On one level this is a genuine question. I am not sure if this violates any trade agreements to which we are signatories or if it would destabilize our relationship with Saudi Arabia in a way that is net counterproductive.

However, on another level its a policy proposal.  There is widespread intellectual support for increases in the gas tax. Popular support seems less forthcoming.

However, taxing imported oil seems like something the populace could go for. It takes advantage of anti-foreign bias and uses it for good. It also raises revenue and if paired with a reduction in subsidies to oil and gas it could reduce spending. It discourages the externalities associated with driving and the non-trivial externalities associated with foreign wars.

One obvious disadvantage is that it generates enormous economic profits for domestic oil produces and gets them even deeper into the rent seeking game. This is always a cause for concern. However, it does pull them in on the side of policies which will result in lower consumption of gasoline.

It also creates more stable gas prices. A larger portion of the price of gas will be fixed, reducing uncertainty for households.

Taxing imported oil would also go a long way towards unwinding international trade imbalances. The majority of the US’s trade deficit is petroleum. That is, to say without imported oil or trade deficit would be cut by more than half.

I’m not sure this is a good idea, but I’m not certain its a bad one either. It does, however, seem like an idea the public might go for.

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