Obama proposes massive $10 per barrel oil tax

Oil tax - President Obama

President Obama has proposed a $10-per-barrel oil fee that would be used for clean transportation investments.

The new tax is very unlikely to get through the Republican-controlled Congress, but if passed, it would be paid for by foreign oil companies.

The tax comes at a time when oil companies are already struggling to turn a profit, with many going bankrupt or laying off thousands of workers. However, Jeffrey Zients, Obama’s chief economic adviser, told reporters the fee would apply only to oil that is imported into the US.

Oil pumped in the US that is exported would not be taxed, ensuring a “level playing field” for American producers.

The US was importing 7.4 million barrels of oil per day as of November, down from 10 million at the end of 2005. The decrease is largely thanks to heavy supply from US producers who are using fracking and other techniques to increase America’s own supplies domestically.

The US pumped 9.3 million barrels of oil and exported just 320,000 barrels per day in November.

It’s still not clear where along the import chain the $10 fee would be levied but the administration says it wouldn’t be imposed at the Wellhead.

Revenue from the oil tax would be used to upgrade to the country’s transportation system. The plan calls for boosting spending on clean transportation infrastructure by 50% and includes integrating new technology like self-driving cars.

“Our transportation system is too dependent on oil. The system was not designed to handle the realities of changing climate,” Zients said.

The Obama administration hopes to expand transit systems in cities, make high-speed rail more of an alternative to flying, and modernize freight systems.

Money from the tax would also go to provide “long-term solvency” of the Highway Trust Fund, a dwindling pool of money that helps finance projects such as maintaining the country’s roads and bridges.

House Speaker Paul Ryan was the first Republican to attack the tax, calling it, “dead on arrival in Congress,” while warning that it would only serve to raise energy prices for poor Americans.

The oil industry says the tax will raise the cost of oil by $0.25 per gallon, while killing thousands of jobs.

“On his way out of office, President Obama has now proposed making the United States less competitive,” Jack Gerard, president of the American Petroleum Industry, wrote in a statement.