(Bloomberg) — President Barack Obama will propose a $10
per barrel tax on oil in his fiscal 2017 budget plan, an idea
that received a chilly reception in the Republican-controlled
Congress that oversees spending.
With the proceeds targeted to transportation and climate
initiatives, the proposal announced Thursday deepens Obama’s
environmental credentials and signifies his ambitions to
aggressively push action on climate change during his final year
“By placing a fee on oil, the president’s plan creates a
clear incentive for private-sector innovation to reduce our
reliance on oil and at the same time invests in clean energy
technologies that will power our future,” the White House said
in a statement.
It is unclear who, exactly would pay the tax if it were to
pass, and how it would be structured. White House officials
repeatedly stressed that the fee would fall on oil companies,
but said it wouldn’t be charged at the wellhead and they look
forward to working with Congress on the details.
The fee, which drew swift objections from oil industry
groups and Republicans, is part of a broader administration plan
to shift the nation away from transportation systems reliant on
internal combustion engines and fossil fuels. The proposal
envisions investing $20 billion to reduce traffic and improve
commuting, $10 billion for state and local transportation and
climate programs and $2 billion for research on clean vehicles
The new oil tax, which would be phased in over five years,
is all but certain to be rebuffed by Republicans who control
both chambers of Congress.
“President Obama’s proposed $10 per barrel tax on oil is
dead on arrival in the House,” said House Majority Whip Steve
Scalise, a Louisiana Republican.
Environmentalists applauded the move. “President Obama’s
vision underscores the inevitable transition away from oil, and
investments like this speed us along the way to a 100% clean
energy future,” Sierra Club Executive Director Michael Brune
said in an e-mail.
Inadequate infrastructure raises costs for businesses and
consumers, including motorists stuck in traffic — a “hidden
tax” and a harm to the environment, said Transportation
Secretary Anthony Foxx.
Foxx said the plan increases investment in infrastructure
in a way that combats climate change.
Oklahoma Senator Jim Inhofe, the Republican chairman of the
Environment and Public Works Committee, said he agreed on the
need to improve the nation’s transportation system but would
oppose the oil tax.
“I’m unsure why the president bothers to continue to send a
budget to Congress,” Inhofe said in a statement. “His proposals
are not serious, and this is another one which is dead on
arrival. America is ready for a new president.”
Jeff Zients, director of the National Economic Council,
told reporters that exported oil products wouldn’t be subject to
the fee, even though imported ones would “across the board.”
“We recognize oil companies will likely pass on some of
these costs,” Zients said.
Obama administration officials cast the additional cost as
more than offset by the benefits of building better highways and
“Make no mistake, this is an energy consumer tax disguised
as an oil company fee,” Neal Kirby, a spokesman for the
Independent Petroleum Association of America, said by e-mail.
“At a time when oil companies are going through the largest
financial crisis in over 25 years, it makes little sense to
raise costs on the industry.”
The dip in gasoline prices may have created a political
opening for Obama’s proposal, but it also could create tricky
politics for one of the Democrats running to succeed him in the
White House, Hillary Clinton.
Obama has used his annual budget request to Congress to go
after tax deductions and incentives long enjoyed by oil and gas
companies — proposals that have never advanced on Capitol Hill.
“The president perennially proposes repealing the oil
industry tax credits which Congress annually ignores,” Benjamin
Salisbury, a senior policy analyst at FBR Capital Markets, said
by e-mail. “It seems overwhelmingly likely that this fee meets
the same fate.”
The plan comes with oil prices down 13 percent this year,
thanks to increasing supply and a weakening U.S. dollar. Crude
stockpiles climbed 7.79 million barrels to 502.7 million last
week, the highest since the 1930s, according to weekly and
monthly data from the Energy Information Administration.
House Speaker Paul Ryan, a Wisconsin Republican, said Obama
“expects hard-working consumers to pay for his out-of-touch
“The president should be proposing policies to grow our
economy instead of sacrificing it to appease progressive climate
activists,” he said in an e-mail.
Before the plan was announced, West Texas Intermediate for
March delivery slipped 61 cents, or 1.9 percent, to $31.67 a
barrel at 1:54 p.m. on the New York Mercantile Exchange.
Kevin Book, managing director of ClearView Energy Partners,
a Washington-based research company, said there are “near-zero
odds that the Republican-led Congress will grant the president’s
“A Congress without the political will to enact a $0.12 per
gallon tax on gasoline sales that would have phased in over two
years seems very unlikely to impose a new fee on oil companies
that would amount to the equivalent of $0.238 per gallon phased
in over five years,” he said in a research note for clients.
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