Energy

Obama’s Upset Congress Doesn’t Like His $10 Tax On Oil Barrels

REUTERS/James Lawler Duggan.

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Michael Bastasch Energy Editor
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The White House said Monday it was “disappointed” Congress chose not to include President Barack Obama’s plan to fund green infrastructure projects with a $10 tax on barrels of oil in a Senate amendment to a transportation appropriations bill.

Administration officials said “the bill does not support the President’s full vision for a 21st Century Clean Transportation Plan that expands transportation options for American families, while reducing carbon emissions, cutting oil consumption, and creating new jobs.”

Namely, the bill does not include the most controversial piece of Obama’s transportation plan: a $10 tax on every barrel of oil to pay for green infrastructure projects.

While the administration supports some aspects of the Senate bill, it wants Obama’s oil tax to be considered as an option to help the U.S. meet its United Nations pledge to cut carbon dioxide emissions.

“The Administration urges the Congress to consider strategic opportunities to enhance revenue and investments to support a new, clean, sustainable transportation system and increase the competitiveness and productivity of the economy,” the White House said in a statement.

The administration, however, should be surprised Congress has not joined Obama’s calls for an oil tax. Obama proposed to tax barrels of oil in February and it was not well-received by Republicans or the oil industry.

Republican leadership quickly came out against the proposal, arguing the way to grow the economy is not to impose more taxes and keep natural resources locked up.

“We won’t let that happen. Instead, we will focus on developing ideas to maximize our energy resources, not tax them and keep them in the ground,” House Speaker [crscore]Paul Ryan[/crscore]’s office said in response Obama’s oil tax plan.

Obama’s plan for a “21st Century Clean Transportation System” is funded “by a new fee paid by oil companies and would increase green transportation spending by $20 billion to “reduce carbon pollution, cut oil consumption, and create new jobs,” according to a White House fact sheet.

Obama would spend $2 billion of that money on green vehicle and aircraft research, along with $400 million to make sure this green fleet can be safely integrated into America’s transportation system.

The federal government would essentially be taxing oil produced through hydraulic fracturing, or fracking — a method of pumping water, sand and some chemicals deep underground to extract oil and gas. The practice has been condemned by environmentalists.

Fracking has been responsible for virtually all the increase in U.S. oil production since the beginning of Obama’s first term in office. In 2009, the U.S. produced just 5.4 million barrels of oil per day, but by 2014 production jumped up to 8.7 million barrels per day.

The White House says taxing oil would help ensure the long-term solvency of the Highway Trust Fund, which was plagued with funding problems because of falling gas tax revenues and other issues.

Obama signed $305 billion highway bill in December, but the Highway Trust Fund is still projected by the Congressional Budget Office to need $113 billion in additional funding to break even over the next six years.

Though economists have warned against taxing oil, since it would essentially be a tax passed onto consumers in the form of higher gasoline prices.

Institute for Energy Research economist Robert Murphy concluded Obama’s oil fee amounts to a $65 billion a year tax on Americans.

“And you don’t create good paying jobs with a $65 billion annual tax hike, the proceeds of which are used to fuel boondoggle spending projects on items that wouldn’t survive in the open market,” he wrote. “The whole episode shows the foolishness of striking deals with carbon tax proponents in the hopes of gaining smaller and more efficient government.”

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