Big Oil Should Pay Windfall Tax to Offset Pain at the Pump

While millions of Americans are cursing the price at the pump or struggling to pay their home heating bills, oil companies like Exxon, Chevron, Shell and BP are raking in massive windfalls. Industry profits had already surged to $174 billion in 2021 due to high prices, and while the first quarter numbers of this year have yet to come in, they are likely to be astronomical. 

“We have more cash than we know what to do with,” Murray Auchincloss, the Chief Financial Officer of BP bragged back in February—and that was before the war in Ukraine drove prices even higher. 

What Big Oil is doing with all its cash is rewarding its wealthy investors and billionaire CEOs. Oil companies are on track to spend a near-record $38 billion this year on stock buybacks to reward their shareholders. Oil company CEOs are stuffing their bank accounts too: since Russia began threatening Ukraine and prices began to skyrocket, just 5 CEOs cashed out nearly $99 million worth of their company stock. 

Lining their own pockets at the expense of American consumers has been the oil industry’s plan ever since the economy started coming out of its Covid-19 induced recession. A series of recordings from corporate shareholder calls and industry conferences executives admitting that they are intentionally restricting supply in order to boost their share price. 

This is what’s helping drive up prices for consumers: an intentional, industry-wide campaign to make massive profits at our expense. The economic bounceback from Covid-19 and embargo on Russian oil created the conditions for this perfect storm, but it's the industry’s malfeasance which has kept prices high. Rather than do everything they can to help the public, the oil companies have put their own profits first.  

There’s a word for this sort of action to restrict an essential supply like energy during a crisis: profiteering. And another word when it's done in a coordinated way: racketeering. Both are illegal.

Whether or not oil companies can be held accountable in the courts, they ought to be made to pay a price. New legislation recently introduced in Congress would do just that. The idea is called a windfall profits tax and in this case, it would apply a 50% tax to the excess profits that the industry is making right now. The revenue raised—which could be upwards of $40 billion a year—would then be used to send a check to Americans who need help with high gas prices and energy bills. Taxpayers below the $70,000 a year income threshold could expect to receive around $240 based on current prices.

That may not be a lot of money to a billionaire CEO, but it could mean the difference between being able to pay the bills or going deeper into debt for many families. It’s been heartbreaking to see stories on TV of mothers who are having to cancel their child’s birthday party because they have to spend the money on gasoline. These checks could help provide some immediate relief and help carry people over until prices go down.

Oil companies and their allies in Congress and the media will argue that this sort of tax is just punishing industry success, will restrict supply, and will just be passed off to consumers. All those arguments are false. The massive profits companies are making right now are from exploiting multiple crises, not from any innovation of their own. As for restricting supply, the industry has more than enough capital and leases on our public lands to drill new wells – as BP said, they have more cash than they know what to do with. And the idea they’d pass the cost off to consumers? The tax would only apply to the largest oil producers who don’t have enough market share to control the price at the pump without being undercut by other suppliers. Besides, the companies will still be making billions in profits, just not the absolutely obscene windfalls they’re making now.

The real solution to escaping all the price volatility, insecurity and pollution that comes with fossil fuels is a rapid transition to clean, renewable energy so that we’re no longer dependent on greedy CEOs and tyrants like Vladimir Putin. But in the meantime, a windfall profits tax can provide some immediate relief to consumers and send Big Oil a message: you can no longer get away with profiting at the expense of the American people.

(Jamie Henn is the director of Fossil Free Media and a co-founder of 350.org. This story was featured in Common Dreams.)