President-elect Barack Obama is not planning to implement a windfall profit tax on oil companies as promised
President-elect Barack Obama is not planning to implement a windfall profit tax on oil companies because prices have dropped below $80 a barrel, an aide said on Tuesday.
"President-elect Obama announced the policy during the campaign because oil prices were above $80 per barrel," an aide on Obama's transition team said. "They are currently below that now and expected to stay below that."
Oil prices have fallen from a record $147 a barrel in July to under $50 this week.
Obama, who signaled early in his campaign for the White House that he would take an active approach to oil markets as president, had planned to use the revenue from a windfall profits tax to fund a tax rebate for low- and middle-income families struggling with high energy prices.
But the aide said Obama's presidential campaign had already taken the price drop into account six weeks ago. When Obama laid out his economic plan for the middle class in mid-October, revenue from a windfall profit tax was not included because of the price change, he said.
Oil companies steadfastly opposed a tax, saying it would stifle exploration and innovation.
The switch drew applause from industry.
"The judgment to withdraw the concept of a windfall profits tax is an important recognition that developing America's oil and natural gas would be seriously damaged by such a tax policy," said Lee Fuller, vice president of government relations for the Independent Petroleum Association of America, which represents independent oil and gas producers.
"A windfall profits tax is bad policy at any price," said Thomas Pyle, president of the Institute for Energy Research, calling the move "a heartening development -- both for consumers and an economy struggling to claw its way out of recession."
Many energy experts warned that imposing a windfall profits tax would discourage energy companies from drilling for oil in the United States, which would exacerbate U.S. reliance on foreign suppliers.
But environmentalists support a tax and want oil companies to invest more in renewable fuels.
Obama has made revamping U.S. energy policy a key priority of his upcoming presidency, promising to increase production of renewable energy sources and start a carbon trading system to reduce greenhouse gas emissions.
He said recently that the fall in gasoline prices was not an excuse to put off tackling U.S. dependence on foreign oil.
Oil Tycoon T. Boone Pickens, who met with Obama during the campaign to discuss energy policy, said he was against a windfall profits tax but did not believe the decision not to implement one would affect domestic oil production.
"The windfall profits tax won't have anything to do with killing any oil projects," Pickens told reporters in Washington.