President Joe Biden endorsed a windfall tax on the profits of oil and gas companies, which he has accused of unethically profiting from high energy prices, if they don’t spend more of their earnings on lowering costs.
Biden called on energy companies to do more to lower costs, including increasing investment in new refining capacity, in remarks at the White House on Monday and is asking Congress to intervene with a windfall profits tax if they don’t.
“Their profits are a windfall of war,” Biden said. “It’s time for these companies to stop their war profiteering.”
Biden, who has frequently targeted major oil companies for their earnings since the fallout from the war in Ukraine first caused energy prices to balloon, previewed the Monday announcement over the weekend, taking aim again at the industry after several firms collectively reported tens of billions of dollars in third-quarter profits.
“Oil companies made billions in profits this quarter,” Biden tweeted on Saturday. “They’re using these record profits to pay out their wealthy shareholders instead of investing in production and lowering costs for Americans. It’s unacceptable. It’s time for these companies to bring down prices at the pump.”
Some of the largest integrated oil majors posted healthy Q3 earnings on Thursday and Friday thanks to high oil prices and high prices for refined products.
ExxonMobil earned a record $19.7 billion. Chevron’s and Shell’s earnings were slightly down from the second quarter but reached $11.2 billion and $9.5 billion, respectively.
The industry has been earning well all year, especially since the war in Ukraine touched off a major surge in oil prices. Oil prices have fallen significantly since their peak near $130 per barrel in the immediate aftermath of Russia’s invasion, but they still remain high at about $95 per barrel on the international benchmark.
High demand for gasoline and diesel fuel, coupled with strained oil refining capacity and low fuel inventories for some regions, have also added to the cost of retail fuel.
Biden and congressional Democrats have criticized the industry for increasing dividends to shareholders and buying back billions in stock, arguing that companies are doing too little to increase the production of oil.
The industry, which was bludgeoned by demand destruction wrought by the COVID-19 pandemic, has been conservative with new capital expenditures over worries that spending too much will overexpose them whenever oil prices fall.
Some have increased investment in new production. Exxon and Chevron both reported record production in Q3 at operations in the Permian Basin.
Even so, a windfall tax has been on the mind of Democrats since the war began. Sen. Sheldon Whitehouse (D-RI) and Rep. Ro Khanna (D-CA) proposed a windfall profits tax in early March to recoup earnings and rebate them to consumers, but legislation has yet to move through Congress.
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House Democrats did pass an anti-price-gouging bill in May, which would authorize the president to issue an energy emergency and prohibit sales of consumer fuel at an “unconscionably excessive” price and charge the Federal Trade Commission with enforcing a prohibition of excessive prices.
Companies targeted by Democrats have resisted the charges of price-gouging and pushed back on the windfall tax proposal.
Anne Bradbury, CEO of the American Exploration and Production Council, said the administration should work with the industry to increase energy supplies “instead of calling for 1970s-era failed policies.”
“Once again, the President is more worried about political posturing before the midterms than he is about advancing energy policies that will actually deliver for the American people. A windfall profit tax might make for good soundbites, but as policy, it’s bad for consumers. It’s likely to disincentivize fuel production and make matters worse for drivers.”
American Fuel & Petrochemical Manufacturers President and CEO Chet Thompson, who represents oil refiners, said a windfall profits tax is “likely to disincentivize fuel production and make matters worse for drivers.”
