The Enhanced Oil Recovery Credit Is Worth 8.73% This Year. Here Is the Arithmetic That Set It.

Section 43 of the tax code gives a credit for the cost of enhanced oil recovery — the techniques used to get more out of a field that will not produce on its own pressure. The credit is designed to disappear when oil is expensive enough that the help is not needed. Notice 2026-46 works through that calculation for 2026, and the answer is 8.73%.

The four numbers

1. The reference price. Domestic first purchase crude oil prices averaged $63.40 a barrel in calendar year 2025, on Energy Information Administration data.
2. The inflation adjustment. The GNP implicit price deflator was 128.888 for 2025 and 59.266 for 1990, giving an inflation adjustment factor of 2.1747.
3. The threshold. The statutory $28 figure, multiplied by 2.1747, becomes $60.892 for 2026.
4. The gap. $63.40 minus $60.892 is $2.508.

How the gap becomes a percentage

The credit phases out across a $6 band above the adjusted threshold. Because $2.508 is less than $6, the phase-out is partial. The reduction is the excess divided by $6, applied to the 15% credit rate:

• $2.508 ÷ $6 = 0.418
• 0.418 × 15% = 6.27 percentage points of reduction
• 15% − 6.27% = 8.73%

So the enhanced oil recovery credit for 2026 is 8.73% of qualified costs paid or incurred during the year.

Reading the mechanism

Two features are worth separating. The threshold moves with a general price index, not with oil. The reference price moves with oil. The credit therefore shrinks whenever crude runs ahead of broad inflation, and returns when it falls behind — and it is a lagging measure either way, because the 2026 credit is set by the 2025 average price.

Why it matters

This is a small annual notice that shows a common piece of tax design clearly: a credit indexed to a commodity price, with the phase-out written as arithmetic rather than as discretion. Nobody decided the credit should be 8.73% this year. A $63.40 average and a 2.1747 deflator ratio decided it.