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Both Eyes on Legacy
Obama Moves to Secure Green Legacy with $10 Oil Tax

President Obama unveiled a plan this week to levy a $10 tax on every barrel of crude oil produced here in the United States, with the funds raised by the tax earmarked for infrastructure investments. Reuters reports:

Set to be officially announced in Obama’s fiscal 2017 budget plan on Tuesday, the fee would provide nearly $20 billion a year to help expand transit systems across the country and more than $2 billion a year to support the research and development of self-driving vehicles and other low-carbon technologies.

What stands out most about this new proposed policy is its timing, for two reasons. First, this new tax would be coming online during a time of sustained low oil prices. Over the past 19 months, crude prices have fallen from more than $110 per barrel to down below $35 today, and while that may be good for consumers, the bearish market is making life very difficult for the companies producing that oil. Here in the United States, most of those producers are plumbing shale reserves, a relatively expensive process, and have been busy innovating new techniques and finding new places to cut costs in order to continue profitably producing. Taxing these companies an extra $10 per barrel produced would put many, many companies already on the brink of insolvency out of business, and in so doing would hurt American energy security.

Second, this idea comes during the final year of the President’s time in office, which should tell you something about how serious a strategy it is. Obama knows that this sort of thing has no chance getting through the Republican-controlled Congress (and indeed GOP lawmakers have been falling over themselves to heap scorn on the idea), which is why he’s floating it on his way out the door. It’s not going to happen, but President Obama hopes proposing it will assuage concerns amongst his green base and help protect his environmental legacy.

With this $10 tax, the Obama administration is attempting ham-handedly to correct a market failure, namely that oil companies aren’t paying for the long-term environmental damages they produce. But this isn’t the right way to address that externality. If the President were interested in actually making progress on this issue, rather than carefully crafting how history will remember his time in office, he’d be better served looking at ways to implement a revenue-neutral carbon tax.

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  • Andrew Allison

    This is simply a publicity stunt. The President knows perfectly well that there’s not a snowflake’s chance in hell of the measure passing. With a little bit of luck, even the sheeple will understand that it represents a 33% increase in the cost of oil and hence, ultimately, of gas.

  • Jim__L

    Aren’t oil companies typically adversarial towards Democrats? It might just be a middle finger to his political opponents.

  • Blackbeard

    Yes it won’t happen right now but make no mistake, the utter destruction of the fossil fuel industry is a key goal for the Greens and thus a key goal for the Democrats. If they can’t get this sort of thing through Congress look for a future president to do something similar by executive fiat, probably via the EPA.

  • bottomfish

    The Obama tax is like the Ted Cruz value-added tax but applied to just one product, and with no effort to abate other taxes like the corporate income tax.

  • CaliforniaStark

    This is an attempt at political cronyism, pure and simple. If you look at Obama’s proposal, the monies would be directed to urban areas to promote urban development and “smart growth” policies. The burden of the added tax would be upon rural residents and agricultural communities, whose residents would be burdened with the cost of providing Obama yet another green slush fund for his supporters and favorites.

    • Tom

      I mean, Obama’s advice to Latino voters back in 2010 was to punish their enemies and reward their friends come ballot time. Guess he decided to apply it to policy.

  • ljgude

    Doing what he did to coal on the way in to oil on the way out.

  • Jacksonian_Libertarian

    “Global Warming” is BS, and no one associated with this scam is going to be treated gently by History.

  • CosmotKat

    “With this $10 tax, the Obama administration is attempting ham-handedly to correct a market failure, namely that oil companies aren’t paying for the long-term environmental damages they produce.”
    What market failure? The government already gets it taste, when they tax the consumer at the pump. In addition, the oil producers pay substantially more tax then other corporate entities. The mere fact he stated this intent is indicative not just heavy handedness, but an overt display of economic ignorance that panders to his base and reveals why our economy continues to limp along at less than 2% growth. It’s the ideology and resulting policies, stupid.

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