The $10.25 tax on each barrel of crude oil purchased by oil companies in the United States proposed by President Obama would mean slower economic growth, a congressional report said Tuesday.
As detailed in his budget Tuesday morning, Obama is proposing to tax each barrel of crude $10.25, 25 cents more than the amount initially reported last week. The money raised from the tax would fund the 21st Century Clean Transportation Plan to the tune of $320 billion over the next 10 years.
A report by the Congressional Research Service, the nonpartisan public policy research arm of Congress, reported the proposal is still vague. It’s unknown how the tax would phased in, but regardless of the timing, the proposal would result in higher gasoline prices.
While the Obama administration attempted to frame the tax as one that would be levied against oil companies, the costs would be passed down to consumers, the report said.
“In general, the fee would likely result in decreased discretionary consumer purchasing power, which may translate into lower expected economic growth,” the report stated.
The Senate Energy and Natural Resources Committee, on behalf of Republican Chairwoman Lisa Murkowski, of Alaska, commissioned the report.
Many questions about the proposed tax have yet to be answered. Among them are how the tax would be applied to crude oil of differing qualities, since not all crude oil is created equal.
It’s also unknown if the tax would apply equally to both large oil companies and smaller companies.
The refining of crude oil produces a multitude of other products in addition to gasoline and diesel. The report indicates a single barrel of oil produces 19 gallons of gasoline and 12 gallons of diesel fuel. It’s unknown how the tax would be spread out among the other products.
The effects the tax could have on the economy are vast, the report says.
Transportation fuel prices would increase, as would home heating prices. The prices of other products could increase as well, since they depend on petroleum products to bring them to market.
The question is how would consumers adjust their spending habits and decisions in the wake of price changes, according to the report.
“The answer is likely to determine how employment would be affected in various industries,” the report stated.
The report adds the tax would make oil companies less likely to hire new employees and explore for new sources of oil. Reducing exploration and production could hurt the country’s energy production and lead to a decrease in energy security and independence.
