With one of its final few opportunities to keep stickin’ it to the hardworking capitalists and industries of America, the Obama administration has proposed a $10 tax on every barrel of oil produced domestically or imported from abroad. Just another step in Obama’s war on American energy.

The honest truth here is that Obama is running short on time. He’s flailing around for one last hoorah before the end of his presidency, and oil is an easy target for a bold proposition like this one.

We understand the importance of renewable energy, but that’s just a convenient side effect for the U.S. Treasury. The real outcome will be taking money directly away from domestic oil producers and re-allocating it into federal coffers.

We’re All Losers

This translates to double the federal gas tax you’re already paying at the pump and an approximate 33% increase on U.S. oil, as it’s currently hovering around $30 per barrel.

The bill, if passed in its entirety, would easily bankrupt the United States’ oil market.

“That’s a lot of money to ask from an industry that can’t afford to pay its own expenses, much less a $10 tax.” — Carl Larry, Oil Outlooks

The cartel that is OPEC is already on a mission to do that itself, so I’m a little curious as to why the President feels the need to add fuel to its fire.

Instead of making it easier for American oil producers to operate and compete with foreign oil, Obama puts them at a competitive disadvantage compared to Russia and Iran.

This comes at a convenient time, since Obama just removed the velvet rope for Iran to flood the market with the 50 million barrels of oil just waiting in offshore tankers.

We will definitely be getting back to this point later, but first, some paperwork.

The proposal states:

We are proposing to fund these investments through a new $10 per barrel fee on oil paid by oil companies, which would be gradually phased in over five years. The fee raises the funding necessary to make these new investments, while also providing for the long-term solvency of the Highway Trust Fund to ensure we maintain the infrastructure we have.  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 also states that the tax would provide “$20 billion a year to help expand transit systems across the country and more than $2 billion a year to support the research and development of self-driving vehicles and other low-carbon technologies.”

Take self-driving cars, for example. They might be battery powered, but where do you think the electricity comes from?

The answer: a mix of natural gas, coal, and nuclear (not to mention the $9 billion the government receives annually from fossil fuel development on public land).

Barack, don’t piss on me and tell me it’s environmentally friendly.

The people who bear the brunt of oil taxes are middle- and lower-income families who allot a higher percentage of their income towards energy.

“Families that make less than $30,000 a year spend 26 percent of their after-tax income on energy expenditures, while families that make over $50,000 a year spend only 8 percent.” — Institute for Energy Research

“Since it is likely that the oil fee would be shifted forward by the oil companies, and since petroleum products enter into many products, consumers will likely see higher prices, not only directly for gasoline and other consumer products, but, in general, for many products to varying degrees.” — Senate Energy and Natural Resources Committee

Oh, and if you ever drive a vehicle…

Anticipate your gas prices to increase by $0.24 cents per gallon.

Obama Herds Investors to the Next Frontier

These final energy plans basically cater to foreign competitors and weaken our own economy at the same time.

Obama is giving a significant competitive advantage to foreign producers like Russia and Iran, while Americans suffer at home.

If American investors are going to benefit in any way from Obama’s ridiculous tax proposal, it’s going to be from piggybacking on foreign oil companies — specifically Iranian ones.

Since sanctions were lifted on the Middle Eastern country, investment opportunities abound — especially in the oil sector.

It’s an appealing frontier for investors, since Iran is arguably one of the most diverse economies in the Middle East. The industrial base is well developed, and it has a competitive advantage specifically among petrochemicals and metals.

Market research group Renaissance Capital estimates that the nation’s GDP was a healthy $437 billion last year.

“Global investors are never going to see a country of this size and sophistication open up again.” — Charles Robertson, Renaissance chief economist

The arrangement is win-win. Iran desperately needs foreign investment in its O&G sector to support outdated infrastructure, and it is planning to raise nearly $30 billion each year for the next five years. 

The real question is, “Are you brave enough?”

Until next time,

Jennifer Clark for Pro Trader Today