Democrats introduced a bicameral bill on Thursday that would levy a tax on oil and gas companies and redistribute the money back to the public, who are currently facing the highest gas prices ever seen in the U.S., according to AAA.
The Big Oil Windfall Profits Act, introduced by Rep. Ro Khanna (D-California) and Sen. Sheldon Whitehouse (D-Rhode Island), would levy a tax on each barrel produced or imported by large oil companies.
Barrels would be subject to a 50 percent tax on the difference between the current price and the average price of a barrel between 2015 and 2019. Only large companies like Exxon Mobil and Chevron would be subject to the tax, disincentivizing large oil companies from keeping prices high without the threat of losing market share.
Under the bill, consumers would receive a quarterly rebate from the revenue raised by the tax, with checks phasing out for individuals who make more than $75,000 annually and couples who make over $150,000. Single filers would get about $240 a year, while joint filers would get about $360 a year, the lawmakers estimate, with the tax raising a total of about $45 billion per year.
“We’ve seen this script before, and we cannot allow the fossil fuel industry to once again collect a massive windfall by taking advantage of an international crisis,” Whitehouse said in a statement. “Over the longer term, speeding up the transition to renewables will lower energy costs, insulate consumers from price spikes, and reduce Western nations’ dependence on foreign despots and greedy fossil fuel companies.”
The bill is cosponsored by 11 senators, including Senators Bernie Sanders (I-Vermont), Elizabeth Warren (D-Massachusetts) and Ed Markey (D-Massachusetts). The proposal comes as oil companies face increasing scrutiny for taking advantage of inflation and instability caused by the Russian invasion of Ukraine to raise prices at the pump and rake in record prices.
Climate advocates praised the bill, saying that it’s a step toward hampering the greed of oil and gas companies. While this bill may not have a direct effect on gas prices, which are largely decided by the intergovernmental oil organization OPEC, it could disincentivize the oil industry from investing in stock buybacks and dividends, which they’ve done in spades as their profits have risen.
The proposal could push companies to invest in moves that would stabilize the energy supply while providing much-needed aid to the public, explained Fossil Free Media Director Jamie Henn. Shareholders have been pressuring companies to drive up share prices at the public’s expense.
“If you’re looking to drive a share price up, you want to drive up the price of oil, basically,” Henn told Truthout. Instead of increasing production in response to pandemic-related inflation and the Russian invasion, oil companies decided, “let’s use this money to reward our shareholders and try to inflate our stock price,” Henn said.
Indeed, oil and gas companies are currently raking in profits and rewarding their shareholders and CEOs handsomely. A report by Accountable.US in December found that the top 24 oil and gas companies made $174 billion in profits in the first nine months of 2021, and spent over $44 billion in stock buybacks and shareholder payouts. Meanwhile, the 18 largest oil and gas CEOs are collectively worth $8 billion more than they were in January 2021, according to BailoutWatch and Friends of the Earth.
From a climate perspective, this bill is “one piece of the puzzle,” Henn said. Next steps could include taking away oil and gas subsidies and working toward a managed decline of the fossil fuel industry; a modified version of this bill could also direct funding to energy retrofit programs or low income energy assistance.
Managing Big Oil’s decline would not only be beneficial for the climate, it would also prevent oil and gas companies from fleecing customers like they are now. “We’re not going to be able to make this transition [away from fossil fuels] if we fool ourselves into thinking that oil and gas companies are gonna come along and witness – they’re gonna fight this tooth and nail all the way, just as they fought it for decades,” Henn said.
“The leadership of these companies is committed to a business plan which is going to destroy life as we know it and continue to fuel dictators like [Vladimir] Putin along the way,” Henn continued. “And so I think the question is, ‘what are the smart common sense regulations we can put into place that rein this industry in?’”
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