Law and Regulations

Oil tax law? It's not going to happen: Bernstein

$10 oil tax won't happen: Pro

President Barack Obama is expected to propose a $10-a-barrel tax on oil companies in his last budget proposal. The initiative aims to create a new clean transportation plan prioritizing the reducing of greenhouse gases.

The White House released a fact sheet on Thursday, where it claims the new plan, which is expected to phase in throughout five years, will reduce carbon pollution, strengthen the economy and make transportation easier for American families.

The administration claims it will use the revenue from these companies to "speed goods to the market," develop autonomous vehicles, and build high-speed rails that could be an alternative to flying to major regional corridors, the White House said.

However, greater tax on oil may implicate higher prices for both companies and consumers.

Barack Obama
Obama to propose $10-per-barrel fee on oil
An oil pump jack in Gonzales, Texas.
Oil is nearing the bottom: Expert

The president, who has previously spoken about his anti-greenhouse gas emission and pro-sustainability positions, even suggesting a Federal Agency greenhouse target reduction of 41.8 percent by 2025, has been met with resistance.

Speaker of the House Paul Ryan, a Republican from Wisconsin, released a statement on Thursday in which he threatened that the proposal will be "dead on arrival."

Speaker's response

A separate statement was issued on Friday by Julia Slingsby, deputy communications director for Ryan, on the speaker's official website in which the president was accused of having ulterior motives for proposing this new law.

The statement suggests that the president wants to "cement his legacy as the most anti-energy president" and shows how far Democrats will go for climate policy changes and distract the American people into believing Republicans are the "no party."

"The rhetoric you've got coming out of this administration and frankly a lot of the people running for president does not really endear us or give us any confidence," said Joe Petrowski, chairman of Gulf Oil, on CNBC's "Closing Bell" on Friday.

The oil industry should not have to pay another $70 billion on top of the already large sum of $200 billion in taxes, Petrowski said.

This move, which will probably not get passed by Congress, is another way for "Washington to pick winners and losers in the alternate fuel space," he said.

President Obama notches clean energy win

And while he's not the only one who believes that this proposal won't pass Congress, Jared Bernstein, former chief economic adviser to Vice President Joe Biden, thinks the tax is a good idea.

That's mainly because, "We need to put a price on carbon for environmental reasons, [and] climate change reasons," he said. He added that "We have to have some way to support our infrastructure."

While market watchers, and even Ryan himself, argue that this new tax law could lead to financial strains in lower-income families, Bernstein considers that the White House will rebate to lower-income individuals 15 percent of the earnings. Beyond those measures, the economist suggests that many people will go relatively unscathed.

Currently oil prices have flirted within the $30-a-barrel range, and gasoline has been reported to be as low as 46 cents a gallon.

"The idea phases in over five years, so given how low gas is at the pump, I do think it's fair to argue that people might not notice it that much," he said.

"I agree it won't happen," he sustained, nonetheless.

— CNBC's Krysia Lenzo contributed to this report.