President Joe Biden called for a windfall tax on energy companies in a speech on Monday, a move that would deliver a major win to the climate and progressive advocates who have been calling for a tax on excess profits made amid high inflationary rates.
In his response to major oil companies posting record-breaking profits, Biden cited wartime policies to stop corporations from war profiteering and said that oil companies must take steps to lower gas prices or face a tax on their profits.
“If they passed the rest [of the profits] onto the consumers, the price of gas would come down around an additional 50 cents,” Biden said. “But rather than increasing their investments in America, or giving American consumers a break, their excess profits are going back to their shareholders and are buying back their stocks and their executive pays are going to skyrocket. Give me a break.”
Oil companies must “invest in America by increasing their production and refining capacity” and lower prices, he said. “If they don’t, they’re going to pay a higher tax on their excess profits and face other restrictions.” He said he will work with Congress to explore the government’s options for this action.
The oil industry has a choice.
Either invest in America by lowering prices for consumers at the pump and increasing production and refining capacity.
Or pay a higher tax on your excessive profits and face other restrictions.
— President Biden (@POTUS) October 31, 2022
Oil majors reported huge profits last week as they released their Q3 finances for this year. Exxon, Chevron and Shell made record or near-record profits totalling billions of dollars each; Exxon, in fact, made the largest quarterly profit ever reported by an international oil company, at a profit of $19.7 billion. Experts have said that the high profits that the fossil fuel industry has experienced — and the stock buyback programs and shareholder enrichment that they allow — are evidence that the companies are price gouging customers at the pump.
Meanwhile, gas prices have stagnated after steadily falling from peak levels for a few months, and remain high at about $3.76 per gallon on average across the country.
The news was celebrated by Democrats, progressives and climate advocates who have been calling for a corporate windfall tax for months. They say that a windfall tax could be a crucial way for Democrats to tackle the current economic pressures facing Americans and that the move could represent a rebuke to corporations as they grow bolder in squeezing the public for profit.
“President Biden is right. At a time when Exxon, Shell and Chevron increased their profits by 168 percent to $81 billion in the last 2 quarters by charging outrageously high prices at the pump, we need a windfall profits tax,” said Sen. Bernie Sanders (I-Vermont) on Twitter. “The revenue should go directly back to the American people.”
In March, Sanders introduced a bill that would capture 95 percent of profits made by any large corporation in excess of pre-pandemic levels, in hopes of curbing greed-fueled inflation. And, earlier this year, Rep. Ro Khanna (D-California) and Sen. Sheldon Whitehouse (D-Rhode Island) introduced a narrower tax that would capture 50 percent of the price increase of oil barrels compared to pre-pandemic levels. The profits from the tax would be sent directly back to consumers.
Those bills were never brought to a vote, and conservative Sen. Joe Manchin (D-West Virginia) has expressed his opposition to the idea, which, partnered with Republicans’ almost certain uniform opposition, would likely doom any chance of passing legislation that comes before Congress. But Biden’s support of the idea could bring renewed energy to the proposal, bringing it from the sidelines to the mainstream in Congress.
“This is exactly the type of leadership we’ve been waiting for from President Biden. Big Oil has made nearly $300 billion in excess profits this year by gouging us at the pump,” said Stop the Oil Profiteering spokesperson and climate activist Jamie Henn in a statement. “With 80 percent of voters supporting the policy, this could be a political game changer for Democrats. It’s a clear way for them to play offense against opponents who are in the pockets of Big Oil.”
Advocacy groups have rallied around the policy. Earlier this year, over 120 progressive and climate groups sent a letter to Senate Majority Leader Chuck Schumer (D-New York) and House Speaker Nancy Pelosi (D-California) urging them to support the idea, saying that the oil and gas industry has been exploiting crises like the Russian invasion of Ukraine to rake in profits and further cement its dominance over the global energy system.
The implementation of a windfall tax would not be without precedent. As Sanders pointed out when he introduced his bill, the U.S. has enacted similar windfall taxes during the first and second World Wars and during the Korean War in order to combat war profiteering.
Further, U.K. lawmakers levied a windfall tax on oil and gas producers earlier this year — the implementation of which could provide lessons for Biden. Climate advocates have criticized the U.K. law for being too lax and for allowing the government to continue subsidizing oil and gas companies while taxing them; Shell, for instance, has paid none of the 25 percent tax on profits so far despite making a record-breaking $30 billion in profits so far this year because the company made investments in production.
Join us in defending the truth before it’s too late
The future of independent journalism is uncertain, and the consequences of losing it are too grave to ignore. To ensure Truthout remains safe, strong, and free, we need to raise $46,000 in the next 7 days. Every dollar raised goes directly toward the costs of producing news you can trust.
Please give what you can — because by supporting us with a tax-deductible donation, you’re not just preserving a source of news, you’re helping to safeguard what’s left of our democracy.