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.
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.
“Meeting future challenges will require a long-term vision for the transportation sector that includes more and cleaner options,” Transportation Secretary Anthony Foxx said in a statement. “This budget brings us closer to that vision.”
Exported petroleum products would not be subject to the fee, and home heating oil would be temporarily exempted. The fee would apply to all petroleum produced or imported beginning Oct. 1, 2021.
Administration officials cited the fee as $10 per barrel when describing it to reporters on Feb. 4. On Tuesday, Jason Furman, chairman of the Council of Economic Advisers, said the proposal calls for a fee that will phase in over five years and then be indexed to inflation. The $10 figure is the average over the phase-in period.
The White House Office of Management and Budget did not share details on the modeling and assumptions it used to estimate the 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.
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. On Tuesday, Zients said the fee "will save consumers and commuters time and energy costs."
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.
Oil companies would probably pass on the added cost to consumers, resulting higher prices for gasoline and other products, the non-partisan Congressional Research Service said in a report commissioned by the Republican staff of the Senate Energy and Natural Resources Committee.
"In general, the fee would likely result in decreased discretionary consumer purchasing power which may translate into lower expected economic growth," according to the report.
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."
Conservationists supported the move. Rhea Suh, president of the Natural Resources Defense Council, said the budget "sets important priorities to continue the historic progress achieved in recent years on protecting our climate, air, land, water and oceans."
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