I think after capitalization for the scale this has to be done at, a dollar a gallon seems too cheap considering the environmental impact and other natural resources (water) that has to be redirected.
Taxes on the other hand are an essential part of the price of fuel that we consume. If it weren't for taxes how else would we build roads? Should we all possess an RFID tag like EZ pass and get a bill at the end of the month for our use of the highways? I think if we are to add into the mix of consumption, conservation, then a tax that is variable with consumption (the more one uses, the more one pays regardless of the mileage on roads driven, ie., gas guzzlers pay more) which in the long run may curb wasteful consumption.
Eliminating taxes on synfuel is to subsidize it, as is being done with ethanol and nuclear power (different mechanism for nukes however). Unless it can stand on its own we will never know in the long term how successful the technology may be. And, I do not think we need to raise taxes or add to the national debt to subsidize personal transportation.
Taxes on the other hand are an essential part of the price of fuel that we consume. If it weren't for taxes how else would we build roads? Should we all possess an RFID tag like EZ pass and get a bill at the end of the month for our use of the highways? I think if we are to add into the mix of consumption, conservation, then a tax that is variable with consumption (the more one uses, the more one pays regardless of the mileage on roads driven, ie., gas guzzlers pay more) which in the long run may curb wasteful consumption. I agree. Theoretically, however, one could make the argument that oil is very heavily subsidized by the State Deparment/Military/Foregin Aid budgets, so that one could reduce taxes on domestically produced energy and/or increase taxes on middle east energy.
"I think after capitalization for the scale this has to be done at, a dollar a gallon seems too cheap..." 
The cost in materials/heat is $192 for every 4 barrels of coal oil...and there are 42 gallons in every barrel.
So that's $192 to get 168 gallons (4 barrels * 42 gallons per barrel).
$1.14 per gallon of "diesel."