The Obama administration announced last week that it is seeking a new $10 per barrel tax on oil. The huge tax increase is aimed at energy companies that will surely pass this increased cost directly on to consumers. At $30 a barrel, the $10 tax amounts to a 33% increase in price.
The oil price increase is part of President Obama’s latest (and final) budget proposal for FY2017 which begins October 1. The president’s new budget, revealed on Tuesday, would spend a record $4.1 trillion. We’ve never seen a $4 trillion budget before!
Fortunately, the odds are slim that Congress will pass the budget as proposed, including the $10-a-barrel oil tax. The new tax, if passed, would be phased in over five years, and would apply to both domestic and imported oil.
The Obama administration said the windfall oil tax would help to reduce carbon emissions (not sure how), promote green energy and renewables and generate billions of dollars for new infrastructure projects in the years to come.
The Obama spokesman added that the $10 oil tax would generate around $320 billion in new revenue over the next 10 years based on demand projections.
Naturally, the president’s new budget calls for over $300 billion in new spending over the same period for mass transit, high-speed rail, self-driving cars and other transportation approaches designed to reduce carbon emissions and congestion.
While President Obama is all too happy to raise taxes, the impetus for the new tax is clearly today’s much lower prices at the pump. President Obama emphasized that now is the right time to implement the oil tax, telling reporters, “Right now, gas is $1.80 and gas prices are expected to be low for the foreseeable future.”
As noted above, I don’t believe the Republicans in Congress will pass the gas tax, especially not in an election year. In fact, increases in the federal tax on gasoline are fairly rare. Under President Reagan, the gas tax was increased five cents a gallon in 1982; the next increase came under President George H.W. Bush, another nickel in 1990.
The federal gas tax currently sits at 18.4 cents per gallon where it has been since the Clinton administration. President Obama’s proposal for a $10 tax per barrel on oil would raise the federal gas tax by another apprx. 25 cents per gallon for a total of apprx. 43.4 cents.
Jack Gerard, president and CEO of the American Petroleum Institute (API) said the proposal “is just the latest and most direct expression yet of what has been an increasingly hostile campaign against American consumers.”
While the tax would be levied on oil companies, it’s clear those companies would pass the costs to consumers. Not only would the costs be passed along at the pump but Gerard said that it would also affect the price of heating oil, food and consumer goods – basically “everything that relies on transportation to get to consumers.”
That hardly matters, however, because the $10 per barrel tax is nothing more than an in your dreams proposal in a budget that will never pass. Obama’s point is to make a moral argument to motivate the environmentalist portion of the Democratic base, which the party very much needs to see at the polls this November.
It will be interesting to see if Hillary Clinton embraces the $10 oil tax. My bet is she won’t go near it. Bernie Sanders… maybe. In any event, this tax will not pass.
Supreme Court Puts Obama Power Plant Regs on Hold
On another energy related front, the Supreme Court on Tuesday abruptly halted President Obama’s controversial new power plant regulations, dealing a blow to the administration’s sweeping plan to address global warming.
In a 5-4 decision, the Court halted enforcement of the plan until after legal challenges are resolved. The surprising move is a victory for the coalition of 27 mostly Republican-led states and industry opponents that call the regulations “an unprecedented power grab.”
By temporarily freezing the new regs, the High Court’s order signals that opponents have made a strong argument against the plan. A federal appeals court last month refused to put it on hold. As expected, the court’s four liberal Justices said they would have denied the states’ request.
President Obama has the worst record of being overturned by the Supremes of any president in the last 70 years. I’ll have more to say on this in the weeks and months ahead.
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