In June 2016, House Republicans introduced their vision for comprehensive tax reform. Premised on a simpler, fairer code than today’s, the GOP’s plan looks to promote economic growth and create jobs. It also proposes taxing imports at 20%. As part of the plan, Republican Speaker Ryan introduced a border adjustment tax (BAT) that taxes imports but excludes exports. The Tax Foundation concluded that a BAT could generate roughly $1 trillion in revenue over the next decade.
According to some oil market experts, “the bottom line with a BAT is the price of crude oil rises.” And with almost a fifth of the world’s crude oil refined in the Gulf region and many urban centers along the Atlantic coast dependent on foreign imports of petroleum for gasoline, U.S. consumers are almost certain to feel the effects of a BAT in the form of higher prices. Legislators too are concerned that a BAT will increase costs for refiners of foreign crude and ultimately, consumers at the gasoline pump. In February, Texas Senator John Cornyn said: “I’ve had some refiners tell me they think it could increase the price of gasoline by 30 cents per gallon.”
While many people in the oil and gas industry are instinctively in favor of a free market, some producers might welcome a BAT, should it lead to a more insulated US market, and thereby allow for the speedier recovery of US shale, with all the associated economic benefits. Over the long-term U.S. oil and gas production would increase with Chevron acknowledging this result as a positive effect of a BAT. The company, however, noted there could be many unintended consequences for consumers, exchange rates, and the global economy. The American Petroleum Institute, the trade organization representing the oil and gas industry, has yet to take a position, but CEO Jack Gerard stated: “we’re very concerned about it (the BAT).”