Core Laboratories N.V. (CLB): Three Factors Keeping Oil Above $90 a Barrel

3. Taxes and regulation. It costs a pretty penny to do business in the oil and gas space. According to the EIA, about 11% of the price of a gallon of gas foes to federal, state, and local taxes.

Source: US Energy Information Administration.

If the recent budget proposal from the Obama administration were to pass as is, though, that could change. The additional taxes and fees for the industry could total as much as $90 billion over the next 10 years. Its very unlikely that oil companies will be happy to let these additional taxes eat into profit, so we will most likely see an uptick in oil if these proposals were to be enacted.

You also have to take into account regulation, safety, and liability costs. According to a report by Lux Research, oil companies pay about $0.70 per barrel of oil on safety regulations, but that could be going up. The industry is expected to spend an additional $21 billion over the next 20 years. What is more expensive, though, is the liability  of cleaning up a spill. It is estimated that the liability costs for cleaning up a spill is about $8,000 per spilled barrel.

Much of the public demands that oil and gas drilling be safer, but we will have to be willing to shoulder higher oil prices if we expect oil companies conduct their business in a safer, more environmentally friendly way.

The article 3 Factors Keeping Oil Above $90 a Barrel originally appeared on Fool.com and is written by Tyler Crowe.

Fool contributor Tyler Crowe has no position in any stocks mentioned.You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter, @TylerCroweFool. The Motley Fool recommends Halliburton and Total SA. (ADR). The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy (NYSE:CHK), Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy.

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