Never has the case for an oil import fee been stronger. Congress and the president should unite and put it in place as soon as possible. I recently introduced a bill that would place a $5-per-barrel import fee on foreign crude oil and $10 on imported refined products. It would raise as much as $15 billion per year for the Treasury. There are a host of clear and convincing reasons to support it.
First, it could help resolve the current political deadlock over the budget. We cannot afford to let the budget process collapse. Tossing in the towel on the battle against the deficit would cast a cloud over the nation's economic future. The money raised by the import fee would help reduce the deficit and provide more room for budget negotiators to resolve other controversial issues that now divide them.
Second, an import fee would put a safety net under the price of domestic oil and would protect the financial system against the shock of any sudden fall of oil prices. The value of oil reserves in the ground is used as security for billions of dollars in loans held by American banks. Some analysts have predicted that oil prices could plunge sharply to $20 per barrel or even lower. While this is unlikely, if it happened it would threaten the stability of the banking and financial system in oil-producing regions of the country and would send shock waves into money centers such as New York and Chicago. We cannot afford to subject our economy to such risks.
Those who argue that an oil import fee could slow economic growth fail to take into account the disruption of the economy which could occur without it. They also fail to assess what a sudden drop in oil prices would do to employment and income in the domestic oil industry. One private study indicated that if oil fell to $20 per barrel, domestic drilling would be cut in half and hundreds of thousands of jobs would be lost.
Third, the proposal is fair tax policy and will promote energy independence. Domestic oil producers pay the windfall profits tax and state severance taxes. Foreign producers do not. Why should our tax policy continue to encourage the creation of jobs for exploration and refining in other nations instead of here at home. Already the portion of oil we obtain from overseas has begun to increase again.
TAKE 234346 PAGE 00002 TIME 15:16 DATE 07-29-85 It is clearly in the interest of national security for us to lessen our dependence on these foreign sources.
The import fee must be placed on refined as well as on crude oil to prevent the other producing nations from simply switching their U.S. sales from crude oil to refined products. Our refineries are already in trouble. More than 100 U.S. refineries have folded in recent years, and our refining capacity is already below the 14 million barrels a day needed to meet emergency national security requirements.
Fourth, an import fee would promote energy conservation. If oil prices continue to fall toward artificially low levels, wasteful use of energy will once more be encouraged. The bill before the Senate would promote conservation while protecting consumers against unreasonable prices. The fee would begin to phase out as crude oil prices reached $25 per barrel and would end entirely at the $30 level.
Fifth, the proposal can be implemented in a manner that will maintain regional fairness and preserve our own competitiveness in trade. The bill I introduced provides rebates on the fee for home heating oil in order to protect those in New England and the Northeast who depend upon this fuel. It also provides a rebate to American manufacturers who use imported crude oil in the process of making products for export. This would ensure that American businesses such as the chemical industry would not be placed at a competitive disavantage in te cost of their products for export to other markets.
Recently, one of my fellow senators said to me, "The import fee makes so much sense that Congress probably won't pass it" I hope that he was wrong. We can't afford the luxury or continuing to discard good ideas.