Now that oil prices are collapsing -- North Sea crude was under $16 a barrel at midweek and probably heading lower -- you will hear a lot of talk about the wisdom of an oil import tax as a convenient way of raising money to help reduce the huge federal deficit.
Imposition of a $5 tax (the proponents prefer to call it a "fee," hoping thereby to slide it past President Reagan's anti-tax gaze) might raise close to $10 billion a year in revenue, while adding about 12 cents to a gallon of gas at the pump. Make it $10, and you've got a quick $20 billion, at a cost of 24 cents a gallon to the public.
Given the colossal deficit-cutting targets of the Gramm-Rudman-Hollings act, an oil-import tax has a certain seductive lure, no doubt about it. But the only really good reason to consider taxing imported oil relates to national energy security considerations.
On economic grounds, imposition of a $5 or $10 fee on imported oil makes no sense at all. It would dilute the extraordinary benefits about to accrue to the United States and other oil users from the decline in energy prices. The collapse of oil prices may be the best economic news of the century.
Lower oil prices, symbolic of disintegration of OPEC's power over the market, are the equivalent of a tax cut. They mean greater economic growth, more jobs, lower inflation and lower interest rates for all nations, with the exception of a few debtor countries, such as Mexico, that produce and sell oil.
Prices, already down 50 percent from their peaks, can stir a recovery from the OPEC-induced depression that has gripped backward and sophisticated economies alike since 1973. It will be a bonanza especially for Europe, which of all the large consuming areas was hit hardest by the two earlier OPEC il shocks.
An oil tax would take away all or some of these benefits. Unless there were an equivalent wellhead tax, it would also provide a windfall for domestic oil producers, who would be able to boost their prices to the new, higher level created by the tax. While this would benefit the Southwest oil-producing states and their bankers who financed risky, high-cost oil exploration, it clearly would be of no help, and considerable harm, to the Northeast where no crude oil is produced but much heating oil is consumed.
What is the security argument? The theory is that an import tax, especially if designed to exclude this country's friends such as Canada, Venezuela and Mexico, will do its damage primarily to the OPEC bloc: by keeping the price to consumers higher, it will protect American investments in alternative energy sources, and deprive OPEC of the benefits of greater demand stimulated by the price war it touched off.
Two economists who advocate the tax are Washington consultant Lawrence Goldmuntz and Myer Rashish, Reagan's first undersecretary of state for economic affairs. On the Chamber of Commerce "It's Your Business" show Sunday, Rashish said, "We had 10 years of devastation after the '73 oil embargo, and we have to prevent that from happening again in the future."
They and some others fear that if no tax is imposed, we will get hooked on cheap OPEC oil; the time will come again, all too soon, when the Arab members of OPEC will be in the catbird seat as the owners of the principal reserves. And having derailed our will to conserve, substitute and explore, they will be able to reestablish control and drive the price back to its $34 peak -- or higher.
Goldmuntz says the increase in consumption and the drop in domestic production triggered by the drop in oil prices will, by the year 2000, return us to the equivalent of our 1979 vulnerability -- the need to import 7 million to 10 million barrels a day. "That's a global scenario for a third oil shock," he argues.
This is a tough one to call: an oil-import tax clearly would lessen the badly needed, immediate stimulative benefits of the oil price collapse. On the other hand, an oil-import tax might limit oil consumption and check the blatant use by the Saudis of their power to churn out -- and, in effect, dump -- the oil. But if we have learned anything about oil since 1973, it is that the future is not predictable. We can't be sure about huge import needs in the year 2000.
On balance, it seems to me that we should wait a while before jumping into an import tax and, for the moment, enjoy the economic benefits of cheap oil. If later it appears the conservation/efficiency/substitution trend has been set back, there will be time to act. In the interim, Mexico and Venezuela should get extended help from the U.S. government. That would be a lot cheaper than the cost to all consumers of an oil-import fee.