Obama’s Oil Tax Is Politically Unfeasible, But It’s Still An Important Discussion To Have

Obama’s Oil Tax Is Politically Unfeasible, But It’s Still An Important Discussion To Have

When President Barack Obama proposed a $10.25-per-barrel oil tax, the offending industry wasted little time attacking his plan as detrimental to consumers, saying that it would hurt the middle class and raise food prices. Even though the plan has zero likelihood of passing in a Republican-controlled Congress during an election year, the motivations behind Obama’s proposal deserve a closer look.

The U.S. consumes 19.11 million barrels of oil a day at a current cost of $27 per barrel of crude oil. According to the BBC, the tax would raise $319 billion over 10 years. Most of the revenue raised would go towards Obama’s “Clean Transportation Plan,” which would allocate funds for clean technology and infrastructure projects. Our bridges are collapsing, remember?

A 2013 report on the state of America’s infrastructure by the American Society of Engineers concluded with a D+ grade. Between the 600,000 bridges, 144,000 miles of freight rail track, 7,300 power plants12,000 miles of inland waterways, 100,000 miles of levees, and 15,000 water treatment facilities scattered across the country, the cost of simply maintaining infrastructure is massive. Due to decades of negligence, the ASE estimated in 2013 that the federal government would have to spend $3.6 trillion on infrastructure by 2020.

The oil industry is promising to pass the barrel fee on to consumers. “The $10 per-barrel tax hike – which would add about 30 percent to the cost of a barrel of oil and potentially about 25 cents to the cost of a gallon of gasoline, according to reports – should be a wake-up call,” said American Petroleum Institute’s President Jack Gerard, in a statement released shortly after Obama’s announcement. “The proposed tax hikes could also have an impact on food prices and all sorts of goods that rely on transportation to reach consumers. Lower-income and middle class Americans, for whom essentials like transportation and grocery bills consume a greater percentage of their income, would be harmed the most by these outrageous tax proposals.”

Even the White House said oil companies would probably pass on the costs to consumers. Still, the tax would only apply to domestic oil production and oil imports, and domestic producers exporting American oil won’t face similar fees. But the proposal has to pass Congress. And it won’t. Republican lawmakers are vehemently against any new taxes, and certainly against implementing them in a sector with profit margins like the oil industry’s.

In his last years in office, Obama has embarked on several progressive political projects in an attempt to set the tone for his successor. This tax is one in a series of Obama proposals aimed at pricing environmentally destructive products “accurately,” or, accounting for the costs associated with climate change. While his opponents may still think climate change is a hoax made up by the Chinese to thwart American economic growth, their grandchildren certainly won’t think so when New York City’s three airports are all underwater.

Photo: Used oil barrels are stacked at a storage facility in Seattle, Washington February 12, 2015. REUTERS/Jason Redmond  

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