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Could a New Tax Be the Death of Oil?

The President is kicking Big Oil when it's already down


In his more than seven years in office, President Obama has already killed the coal industry. And in his final budget request of his presidential term, he made it clear that he has a new target — the already battered oil industry

Could a New Tax Be the Death of Oil?
Source: Flickr>

Last Thursday, Obama proposed an upgrade to the country’s transportation system.

He wants to increase spending on clean transportation infrastructure by 50%, which will include integrating new technology (like self-driving cars), expanding transit in cities, making high-speed rail more of an alternative to flying and much more.

But to pay for all of this, the White House plans to implement a $10-per-barrel tax on oil to be paid for by the oil companies.

The industry was quick to voice its opposition to the proposal, noting that such a tax would be passed on to consumers, with the possibility of as much as a 25 cent hike at the pump.

While the White House acknowledged these claims, it stressed that the current infrastructure system has costs as well, and said that the new tax would encourage clean energy innovation while also helping to reduce the country’s heavy reliance on oil.

One of the main problems here is that this proposal and potential tax comes at a time when the oil industry has already been pummeled by the crash in oil prices.

Prices have been falling for some time now, and as I write this oil costs less than $30 a barrel. To cope, many companies have had to cut jobs, file for bankruptcy and default on their loans, and even the giants have posted huge profit declines and slashed plans to invest in expansion.

A $10-per-barrel tax would only hurt these companies further, killing more American jobs when 300,000 have already been lost in the oil patch.

To put that into perspective, only 151,000 new jobs were created in January, and some argue that 70% of them pay just minimum wage. We can’t afford to lose even more jobs. What the economy really needs is more being created.

While it’s unlikely that the Republican-controlled Congress will allow this to see the light of day — House Speaker Paul Ryan called the tax “dead on arrival” and warned that it would raise energy prices and hurt poor Americans — I’m not surprised that the President is going in for the death blow here.

He’s talking about destroying another fossil fuel industry, and it’s a very scary prospect.

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