President Biden says he will talk to Congress about creating a windfall profits tax for oil companies if the companies do not lower prices for consumers.
Speaking Oct. 31 from the White House a week before the midterm elections, the president cited record quarterly profits at oil companies as “outrageous” and “war profiteering”—taking advantage of high prices resulting from the Russian war on Ukraine.
Gasoline prices have come down from their spring peaks, and Biden attributed the decline to his decision to sell oil from the Strategic Petroleum Reserve, an action taken in consort with several other nations also releasing some reserves.
“If these companies were making average profits they’ve been making by refining oil over the last 20 years instead of the outrageous profits they’re making today and if they passed the rest on to the consumers, the price of gas would come down around an additional 50 cents,” Biden said.
He accused oil companies of failing to invest enough of their profits in oil production and refining capacity.
“I think they have a responsibility to act in the interest of their consumers, their community, and their country, to invest in America by increasing production and refining capacity,” Biden said.
“If they don’t, they’re going to pay a higher tax on their excess profits and face other restrictions,” the president said. “My team will work with Congress to look at these options that are available to us.”
Tax called disincentive
Biden’s remarks did not sit well with oil companies, whose representatives said the president was playing politics a week before the midterm elections.
“Once again, the president is more worried about political posturing before the midterms than he is about advancing energy policies that will actually deliver,” said Chet Thompson, president of the American Fuel & Petrochemical Manufacturers, a trade group including most US refiners.
A windfall profits tax is “likely to disincentivize fuel production and make matters worse for drivers,” Thompson said in a statement released after Biden’s press conference.
“Oil companies do not set prices—global commodities markets do,” said Mike Sommers, president of the American Petroleum Institute. “Increasing taxes on American energy discourages investment in new production, which is the exact opposite of what is needed.”
Calling Biden’s remarks campaign rhetoric, Sommers said a US windfall profits tax during 1980-1988 was found by the Congressional Research Service to have reduced domestic oil production by as much as 8%. It was repealed in part because it made the US more dependent on foreign oil, Sommers said.
Support
There is support among Democrats in both houses of Congress for a windfall profits tax on oil companies. In early March, Sen. Sheldon Whitehouse (D-RI) introduced a windfall profits tax bill specifically targeting big oil companies, those producing or importing at least 300,000 b/d, or who did so in 2019.
The legislation (S. 3802) was cosponsored by 17 Senate Democrats. In the House, a companion bill was introduced by Rep. Ro Khanna (D-Calif.) and drew support from 23 cosponsors.
Britain enacted a windfall profits tax on oil and natural gas earlier this year. It was introduced in May by Rishi Sunak, who was then finance minister and now is prime minister. It has only applied to profits since May 26, and it allows deductions for domestic investments in fossil fuels.
Ed Miliband, a Labor Party member of parliament and former leader of his party, in late October denounced the windfall profits tax as inadequate. He cited record quarterly profits of Shell plc in making his argument.
