President Barack Obama has announced a new plan to levy a $10 fee on every barrel of oil to fund new vehicle technology, rail initiatives and alternative fuel transportation systems. Let’s be honest, it’s a tax. At today’s crude oil prices, that’s a 38 percent tax on an already-suffering industry.
While Congressional leaders have called the proposal “dead on arrival,” the Obama administration’s plan shows just how out of touch our president is with America’s oil and natural gas industry.
In Oklahoma, like the rest of the nation, crude oil production is dominated by independent producers that do not own their own refineries or service stations. For every BP and Chevron, companies that do own refining and marketing, there are tens of thousands of companies run by independent producers who are unable to pass the tax increase on to consumers as the Obama administration has suggested.
Just like American farmers, independent producers are price takers. Just like farmers and ranchers who sell their beef or corn at market prices, independent oil producers simply take the price the market gives them. Today, that price is $26. Adding a $10 tax on top of that would mean Oklahoma oil producers are bringing in $16 for every barrel of oil they produce, far below the $45-per-barrel breakeven price needed to keep drilling rigs running and Oklahomans working.
With all that said, a slight modification to Obama’s proposal — putting his proposed $10 fee on imported oil only — would pay dividends for both Obama and the oil and natural gas industry. Such a move would generate revenue to fund Obama’s transportation follies, and by encouraging American refineries to utilize American crude oil, Oklahoma oil producers would have a rejuvenated market in which to sell their product.
Unfortunately, it is also a move that will never happen. President Obama has not hidden the fact that he would like to eliminate the use of fossil fuels. A $10-a-barrel fee is nothing more than another attempt to tax an already-suffering industry into extinction.
Come on, America. Wake up. Let’s not let this administration destroy the American oil and natural gas industry.
Jeffrey J. McDougall is chairman of the Oklahoma Independent Petroleum Association and president and principal owner of Oklahoma City’s JMA Energy Co.