, including hybrids and electric cars.

Democrats face a tough battle to pass any kind of energy or climate legislation, and will need to appease Republicans and industry to make it happen. The bill from Kerry, Graham and Lieberman includes expansion of offshore oil drilling and major new incentives for nuclear power plant construction.

Passing the Cost to the Pumps

Even a number of oil companies are on board, apparently because the new proposal would conceivably cost the industry less than other proposals on the table. The American Petroleum Institute’s president Jack Gerrard told Greenwire that a gas tax would give a “the most transparent signal” about the costs of a climate program. “Unlike the House bill’s cap-and-trade system, oil companies would pass through the costs with signs at the gas pump letting people know they’re paying more because of US efforts to deal with climate change.” Others speculate that it’s a set up—because a direct tax will make it easier for the oil companies to fight than a cap-and-trade system.

So far, Graham is the only Republican publicly supporting the gas tax idea. But in a twist, it might be Democrats in the long-term that kill a higher gas tax—even one as mild as 15 cents a gallon. Democrats don’t want to get blasted for the higher prices at the pumps this summer or to face anti-tax outrage from “tea party” activists.

New electric-drive vehicles, like the Chevy Volt and Nissan Leaf hitting the market in late 2010, are expected to be very popular among early adopters of new technologies. But the ultimate size of the market for hybrids and electric cars—after the first wave of early adopters and after consumer incentives have subsided—will greatly depend on the price of a gallon of gas in the United States, which remains low by world standards.