Should President-elect Obama propose a $10 per barrel oil tax?

Posted Dec 24th 2008 3:32PM by Joseph Lazzaro
Filed under: International Markets, Politics, Commodities, Oil

During the past four years, as gasoline first soared above $3, then $4, the United States transferred more than $2 trillion is wealth to oil producing nations, to which OPEC says, "Thank you very much."

However, in recent months, the price of oil has collapsed with the onset of the U.S. and global recessions, and oil now appears destined to test $30 per barrel - - and probably lower levels - - in the year ahead. Oil traded Wednesday down $1.53 to $37.43 per barrel, with regular unleaded gasoline averaging about $1.55-$1.75 nationwide. Incredibly, the stunning turn of events in the oil market means that energy from crude is now 'comfortably priced.'

Still, with three oil shocks (1973-74, 1979-80, 2007-08) having contributed to or directly causing three U.S. recessions, oil's drift back toward 'comfortable' levels re-opens the door for a policy debate: namely, should the U.S. let its economy remain vulnerable to prices swings in this volatile commodity or should it consider a tax to fund alternative energy sources for transportation.

Is a $10 oil tax up ahead?

Economist Peter Dawson said it seems almost unfathomable that the American people and Congress would be willing to ship $100 per barrel (or more) in oil revenue to foreign governments, and not to its own government, but that is precisely the case.

"This is another case where the 'free market' philosophy leads to public policy idiocy," Dawson said. "The oil lobby is so strong in the U.S., it's able to defeat almost any oil tax. As a result, because we import more than 40% of our oil, Americans pay hundreds of billions of dollars in oil costs to foreign governments. So in effect, we won't pay for our public policies, but we'll pay for other countries' public policies, which makes no sense."

What would make more sense, in Dawson's interpretation? Pass a federal, $10 per barrel oil tax, and restrict the money's use to alternative / renewable energy resources research, and energy efficiency, including development of next-generation cars, engines, and heating/cooling systems. A $10 tax on oil would generate $70-100 billion per year in federal revenue, Dawson said.

Will President-elect Obama propose a $10 oil tax? "Probably not. The fiscal stimulus package is priority No. 1 and that will take a lot of political capital," Dawson said. "The oil tax would be hotly debated. If he proposed it, Obama would probably be accused of trying to re-unite the old Soviet Union, so he's not likely to propose the tax."

And so the United States, from an energy independence standpoint, will remain far behind where it needs to be on energy policy -- and well behind Europe, he said.

And when the price of oil resumes its arc up (and we know it will) as the U.S. and global economies start to recover, United States citizens will resume shipping hundreds of billions of dollars into the coffers of foreign governments, including OPEC, he added. "The American consumer has been a great customer for OPEC," Dawson said.

Fiscal Policy / Oil Analysis: A $10 oil tax to fund renewable energy and conservation -- some argue the tax should be $20 -- merits consideration. It could speed the transition to renewable energy and keep more energy dollars at home, working in the U.S. economy, and creating domestic-based jobs. It would also enhance U.S. foreign policy options by making oil producing nation interests in the Middle East a less-important consideration in foreign policy decisions.

Tags: alternative energy sources, Congress, Democrats, gasoline prices, inthenews, Obama, oil prices, oil tax, OPEC, Republicans, taxes, trade deficit

Print this

Reader Comments (Page 2 of 2)

12-26-2008 @ 11:58PM

LARRY said...

WRONG --CLINTON DID CREATE HOUSING PROBLEM HE PUT THE PEOPLE IN THAT SCREWED IT UP--BUSH FIRED THEM IN 03 OR 05 -BARNIE FRANKS ALSO MAJOR COTRIBUTOR

1-02-2009 @ 5:20PM

Ashram said...

Actually, oil is not being allowed to operate in a true free market.

If it were, then there would be efforts underway to search and drill for oil domestically and in direct competition with OPEC.

Instead, we consume imported oil while keeping our own oil reserves out of the market. Since we don't produce and compete, we are subject to the whims of those that do produce without competition.

Blaming free market principles for this crap is an excuse to failed policies by those opposed to American efforts to produce oil domestically. The reasoning behind putting a $10 per barrel tax is rubbish and, I guarantee you, the oil exporters will circumvent the tax penalty by finding ways to charge us EVEN MORE for each barrel of oil.

1-04-2009 @ 4:44PM

Boyle said...

Only on Foreign Oil ....eom

1-05-2009 @ 7:16PM

don said...

The government would just screw it up and waste the money that should be ours. Oil is on the way back up to $4 now. Put tarrifs on foreign cars equal to what foreign governments put on American cars and save the American car companies. Leave oil prices alone and keep government hands off.

1-06-2009 @ 7:54AM

Dave said...

Get rid of free trade, get rid of nafta...things were almost normal back in the early 1990's before this "free trade" stuff happened. The reason we were once a great country in our own heads was because we didn't have to compete with cheap labor, slave labor, communist labor...whatever happened with us calling a communist country such as China bad? (After the collapse of communist Russia?) Well there's a new enemy and it IS CHINA! So they learned you can only win if you fight using economic weapons...and that's exactly what our own stupid politicians are doing...playing into the hands of greed and China.

1-06-2009 @ 10:39PM

Daang7601 said...

only $10??? Sheit, oil should be taxed $200 bbl... Would like to see oil and all the primitive gasoline or diesel fueled vehicles or tools... Kill and completely bankrupt OPEC and all the Wall Streeters to where there will be no point of return or bailing...

1-07-2009 @ 5:36AM

Darin said...

It is really funny how all you people think we have a choice in buying fuel for our autos...most people have to drive since there is no mass transit in my area...oil is a necessity, like food and water...to raise the prices on it will only take more money from the consumer( basic needs cost will increase, like food, and more companies will fold or layoff even more workers due to lack of sales) and they will spend even less , since most people don't get scheduled raises every year, and when they do it would not be enough to offset this increase in fuel price. High fuel prices caused this Recession, to cause it to go higher on purpose will bring on the Depression

1-07-2009 @ 7:58PM

C J Dunmore said...

Everytime the government interferes with the market, things get screwed up. Remember Jimmy Carter's oil errors. We don't need that again. Obama needs to pay attention to the corruption in his midst before addressing socializing energy.