Obama Calls for $10 Oil Tax

Plan Would Pay for Greener Transportation, But Unlikely to Draw Congressional Support

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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A proposed tax on oil would pay for high-speed rail and modernization to freight rail, as well as increased federal funds to mass transit in cities. (DTN/The Progressive Farmer file photo by Jim Patrico)

OMAHA (DTN) -- President Barack Obama's advisers on Thursday pitched a $10-per-barrel tax on oil to pay for new transit programs and research on higher-mileage vehicles.

The president will propose the plan when he releases his proposed 2017 budget next week to Congress. Such proposals frequently come with a truckload of "dead on arrival" comments from congressional leaders. Republicans, who control the House and Senate, are highly unlikely to approve a tax on oil to fund cleaner energy. The president's plan does provide stump-speech fodder for presidential and congressional campaigns.

The plan to tax oil comes as per-gallon national gas prices are the lowest since early 2009, Obama's first days in office. AAA reports gas prices are averaging $1.77 a gallon nationally and dip as low as $1.45 a gallon on average across Missouri.

Such a proposal is unlikely to be embraced by farm groups, which are going to highlight the high costs farmers pay for inputs, including fuel costs for machinery and vehicles.

The White House briefed reporters Thursday and laid out details for the president's "21st Century Clean Transportation System" that would spend about $32 billion a year on different infrastructure investments.

The president pointed to the need to address climate change by reducing carbon emissions while creating jobs in cleaner transportation. The transportation sector accounts for about 30% of greenhouse-gas emissions, the White House stated.

Thus, a new tax on oil would pay for high-speed rail and modernization to freight rail, as well as increased federal funds to mass transit in cities. It would also pay for more research into cleaner cars and planes. Increased funding would also make the Highway Trust Fund solvent again.

House Speaker Paul Ryan, R-Wis., sent out a "dead-on-arrival" statement shortly after the White House issued the proposal.

"Once again, the president expects hardworking consumers to pay for his out-of-touch climate agenda," Ryan said in a statement. "A $10 tax for every barrel of oil produced would raise energy prices -- hurting poor Americans the most."

The White House stated the $10-a-barrel oil tax would be paid by oil companies and phased in over five years. "By placing a fee on oil, the president's plan created 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 stated.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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Chris Clayton