Obama to Seek New Tax on Oil in Budget Proposal

by Ayesha Rascoe and Valerie Volcovici (Reuters) U.S. President Barack Obama will launch a long-shot bid next week to impose a $10-a-barrel tax on crude oil that would fund the overhaul of the nation's aging transportation infrastructure, the White House said on Thursday.

The proposed fee, which would be paid by oil companies and phased in over five years, was quickly met with scorn by lawmakers in the Republican-controlled Congress.

In the last year of his presidency, Obama has said the country must stop subsidizing the "dirty" fossil fuels of the past and focus on clean, renewable fuels that do not exacerbate climate change.

"By placing a fee on oil, 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 White House said in a statement.

Jeff Zients, director of the White House National Economic Council, pushed back against assertions the oil tax would place U.S. crude producers at a disadvantage. He told reporters on a call that the fee would be applied to domestically produced and imported barrels of oil but not to crude exported from the United States. READ MORE and MORE (WhiteHouse.gov) and MORE (Politico) and MORE (The Hill) and MORE (Senate Energy and Natural Resources Committee) and MORE (Politico)

Excerpt from Politico: President Barack Obama's proposal to impose a $10.25 fee provided no revenue estimate, no point of collection, and no detail on whether the fee would be applied differently to different firms, according to a Congressional Research Service report Energy and Natural Resources Chairman Lisa Murkowski will release today. The report will lands as Energy Secretary Ernest Moniz appears before Murkowski's committee for a hearing on his department's budget, his third budget hearing of the week. He likely can expect to get questions on the oil fee from Murkowski. "We have astonishingly few details about the President's proposal, and the few details we do have all suggest that this tax or 'fee' would further imperil the American energy renaissance," Murkowski said in a statement. READ MORE / MORE

Excerpt from "Statement by the President on the Economy" WhiteHouse.gov: With respect to oil and energy, I’ll probably make a larger speech about that and the direction that we need to go on this. The basic proposition is, is that right now, gas is $1.80. And gas prices are expected to be low for a while, for the foreseeable future. That, overall, can be a good thing for the economy. But what is also important is that we use this period where gas prices are low to accelerate a transition to a cleaner energy economy because we know that’s not going to last. Every one of us have seen cycles where gas prices go down and then they pop back up.

And the idea here is, is that if we say to oil companies -- which, by the way, got a significant benefit when we, in the omnibus, allowed them for the first time to export oil; up until that point, domestic oil producers couldn’t export. So if we say to them now, all right, oil companies, we know that you’re having to retool, we know that prices are low right now, you’re allowed to export, but what we’re also saying is, is that we’re going to provide -- we’re going to impose a tax on a barrel of oil -- imported, exported -- so that some of that revenue can be used for transportation, some of that revenue can be used for the investments in basic research and technology that’s going to be needed for the energy sources of the future -- then 10 years from now, 15 years from now, 20 years from now, we’re going to be in a much stronger position when oil starts getting tight again, prices start going up again.

We will have further weaned our economy off of dirty fuels. We will have not just made environmental progress, but we’ll also have a much stronger economy, a strong infrastructure. We’ll be creating the jobs of the future. And I think we’ll look back and we’ll say, that was a smart investment, that was a wise decision for us to make.

But the point is, it’s right to do it now when gas prices are really low. And they will be low for quite some time to come, so it’s not going to be a disruptive factor in terms of the economy. READ MORE

Excerpt from Politico: There is no real chance that the Republican-controlled Congress will embrace Obama’s grand vision of climate-friendly mobility in an election year—especially after passing a long-stalled bipartisan highway bill just last year—and his aides acknowledge it’s mostly an effort to jump-start a conversation about the future of transportation. But by raising the specter of new taxes on fossil fuels, it could create a political quandary for Democrats. The fee could add as much as 25 cents a gallon to the cost of gasoline, and even with petroleum prices at historic lows, the proposal could be particularly awkward for Hillary Clinton, who has embraced most of Obama’s policies but has also vowed to oppose any tax hikes on families earning less than $250,000 a year.

During Obama’s first year in office, he was so concerned about the politics of taxes that he scuttled a Democratic transportation bill just to avoid a debate over a gasoline-tax hike. Now in his last year in office, he seems to be actively courting a similar debate. A White House memo outlining his plan suggested that its $10-a-barrel fee would not only be necessary to pay for his sustainable transportation dreams, but would do some good on its own by increasing fossil-fuel prices and creating “a clear incentive for private-sector innovation to reduce our reliance on oil and invest in clean-energy technologies that will power our future.” READ MORE