WASHINGTON (Bloomberg) -- President Barack Obama will propose a $10 per barrel tax on oil in his fiscal 2017 budget to finance self driving cars, public transit, railroads and other transportation improvements, the White House said.
"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 Thursday in a statement.
The fee is part of a broader administration plan to shift the nation away from transportation systems reliant on internal combustion engines and fossil fuels. The proposal envisions investing $20 billion to reduce traffic and improve commuting, $10 billion for state and local transportation and climate programs and $2 billion for research on clean vehicles and aircraft.
The plan comes with oil prices down 13 percent this year, thanks to increasing supply and a weakening U.S. dollar. Crude stockpiles climbed 7.79 million barrels to 502.7 million last week, the highest since the 1930s, according to weekly and monthly data from the Energy Information Administration. The proposal could increase the price of a gallon of gasoline by as much as 25 cents for U.S. drivers.
Before the plan was announced, West Texas Intermediate for March delivery slipped 61 cents, or 1.9 percent, to $31.67 a barrel at 1:54 p.m. on the New York Mercantile Exchange.
The new oil tax, which would be phased in over five years, is all but certain to be ignored by Republicans who control of both chambers of Congress.
Some Republicans reacted swiftly to Obama's call for the new oil tax, promising to kill what they called an "absurd" idea.
"From day one of President Obama's administration, he has waged open warfare on American energy," said House Majority Whip Steve Scalise, the third-ranking Republican.