American President Barack Obama on Tuesday proposed a $10.25 tax per barrel on crude used locally, which he hopes will help raise $319 billion over the next decade on transportation and other needs. The announcement formed part of the president’s $4.1 trillion budget which he released to the US Congress.

The tax has already been firmly criticised by a lot of Republicans that and it is unlikely that they will approve the budget. A major aspect of the criticism of the tax is the fact that oil companies will transfer the cost to consumers which in turn means higher gasoline prices.

Americans are currently buying fuel at record low prices and will not be willing to buy fuel at an additional cost emanating from taxes. 

Patrick DeHaan, senior petroleum analyst at GasBuddy.com explained in a Market Watch article

To me it’s clear: this is not something oil companies are going to absorb.”As with almost every tax increase on fossil fuels, whether at the state or federal level, it will likely be completely passed to consumers in the years ahead,” he said.

And it won’t just impact gasoline prices, but also diesel, jet fuel, heating oil and others, DeHaan said. “It could stifle production to some degree, though to a lesser degree as long as the tax applies to imported oil as well.”

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