An oil import fee of $5 a barrel "is very high on the list of revenue measures" White House officials are suggesting in their negotiations with congressional leaders over how to reduce federal budget deficits, a key administration official said yesterday.
Such a fee would likely lift prices of gasoline, home heating oil and other petroleum products up to 12 cents a gallon above where they would otherwise be and add nearly a full percentage point to the nation's inflation rate unless the soft world oil market forced exporting countries to absorb part of the increase, according to Congressional Budget Office estimates.
Estimates of how much a fee would yield the Treasury vary widely, depending mainly on whether it is assumed the higher oil prices would depress the general level of economic activity.
The CBO calculated in a March 22 memo that federal revenues from a fee of $5 a barrel and the windfall profits tax would be "in the $11 billion to $13 billion range starting in 1983." However, the higher prices would cost the government, as an oil user, several hundred million dollars, and up to $2 billion in higher Social Security and other benefits payments triggered by the higher inflation rate.
Some of the Senate participants in the budget negotiations, including Finance Committee Chairman Robert J. Dole (R-Kan.) and Budget Committee Chairman Pete V. Domenici (R-N.M.), are actively backing use of the fee in the package of spending cuts and revenue raising steps designed to reduce the 1983 budget deficit. Without any such reductions, administration officials estimate the deficit may be as much as $185 billion.
A fee would have much the same impact as a direct increase in oil prices engineered by the Organization of Petroleum Exporting Countries or dictated by market forces.
The nation's most oil dependent regions, such as New England and the Middle Atlantic states, would bear more of the brunt of the cost. Oil producing regions would benefit relatively as the prices of domestically produced crude oil, natural gas liquids--and eventually even natural gas--rose to meet the higher price of imported crude and refined products.
Legislators from the Frost Belt generally oppose the fee, but it might be sold as part of a package reducing the deficit, congressional observers said. However, one source close to House Speaker Thomas P. O'Neill Jr. (D-Mass.) declared, "There is no New England congressman who could support it."
Most major oil companies are opposed to the fee, though most have not yet spoken out against it. Congressional sources said other groups, including the National Governors Association, are gearing up to oppose it.
A Gulf Oil Corp. vice president, William Moffett, had a typical industry comment: "American consumers already bear heavy tax burdens every time they fill up their gas tanks or turn on their furnaces. Additional taxes on imported oil at this time, just when consumers are getting some relief, would convince consumers that the free market is only a figment of our national imagination."
Said another major oil company representative, "It would create all sorts of international complications. If you're fighting inflation, it's not what you want to do."
President Reagan apparently has not given his personal approval to inclusion of a fee in any budget compromise package. However, administration negotiators, led by presidential aide James A. Baker III, are pushing the idea because they need a "big ticket" revenue raising item in the absence of any indication Reagan will agree to reducing the size of the 1983 personal income tax cut, said an aide to House Ways and Means Committee Chairman Dan Rostenkowski, one of the negotiators.
David A. Stockman, director of the Office of Management and Budget, and Murray L. Weidenbaum, chairman of the Council of Economic Advisers, were said to be backing the fee in order to reduce the deficit. Some other administration officials, including Energy Secretary James B. Edwards, are against it.
One appeal of the fee is the fact that under the Trade Adjustment Act the president could impose it by executive order that could be blocked only by a resolution passed by both House and Senate. On the other hand, Reagan would have to claim under the act that he was imposing the fee because oil imports were threatening national security, not just to raise revenue.
Since the principal objective is revenue, not import reductions, "he inevitably would be sued," predicted one Capitol Hill energy expert.
Politically, a fee is somewhat more palatable in a time of declining oil prices since the increase paid by consumers would appear to be less than it actually was. Nevertheless, the fee would be acceptable to some members of Congress only if a way could be found to ease the burden on home heating oil users.