Obama wants to tax oil companies $10 a barrel to pay for investments in clean transportation

Energy Shocks
Energy Shocks

US president Barack Obama has proposed building a “21st-century clean transportation system.” That roughly translates to more spending on public transit and a decrease in greenhouse-gas emissions. But the the most important part of the proposal—most proposals, really—is how it’s getting paid for.

And the most solid proposal Obama put forth on that point is a $10-a-barrel tax on crude oil, paid for by the oil companies and phased in over five years.

Which oil companies—foreign? domestic? both?—Obama doesn’t say. And does that $10 get slapped on a barrel right when it comes out of the ground? (If so, that’d get the government $90 million in revenue per day using just the stuff produced in the US.)

Or does it get levies when it’s sent to the refinery? (Counting imports, that’d yield about $160 million in tax revenue per day—even with the recent fall-off in supplies sent from outside the US.)

But what most people care about is how much this might cost them at the pump.

The US Energy Information Administration says that the typical barrel of crude oil makes about 45 gallons of fuel. So a $10-a-barrel tax works out to about $0.22 cents extra per gallon of fuel. Presuming the full cost of the tax gets passed on to consumers, that’d be enough to put the national average price for a gallon of gas back above $2 for the first time since… last year.

This is a pretty convenient time for Obama to talk about a hike in the gas tax. People have been crowing about infrastructure investment for years now, but for much of that time, oil was expensive and higher gas taxes would’ve been a political non-starter. (The American Petroleum Institute, an oil industry lobbying group, notes that the national average for taxes on a gallon of gasoline is already about $0.48, and $0.53 for diesel.)

But oil is cheap now, and Obama’s on his way out of office anyway. With those winds to your back, you might as well go for it.

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