Updated:
7/6/2009 3:45:00 AM
DeFazio Seeks to Tax Oil Futures Contracts
Move Would Add Highway Funds, Curb Speculation
By Sean McNally, Senior Reporter
This story appears in the July 6 print edition of Transport Topics.
A leading Democrat on the House Transportation and Infrastructure Committee proposed taxing speculative oil trades to kill two birds with one stone: Boost highway funding and reduce the effect of speculation on fuel prices.
Rep. Peter DeFazio (D-Ore.), chairman of the highways and transit subcommittee, said a 0.02% tax on the purchase of a futures contract for oil and 0.5% on future contract options was a “win-win” for consumers and highway users.
“A transaction tax on crude oil securities will close the gap in funding a 21st-century transportation system while lowering the price of oil,” DeFazio said in a June 25 statement.
He put the proposal forward as momentum seemed to stall for the six-year transportation bill that the committee championed (click here for related story).
“My proposal will not cost consumers one cent but will substantially increase our investment in our transportation infrastructure, so we can move beyond the broken policies of the past toward a safer, cleaner more efficient transportation system,” he said.
In DeFazio’s proposal, the levy on futures transactions would raise $190 billion over six years — enough to cover the $140 billion shortfall between expected revenue from fuel taxes at their current levels and the $450 billion the committee’s bill would spend.
DeFazio’s proposal would exempt end-users that actually buy fuel, such as trucking companies and airlines, which use futures contracts to hedge against increases in fuel prices.
American Trucking Associations is one of several groups that recently urged Congress to rein in “excessive speculation” in oil markets (click here for previous story).
So far this year, three bills have been introduced to ban or regulate oil speculation, and nearly two dozen bills were introduced to curb oil transactions during the height of the fuel price crisis.
ATA Senior Vice President Tim Lynch said the federation “want[s] to keep an open mind, but it’s a very new concept.”
Lynch said ATA was still evaluating what the proposal’s effects on legitimate hedging would be and how it fits into efforts to curb excessive speculation.
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