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Obama's $10 Per Barrel Oil Tax and Why We Hate It


There is never a shortage of news out there that makes you scratch your head and wonder if you are the only one paying attention anymore.  Usually, this news has to do with either the government or some idiot celebrity.  Because we are not in the business of reporting celebrity news, I’m going to talk about a proposed regressive tax brought to you by your very own Federal Government.

President Obama has proposed a $10 per barrel oil tax to fund a new transportation spending plan.  Before you get bent out of shape about the extra 33 cents per gallon you might be paying because of this, you may want to know that this tax won’t be on the consumer.  That’s right, this tax will be levied on the oil companies.  And I’m sure that Chevron, which just posted a loss in the 4th quarter, and ExxonMobil, whose profits declined 57% quarter over quarter, or maybe BP, which lost $3.3 billion dollars in the 4th quarter, are probably going to eat this new tax and not pass it on to you.  Right?  Wrong. You will pay it   

I was curious if the oil companies could absorb that tax if they wanted to, so I did some research.  From the US Energy Administration's own website, I found that in December of 2015, the average price of a gallon of gas in the US was $2.04.  Of that , 42% or 86 cents per gallon was the cost of extracting the crude oil from the ground, 19% or 39 cents was the cost of refining the crude, 17% or 35 cents goes into distribution and marketing, and 22% or 45 cents is taxes.  This varies greatly across the country based on state and local taxes, delivery costs, etc… but this was the national data.  For example, in Pennsylvania, motorists pay 73.7 cents per gallon, which is over 30% of the cost of the gas.  Considering that the estimated net loss of energy companies in 2015 is almost $30 billion dollars, I think it is safe to say that they cannot absorb an additional 33 cent per gallon tax.  So guess who that leaves to pay it?  If you guessed the American motorist, you are correct.

Do you think it is a coincidence that this new tax is getting proposed now, while gas is at $1.70 per gallon locally?  Heck no, this is a strategic move by this administration to shove another tax on American public, disguised as a tax on a corporation, timed when it will hurt us the least due to low energy prices.  Do you realize that a 33 cent per gallon tax will cost you an extra $6.60 every time you fill up your tank, assuming you have a 20 gallon tank? That amounts to more than $343 per year in new taxes if you fill up once a week. And my least favorite part of this tax is that it is regressive, meaning it hurts low-income earners more than high-income earners.  This tax hits everyone who has a car and buys gasoline, which in America, is just about everyone.  That means that someone who earns $34,300 per year will pay 1% of income towards this tax in the scenario above. However, someone who makes $100,000 per year will pay just 0.34% of their income towards this tax. Who does this tax hurt more?

Ironically, one thing I have noticed is that saving money on gasoline is one of America's favorite pastimes.  I have seen people who will not clip a coupon no matter how much they will save drive out of their way to shop at Winn Dixie to get the fuelperks! benefits they offer.  Then they will go and save 25 cents per gallon, and post their savings on Facebook just to show everyone what a great deal they got!  How exciting, you paid $1.45/gallon for 20 gallons instead of of $1.70!  You saved $5.00.  Yes, $5.00.  Meanwhile, if you had clipped coupons before the shopping trip, you probably could have saved at least 3 times that, but no one is posting about that on Facebook.  

And a little bit off topic, according to Newsbusters.org, the 3 main networks (ABC, NBC, and CBS) evening news shows have quietly forgotten to mention the struggling oil companies in 2015.  In 2006, when prices and profits were high, they mention oil company profits 9 times more than they did last year.  Go figure.