Revenue Grab, Not Energy Policy
There's a case for taxing oil consumption. If oil costs consumers more, consumers would presumably use less.
Given that the United States imports more than half its oil - and will continue to import the majority of its oil under any likely future scenario -- less use = more energy independence. And both Republicans and Democrats are committed to promoting energy independence.
The new Obama budget does impose oil taxes - but not on consumers. It taxes oil exploration instead, by slowing the depreciation schedule for oil exploration costs. This policy change won't reduce consumption any. What it will do is discourage oil exploration by U.S. oil companies, tilting the competitive field in favor of foreign producers. There's no energy logic to that. It looks instead like the Obama administration has got itself a new revenue policy: demonize an industry (banking, oil) and hit them with an opportunistic tax to squeeze a few extra hundred million out of them.
Likewise, there's a case for incentivizing green energy production. Just about everybody wants to move away from oil, and despite this year's Climategate scandals, the preponderance of the evidence suggests that coal presents serious environmental concerns.
Again there's a right way and a wrong way to do it. The right way is to raise a cost umbrella over all forms of green energy via, for example, a carbon tax - and then let the technologies battle it out in the marketplace. Let private investors direct capital to its best use. (As I write, I am at a conference in Montana to introduce a very promising new solar technology to venture capital funds.)
Government has a role as a funder of basic research. Beyond that, though, government historically makes a very bad energy investor. Yet the Obama plan will expand government's investment in energy development. Worse still, the Obama plan continues to sprinkle tax credits and other benefits on favored industries: wind, solar, and now nuclear. The playing field, already uneven, is being tilted even more.
Here's the crazy thing about energy policy: If you want off oil, the only way to preserve free markets is by raising energy taxes. If you seek to quit oil without raising taxes, you plunge into a welter of subsidies and special favors. And that, sorry to say, is the course the Obama administration has chosen.