As oil companies seek to profit off of Russia’s invasion of Ukraine, Sen. Bernie Sanders (I-Vermont) is calling for officials to place a tax on oil profits and implement price controls in order to lessen the effects of the crisis on the public.
“We can no longer allow big oil companies, huge corporations and the billionaire class to use the murderous Russian invasion of Ukraine and the ongoing pandemic as an excuse to price gouge consumers,” Sanders wrote over the weekend. “It is time to enact a windfall profits tax and reasonable price controls.”
Crude oil prices have been jumping since Vladimir Putin invaded Ukraine last week, with corresponding soaring prices at the pump for consumers. According to surveys, the national average is now $3.61 per gallon, which is almost a dollar higher than the average this time last year.
But even before the invasion, retail prices were steadily rising. As inflation has risen precipitously over the past few months, oil and gas companies have taken the opportunity to raise prices to compensate for rising production or other costs – and to make even greater profits.
A windfall tax would levy a tax on profits made by fossil fuel companies in response to the invasion, and possibly also tax profits made as inflation has risen. This could potentially discourage fossil fuel companies from artificially inflating prices in response to the crisis.
In 2020, Sanders introduced similar legislation, which sought to capture 60 percent of the skyrocketing wealth increases that billionaires have been raking in during the pandemic in order to fund universal health care. If such a tax had been implemented from then until now, it would have raised trillions of dollars with essentially no impact on billionaires’ lifestyles.
A tax on Big Oil could be similarly fruitful for the government. Last year, a report found that top oil and gas companies made $174 billion in the first nine months of 2021, while raising dividends and paying CEOs tens of millions of dollars. Companies posted similarly high profits in the fourth quarter of 2021, with Exxon Mobil reporting profits of $8.9 billion, its highest earnings in seven years.
Lawmakers like Sanders have noted that prices are rising in part because companies are trying to rake in profits at consumers’ expense; in November, President Joe Biden asked the Federal Trade Commission to investigate whether oil and gas companies are engaging in antitrust behaviors in order to pad profits under the guise of inflation. Before winter set in last year, reporters found gas companies were sending large amounts of gas abroad in order to limit supply and raise prices for heating bills.
For an oil company, Putin’s invasion of Ukraine and the potential impacts to fossil fuel supplies could be an opportunity to price gouge. In an attempt to preempt this last week, Biden warned companies against raising prices, saying they should “not exploit this moment to hike their prices to raise profits.” But so far, he hasn’t taken further action to discourage companies from doing so.
Meanwhile, pro-fossil fuel groups wasted no time saying that oil production should increase now, even though the country is already producing close to its limit. Less than 24 hours after the invasion – and, in the American Petroleum Institute’s case, just as the invasion was being announced – extremist right-wing politicians, conservative pundits and influential oil groups jumped on the crisis. Oil cronies insisted that more drilling is the only way to achieve energy independence, even though climate advocates have pointed out that 100 percent energy independence could have been achieved years ago if the country relied on renewable sources instead.
Increasing drilling is also a terrible, near-genocidal idea in terms of the climate. In a report released on Monday, the Intergovernmental Panel on Climate Change found that the effects of continuing on the current path of the climate crisis will lead to food and water shortages, mass migration and death, especially in poor nations. Even more traditionally conservative energy organizations have directed governments and oil companies to stop pursuing new fossil fuel projects immediately in order to avert disaster.
Sanders’s suggestion to cut into oil and gas profits could not only help reduce costs for consumers, but also help to mitigate the climate crisis. The profitability and influence of fossil fuel companies, which receive trillions of dollars in subsidies from world governments, are part of what’s keeping them going – for now.
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