In a move that received a chilly reception in the Republican-controlled United States Congress that oversees spending, President Barack Obama is proposing a US$10 a barrel tax on oil in his fiscal 2017 budget plan.
With the proceeds targeted to transportation and climate initiatives, the proposal deepens President Obama’s environmental credentials and signifies his ambitions to aggressively push action on climate change during his final year in office.
“By placing a fee on oil, the president’s plan creates 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 said in a statement reported by Bloomberg newsagency.
It is unclear whom, exactly would pay the tax if it were to pass, and how it would be structured.
White House officials repeatedly stressed that the fee would fall on oil companies, but said it would not be charged at the wellhead and they look forward to working with Congress on the details.
The fee, which drew swift objections from oil industry groups and Republicans, is part of a broader administration plan to shift the nation away from transportation systems reliant on internal combustion engines and fossil fuels.
The proposal envisions investing US$20 billion to reduce traffic and improve commuting, US$10 billion for state and local transportation and climate programs and US$2 billion for research on clean vehicles and aircraft.
“President Obama’s proposed US$10 per barrel tax on oil is dead on arrival in the House,” said House Majority Whip Steve Scalise, a Louisiana Republican.
Environmentalists applauded the move.
“President Obama’s vision underscores the inevitable transition away from oil, and investments like this speed us along the way to a 100% clean energy future,” Sierra Club Executive Director Michael Brune said in an email.
Inadequate infrastructure raises costs for businesses and consumers, including motorists stuck in traffic, a “hidden tax” and a harm to the environment, said Transportation Secretary Anthony Foxx.
Mr Foxx said the plan increases investment in infrastructure in a way that combats climate change.
Oklahoma Senator Jim Inhofe, the Republican chairman of the Environment and Public Works Committee, said he agreed on the need to improve the nation’s transportation system but would oppose the oil tax.
President Obama’s officials cast the additional cost as more than offset by the benefits of building better highways and transit systems.
“At a time when oil companies are going through the largest financial crisis in over 25 years, it makes little sense to raise costs on the industry.”
Bloomberg reports the dip in petrol prices may have created a political opening for President Obama’s proposal, but it also could create tricky politics for one of the Democrats running to succeed him in the White House, Hillary Clinton.
House Speaker Paul Ryan, a Wisconsin Republican, said President Obama “expects hard-working consumers to pay for his out-of-touch climate agenda.”