President Obama proposed yesterday to tax every barrel of oil produced or imported an additional $10, which translates to nearly twice the federal gas tax Americans pay at the pump. Last year Obama told senior citizens that they wouldn’t see a 2016 cost of living adjustment in their Social Security benefits because of “cheap oil.” The new tax would only be applied to domestic and imported oil, but not to oil exported to other countries. This means other countries would benefit from the president’s largesse, and penalizing Americans in the process.
This new tax would also be equivalent to a 30 percent tax hike on U.S. oil, as it’s currently hovering around $30 per barrel. His new tax proposal is in his latest budget proposal and the Republican-controlled Congress has already indicated this new tax would be dead on arrival. The White House says the tax would provide “$20 billion a year to help expand transit systems across the country and more than $2 billion a year to support the research and development of self-driving vehicles and other low-carbon technologies.”
Critics say Obama is picking winners and losers again using crony capitalism. Currently, many tech giants are testing new vehicles that rely on cameras, maps, motion, software, et al, to create so-called self-driving cars. The self-driving cars are also battery powered, but that electricity comes from a mix of natural gas, coal, and nuclear energy. They also want to use the extra money to fix the country’s infrastructure system.
Thomas Pyle, president of the Institute for Energy Research (IER), said in an emailed statement this is just another example of this administration taxing the energy they don’t to make President Obama’s favored energy sources and companies more profitable. “The revenue generated from a new energy tax is peanuts compared to the revenue, jobs, wages, and economic activity that could be created by simply opening federal lands to energy development.”
Many might remember Obama’s trillion dollar American Recovery and Reinvestment Act of 2009, which went toward infrastructure, jobs, and renewable energy companies (many of which have since declared bankruptcy). That was when Obama had control of both chambers of the Congress. There was also the cash for clunkers program in 2009, which cost taxpayers $24,000 for every vehicle sold. While this did motivate some consumers to trade in and buy more energy-efficient vehicles, the “economic claims have been rendered quite weak.”
The White House also said in a statement that by taxing oil even more, “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 new tax will be announced on Tuesday in Obama’s fiscal 2017 budget. Currently, gas is federally taxed at 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel, not including state and local taxes. Obama’s new tax would nearly double this amount.
Meanwhile, Saudi Arabia has been lowering its crude oil prices over the past few years to drive U.S.-based oil companies out of business, specifically those involved in “fracking.” Most fracking companies have said publicly it was cost-prohibitive to use fracking if oil dipped below $50 a barrel. As a result of Saudi Arabia’s predatory pricing, many fracking companies have gone out of business or folded up their tents altogether.
While ten dollars a barrel may not seem like much, that translates to nearly 24 cents a gallon at the pump, Pyle notes, and it’s the “the very energy source that keeps Americans and our economy moving.” This new tax is also something seniors or those living on fixed incomes will find hard to adapt to; it would also raise home-heating oil prices across the country.