Wednesday, February 10, 2016

What's Really Behind Obama's $10/Barrel Oil Tax

Obama is preparing to deliver a speech justifying his proposed $10 a barrel federal oil tax that would be phased in over the next 5 years; arguing that it is needed to fund his climate change agenda for building rail transport systems in heavily trafficked regional areas of the country.  Sounds logical; doesn't it?  Of course, its our deteriorating roads and infrastructure that really needs the money. But, I'll put that aside.

In reality, the tax is intended to kill existing oil fracking and any new oil exploration using fracking. At the same time, it will add 25 cents to the cost of each gallon of gas you and I buy.  Thus, hitting the working poor the hardest and forcing many to consider high mileage hybrids or electrics.

More importantly, because the tax is at the producer level, it substantially increases the cost of exploration and the extraction of oil.  For example, if it was fully implemented and oil was selling for the current, pre-tax price of $30 a barrel, the gross return on investment for producing a single barrel would be cut to just $20 after the tax was applied.  In other words, with an average break-even cost of $25/barrel for fracking operations, many fracking operators would have to shut down to avoid a $5 or higher per-barrel-loss on every barrel of oil they produce.

Obama knows all these facts and they are the real reasons behind his $10/barrel oil tax.


Obama to call for $10-per-barrel oil tax to fund clean transport:

 With Fuel Prices Low, President Obama Floats $10 Per Barrel Tax On Oil:

Oil crashed by 6.3 percent to $30.98 on January 11, as the price of crude oil continues to fall toward the $25 break-even cost of production:

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