Strategy Would Raise Significant Monetary

¶ … strategy would raise significant monetary resources for the United States government, it is not a sustainable policy for the long-term. In an integrated world economy, crude oil prices would affect the largest foreign producers the most, primarily the Middle East and South America. Since for members of OPEC, crude oil exportation makes up as much as 90% of all oil exports, a tax of this nature from the world's largest crude oil importer would severely weaken their economies. The driving force in decreasing oil prices is an increase in worldwide oil production. During the 1980s, this occurred for several reasons. Saudi Arabia signed an agreement with the United States to increase oil production and encourage OPEC countries to do the same to drive down the price of oil in the wake of the Oil Embargo Crisis. South America also similarly increased its oil production in the wake of new oil discovery in places bordering the Amazon. These two strategic events were the catalyst for the price decrease and overall oil production on the world stage. If a tax was levied on imported crude oil it would affect the former countries in a dramatic fashion. The United States may gain temporary revenue because they would reap the rewards of the 5 dollars per barrel tax, however in the long-term the consequences are not worth the risk. Such a tax would decrease the revenue generated by foreign oil interests from their oil production, which would encourage them to cut production in order to drive up the price of oil. Moreover, such a policy would cause severe tension and outrage among oil producing nations in the Middle East, who are already on very tenuous terms with the United States. Such a tax risks a strong counter message from OPEC which would dramatically affect the United States oil supply.

A tax levied on imported refined oil will have significantly different impact than on importation of crude. Since the majority of oil producing nations in the 1980s was still going through a period of infrastructural improvement, the actual refinement of oil was conducted not in these host countries in the majority of cases but rather refined through major transnational corporations. As a result, this tax would chiefly benefit the United States government in that it would levy much more money than just raw crude oil because refined oil is almost as coveted a product as crude. At the same time however, the impact would mostly be felt by American oil companies such as Shell, BP, Exxon Mobile, etc. These companies are the ones who are refining oil and therefore will be charged the extra handling tax assessed through the tariff. The long-term consequences of such a deal could be dramatic. First, since oil companies consistently fund the United States government through lobbies and other methods, such funding could be impacted through passage of such a policy. On a more public level, an impact on the U.S. economy would be felt more because oil interests are a strong indicator of economic welfare. The success of such oil companies is crucial to the United States economy. In effect, such a tax would be a leveraged internal tax on American corporations which could cause a backlash from American corporations in general. Also, such a tax would encourage oil companies to charge significantly more to refined oil in order to increase their margins on profits, something that would inevitably raise oil prices in the long-term.

If both the 5 dollar and the 10 dollar per barrel policy are put into play, the consequences will be severe. Within the international market such a policy would mean that the value of crude per barrel will increase even as production increases. With the excess revenue funneled directly to the United States government. An international backlash is inevitable in this circumstance because foreign countries will see this as a stealing of their natural resources through government protectionism, something that the United States stressed Middle Eastern countries cannot do. At the same time, refined oil tariffs will decrease profits from large transnational corporations on all different continents, which mean that overall corporate profits would decrease. This affects the world economy negatively as the oil industry itself will suffer the repercussions. Furthermore, such a measure would cause alienation from major oil corporations as well as countries capable of oil refining. For Middle Eastern countries this is especially damaging, because during the 1980s, countries such as Saudi Arabia had just started a cycle of strong borrowing to develop their oil refining infrastructure. By decreasing the profit from refineries, OPEC nations that developing these capabilities will lose much more money than their initial investments, which would cause them to sink into either a financial crisis or default on loans from the World Bank and the United States. Although in the short-term these measures would help domestic producers, refiners, etc. It is not a measure that will have any sustainable benefit, because overall this policy could not last more than a year because of international pressure. Also, since U.S. domestic oil production is severely limited in that it could not possibly supply the entire country, the benefit for them would be minimal compared to the sustained damage such a policy would perpetuate if actually carried out. The end result of such a policy would be that domestic producers would see a boost in their sales temporarily, which would encourage them to increase production, refinery, etc. However, when the inevitable backlash from foreign interests occurs, the United States will be forced to remove both tariffs, causing domestic interests to actually lose money because they will have anticipated the positive affects of the tariff to last. As a result, the long-term damage will be both to the United State's reputation as well as the financial sustainability of domestic oil companies.

Foreign suppliers of crude oil and refined products will see such an action from the United States as extremely hypocritical. When OPEC decided in the 1970s to decrease their production of oil in order to increase the price of crude so that they can retain the long-term benefits of their new found natural resource, the United States used every means necessary to prevent such a measure. The U.S. called such action blatant protectionism, and something that would decrease the overall good will and economic welfare of the world economy. For the U.S. To levy a tax on crude in order to benefit domestic industry as well as raise money for the government would be to act against its own stated international stance on protectionism. If this occurred, it would completely erode any trust established by the United States by foreign oil interests. It would cause undue tension between the two parties who are trying to create a harmonious relationship. Since the U.S. is the world's largest oil consumer by far during the 1980s, the impact of such a tariff on the world stage will be profound. Foreign interests will react very negatively by using its own "oil weapon" in order to punish the United States for its blatant protectionism. Such actions may involve embargos against the United States similar the oil embargo of Carter's era, as well as progressive policies that would make it much more difficult for U.S. corporations to penetrate Middle East and South American oil supplies.