Obama's $319 Billion Oil Tax Plan Raised to $10.25 a Barrel

Obama's $319 Billion Oil Tax Plan Raised to $10.25 a Barrel
President Barack Obama proposes budget to raise $319 billion during the next decade for transportation, other needs with a $10.25-per-barrel tax on crude.

(Bloomberg) -- President Barack Obama proposed Tuesday to raise $319 billion over the next decade for transportation and other needs with a $10.25-per-barrel tax on crude - up from $10 that was announced last week.

The higher amount, along with other details, were released Tuesday as part of the president’s $4.1 trillion budget request to Congress, including a proposed increase in the oil tax that Republicans swiftly rejected.

While major questions still remain unanswered, including how and when the fee would be charged, the White House envisions collecting the tax from an estimated 4 billion barrels of domestic and imported oil in 2022, once it is fully phased in.

The money would be steered to a "21st Century Clean Transportation Plan to upgrade the nation’s transportation system, improve resilience and reduce emissions," according to budget documents released Tuesday.

Exported petroleum products would not be subject to the fee, and home heating oil would be temporarily exempted. After a five-year phase in, the fee would apply to all petroleum produced or imported beginning Oct. 1, 2021.

10.9 Million

The White House Office of Management and Budget did not explain the higher fee or share details on the modeling and assumptions it used to estimate money it would raise - as much as $319 billion from fiscal 2017 to fiscal 2026. But the $41 billion estimated to come in during fiscal 2022 would reflect about 10.9 million barrels per day of oil. 

The Energy Information Administration projects the U.S. will produce 10.44 million barrels of crude oil per day in 2022.

Republicans in charge of Congress - which decides whether, and how, to act on Obama’s budget blueprint - have already declared his proposed oil fee "dead on arrival." And it has been angrily denounced by oil industry leaders, who say the fee would be passed on to consumers, hitting poor and middle-income families especially hard.

American Petroleum Institute President Jack Gerard called it an "unprecedented tax hike" in remarks to reporters Monday.

"We know that this tax hike could also have an impact on food prices and all sorts of consumer goods - everything that relies on transportation to get to consumers," Gerard said in a teleconference. "Only extremists whose goals ignore the concerns of consumers and lower-income families could welcome such an approach."

National Economic Council Director Jeff Zients told reporters Feb. 4 that oil companies would pay the fee, though it would not be charged at the wellhead. He said the fee would be $10 per barrel.

To contact the reporters on this story: Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net; Brian Wingfield in Washington at bwingfield3@bloomberg.net To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Elizabeth Wasserman.

Copyright 2016 Bloomberg News.

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Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
David Thompson | Apr. 15, 2016
Only end-users pay taxes. Corporations pay no taxes. They must pass all costs through. This may sound simplistic, but it is the law. The corporation's first loyalty is to the shareholders, therefore all costs must be passed to the consumer. If they don't do that, the shareholders can sue the corporation. Taxing corporations is just an illusion. They pay no taxes - the end-users pay.

Michael Gilstrap | Feb. 13, 2016
What happen to cutting government waste and reducing government spending along with reducing big government? Lets start with that then see what we need to do next!

Gary Allen | Feb. 10, 2016
Spend Spend Spend..........Its amazing how the Washington elite lose their perspective as soon as they become elected.

Charles Drobny | Feb. 10, 2016
Definition of a liberal. They tell you how they want to spend your money. So millions of Americans have lower transportation costs and the response is raise tax to redirect the savings. Then of course theres the basic economic lesson - lost on the Administration - that if they add $10.25/bbl to the cost the domestic O&G industry will be 33% less competitive in the global market. Refiners will be MORE likely to purchase foreign oil because it will be 33% cheaper. Morons.

M A Steiner | Feb. 10, 2016
Elections have consequences.


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