Obama seeks new $10-per-barrel oil tax in budget proposal to fund clean transport

President Obama will propose a US$10 per barrel tax on oil in the fiscal 2017 budget to finance self- driving cars, riding on the bus, railroads along with other transportation improvements, the White House said.

“By placing a fee on oil, the President’s plan results in a clear incentive for private sector innovation to lessen our reliance upon oil and at the same time invests in clean energy technologies which will power our future,” the White House said Thursday in a statement.

The fee is part of a broader administration plan to shift the country away from transportation systems reliant on car engines and fossil fuels. The proposal envisions investing US$20 billion to lessen traffic and improve commuting, US$10 billion for local and state transportation and climate programs and US$2 billion for research on clean vehicles and aircraft.

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The plan includes oil prices down 13 per cent this year, thanks to increasing supply along with a weakening U.S. dollar. Crude stockpiles climbed 7.79 million barrels to 502.7 million a week ago, the greatest since the 1930s, according to weekly and monthly data in the Energy Information Administration. The proposal could increase the cost of a gallon of oil up to 25 cents for U.S. drivers.

Before the plan was announced, West Texas Intermediate for March delivery slipped 61 cents, or 1.9 percent, to US$31.67 a barrel at 1:54 p.m. on the New York Mercantile Exchange.

The new oil tax, which would be phased in over five years, is all but sure to be ignored by Republicans who charge of both chambers of Congress.

–With the help of Mark Shenk.

Bloomberg News