Oil imports are down 62% from their high in 2005. We now import roughly 24% of our oil, which is at the lowest level since 1970. 40% of those imports come from Canada where the operating cost of a barrel of oil is $23.30. The US operating cost now stands at $13.30, and the operating cost in Saudi Arabia is $5.00, which accounts for 11% of our imports or roughly 400 million barrels per year. The price of crude is currently $48 per barrel.
Given the operating cost of oil, would it make sense to put into place a floating tariff? If we use our operating cost as a standard we would place a tariff of approximately $8 per barrel on Saudi crude. If we were to continue to import Saudi crude at current levels it would generate approximately $3 billion a year in tax revenue. The tax revenue would be earmarked for alternative energy R&D, as well as exploration subsidies in the US with additional environmental costs. If the environmental costs go up the operating cost goes up and the floating tariff rises as well.
This approach should spur the US economy to import neutral, increase our production while protecting the environment. The other plus side is that we would be importing less oil from countries that sponsor terrorism, as well as move us to an energy supply that is less oil dependent.
Just food for thought.