Obama’s $319 Billion Oil Tax Plan Raised to $10.25 a Barrel

(Bloomberg) — President Barack Obama proposed Tuesday to

raise $319 billion over the next decade for transportation and

other needs with a $10.25-per-barrel tax on crude — up from $10

that was announced last week.

The higher amount, along with other details, were released

Tuesday as part of the president’s $4.1 trillion budget request

to Congress.

While major questions still remain unanswered, including

how and when the fee would be charged, the White House envisions

collecting the tax from an estimated 4 billion barrels of

domestic and imported oil in 2022, once it is fully phased in.

The money would be steered to a “21st Century Clean

Transportation Plan to upgrade the nation’s transportation

system, improve resilience and reduce emissions,” according to

budget documents released Tuesday.

“Meeting future challenges will require a long-term vision

for the transportation sector that includes more and cleaner

options,” Transportation Secretary Anthony Foxx said in a

statement. “This budget brings us closer to that vision.”

Exported petroleum products would not be subject to the

fee, and home heating oil would be temporarily exempted. The fee

would apply to all petroleum produced or imported beginning Oct.

1, 2021.

10.9 Million

Administration officials cited the fee as $10 per barrel

when describing it to reporters on Feb. 4. On Tuesday, Jason

Furman, chairman of the Council of Economic Advisers, said the

proposal calls for a fee that will phase in over five years and

then be indexed to inflation. The $10 figure is the average over

the phase-in period.

The White House Office of Management and Budget did not

share details on the modeling and assumptions it used to

estimate the money it would raise — as much as $319 billion

from fiscal 2017 to fiscal 2026. But the $41 billion estimated

to come in during fiscal 2022 would reflect about 10.9 million

barrels per day of oil.

DOA

National Economic Council Director Jeff Zients told

reporters Feb. 4 that oil companies would pay the fee, though it

would not be charged at the wellhead. On Tuesday, Zients said

the fee “will save consumers and commuters time and energy

costs.”

Republicans in charge of Congress — which decides whether,

and how, to act on Obama’s budget blueprint — have already

declared his proposed oil fee “dead on arrival.” And it has been

angrily denounced by oil industry leaders, who say the fee would

be passed on to consumers, hitting poor and middle-income

families especially hard.

Oil companies would probably pass on the added cost to

consumers, resulting higher prices for gasoline and other

products, the non-partisan Congressional Research Service said

in a report commissioned by the Republican staff of the Senate

Energy and Natural Resources Committee.

Tax Hike

“In general, the fee would likely result in decreased

discretionary consumer purchasing power which may translate into

lower expected economic growth,” according to the report.

American Petroleum Institute President Jack Gerard called

it an “unprecedented tax hike” in remarks to reporters Monday.

“We know that this tax hike could also have an impact on

food prices and all sorts of consumer goods — everything that

relies on transportation to get to consumers,” Gerard said in a

teleconference. “Only extremists whose goals ignore the concerns

of consumers and lower-income families could welcome such an

approach.”

Conservationists supported the move. Rhea Suh, president of

the Natural Resources Defense Council, said the budget “sets

important priorities to continue the historic progress achieved

in recent years on protecting our climate, air, land, water and

oceans.”

To contact the reporters on this story:

Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net;

Brian Wingfield in Washington at bwingfield3@bloomberg.net

To contact the editors responsible for this story:

Jon Morgan at jmorgan97@bloomberg.net

Elizabeth Wasserman

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