For the last year we’ve enjoyed the lowest gas prices we’ve seen in quite a long time. This has been as Saudi-led OPEC is flooding the market with oil while global demand remains constant (and as China’s economy deteriorates, potentially faces a decline).
The consensus is that OPEC’s strategy is to put competitors out of business, since they have a relatively low cost of producing oil. While it has been damaging – causing a significant drop in America’s rig count, there’s been a silver lining for the American consumer.
Naturally Obama wants to take credit for this – despite how high gas prices were before OPEC’s strategy began (which he has ZERO control over). In his State of the Union he stated “We’re taking steps to give homeowners the freedom to generate and store their own energy — something, by the way, that environmentalists and Tea Partiers have teamed up to support. And meanwhile, we’ve cut our imports of foreign oil by nearly 60 percent, and cut carbon pollution more than any other country on Earth. Gas under two bucks a gallon ain’t bad, either.”
He may have had zero control over the drop in the price of oil, but he is taking steps to reverse it. As Yahoo reported:
U.S. President Barack Obama will propose a $10-a-barrel fee on oil in his budget plan next week, as the White House seeks to boost the nation’s investments in clean transportation projects, the White House said on Thursday.
The fee, which would be paid by oil companies, is likely to fall flat in the Republican-controlled Congress.
In the last year of his presidency, Obama has said the country must stop subsidizing the “dirty” fossil fuels of the past and focus on clean, renewable fuels that do not exacerbate climate change.
“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.
The long-shot proposal for the oil fee, set to be announced in Obama’s fiscal 2017 budget plan on Tuesday, would provide nearly $20 billion a year to help expand transit systems across the country and more than $2 billion a year to support research and development of self-driving vehicles and other low-carbon technologies.
To put in perspective of how large a tax this is, crude traded around $30 a barrel this week. A $10 tax would increase that price by 33%, and the price of oil is going to go back up in the future eventually.
Obama may want to take credit for low gas prices, but his actions prove he’s trying to accomplish the opposite.
[Note: This post was authored by The Analytical Economist]