Enough is Enough – says Biden, warning of Bigger tax bills for Oil Giants

Biden says that oil companies that are thought to be making money from the war with unusual Oil prices could be hit with a windfall tax.

During the war between Russia and Ukraine, oil companies made record profits, which the US president says is disappointing, and he threatens to raise taxes.

The president got angry at the megacorporations when some of them reported a recent rise in earnings, which he called an “outrageous” windfall caused by Russia’s war on Ukraine. 

He warned them to use the funds to increase oil supplies or to return them to customers in the form of price cuts.

“If they don’t,” Mr. Biden told reporters at the White House, “they’ll pay a greater tax on their surplus earnings and face additional constraints.” 

“My staff will work with Congress to look at the options we and others have.” 


Behind the scenes

The president’s support for additional energy levies has encouraged liberals in his party who have been asking him to act for months. 

But since Congress isn’t even in session and would be much less likely to pass such a law if Republicans win one or both houses in next week’s election, it was more of a way to put pressure on the oil companies than a practical policy suggestion for the near future.

Mr. Biden has been trying to shift the public’s anger about gas prices away from himself and onto the oil industry. 

This is because Democrats are trying to keep control of Congress by getting past historical and public obstacles. 

Oil and Gas prices

Soaring gas prices

While gas prices have dropped dramatically since peaking just above $5 a gallon in the summer, they remain significantly higher than when Mr. Biden entered office, contributing to the overall inflation rate, which remains near a four-decade high.

The president set up his arguments against the oil companies in a way that seemed aimed at the vote next week. 

“The American people will decide who is standing with them and who is solely concerned with their own bottom line,” he stated. “I know exactly where I stand.”



Republicans got back at the president by saying that his policies make it hard for the energy industry to expand.

“Haven’t American families suffered enough as a result of President Biden’s harmful attack on American-made energy?” argued Texas Rep. Kevin Brady, the top Republican on the House Ways and Means Committee. 

“Desperate to save the midterm elections, he’s now proposing another risky strategy that will raise energy prices and energy poverty while making America more dependent on other countries for our everyday energy needs.”

Since the summer, gas prices have gone down by about a quarter, so the oil industry said Trump was just trying to get votes. 

“Rather than taking credit for price decreases and shifting blame for price increases,” said American Petroleum Institute President Mike Sommers. 

“The Biden administration should get serious about addressing the supply-and-demand imbalance that has caused higher gas prices and created long-term energy challenges.”


Record profits posted by Oil Companies

Mr. Biden’s remarks came only days after the oil companies reported another three months of record profits. 

Exxon Mobil made about $20 billion in profits in the third quarter of the year. This is a 10% increase from the previous quarter and the fourth quarter in a row that the company has done well. 

Chevron reported $11.2 billion in profits, barely below the previous quarter’s record. When compared to the same time last year, Shell and Total Energy in Europe made more than twice as much money.

The five largest oil corporations made more than $50 billion in profits in the second quarter, and the International Energy Agency predicts that total net income for the world’s oil and gas producers will treble to a record $4 trillion this year from last. 

According to the agency, “Today’s high fossil fuel prices have resulted in an unparalleled windfall for producers.”

According to White House officials, a half-dozen of the largest corporations earned more profit in the previous six months than they did in all of last year and more than two and a half times what they earned in the same quarters of 2021. 

Mr. Biden said that people would pay 50 cents less per gallon of gas if the business kept making the same amount of money for the next 20 years.


Who is really profiting?

In certain situations, companies have used their earnings to increase dividends and stock buybacks rather than expand production, which may lower the price of oil and so reduce their profits. 

Exxon Mobil raised its dividends on Friday, citing a promise to “return excess cash” to shareholders.

The White House chief of staff, Klain, tweeted on Saturday, “If you’re filling your gas tank this weekend, you’re seeing one of the cheapest Saturdays of the year.” “Nationally, gas prices continue to fall,” he continued on Monday morning.


The Real prices

According to AAA, the current national average of $3.76 per gallon is about three pennies lower than a month ago and about $1.25 lower than the June peak, but it is still significantly more than the $2.39 it was when Mr. Biden took office.

The issue recently came to a head when Saudi Arabia led the OPEC Plus cartel in cutting output by up to two million barrels of oil per day right before the midterm elections. 

Officials in the Biden administration thought this was a violation of a private deal to increase supplies instead of decrease them.


Windfall Tax 

A windfall profits tax would levy an excise tax on domestic oil producers’ output. The tax rate would be set by Congress, and it may vary between individual producers and the largest corporations. 

It would be the first windfall gains tax in the United States in more than 30 years, but the Tax Foundation says that since the beginning of this year, 15 European countries, including Britain, Italy, and Spain, have proposed or adopted similar fees.

In 1980, after an OPEC embargo caused oil prices to skyrocket, President Jimmy Carter asked Congress to pass a “windfall profits tax.” Congress did so. 

Lawmakers were trying to balance out big sector tax breaks, such as a depletion allowance for older wells with depleted resources and a bunch of drilling deductions.

The windfall tax was supposed to bring in a lot of money, but it didn’t bring in as much as expected, and oil imports became more important. After oil prices plummeted, Congress removed the tax in 1988.


What Industry Experts say?

Industry leaders say that Mr. Biden’s plan to bring back the levy won’t increase supply. “It’s a terrible concept, little thought,” Patrick Montalban, president of Montalban Oil and Gas, a North Dakota and Montana producer, said.

 “It will reduce domestic oil and gas exploration and production.” It’s as simple as that. “It’s all politics.”

Investment in oil and gas exploration is 17 percent lower in 2019 than it was in 2014, when the oil industry was experiencing a price boom, according to the International Energy Agency. 

In recent years, few new fields have been identified, resulting in ever-shrinking supplies. Because of growing concerns about climate change, Wall Street has shied away from investing in hydrocarbons.


American Oil Output

Oil Prices

Despite the administration’s push for firms to dig and produce more, American oil output this year is averaging 11.87 million barrels per day, a 4% rise over last year. 

The number of rigs deployed has increased this year, though the pace has slowed since the summer.


In Europe 

Repsol‘s (REP.MC) Chief Executive Officer Josu Jon Imaz said on Thursday that the European Union’s temporary windfall tax on profits earned by fossil fuel corporations “creates a seed of doubt” about their ability to invest in the sector.

During a conference call with analysts, Imaz stated that the Spanish oil and gas business was looking into the potential to shift some of its investments to the United States.

Imaz explained that sometimes European officials are focused on prohibiting, whereas American policymakers are focused on encouraging and providing possibilities under the idea of technology neutrality.

In September, the European Commission gave the go-ahead for a temporary windfall tax. At the time, oil and gas prices had gone up after Russia invaded Ukraine in February, which was good for energy companies.

In response to Europe’s natural gas supply issue, Imaz stated that diesel fuel was becoming a “competitive substitute” for gas that could be used for both heating and power generation.


EU’s windfall Oil Tax Revenue

According to a new Transport & Environment (T&E) report, the estimated revenues from the EU’s windfall tax will not even cover the €29 billion in gasoline duty reduction that oil firms profit from. 

In a year when oil firms have already made about €70 billion in profits [2], T&E has urged governments to abolish fuel subsidies and tax oil companies more heavily.

“Governments have handed away roughly €30 billion in taxpayer-funded fuel duty cuts, which has propped up demand for oil,” said Agathe Bounfour, T&E’s oil campaign head. 

Nonetheless, the EU’s proposed windfall tax will leave states in the red. It’s no surprise that Shell’s CEO supports the EU’s objectives. European governments can correct this imbalance by eliminating regressive subsidies and making oil companies pay. “


Meanwhile in UK

In the United Kingdom, BP’s profit more than doubled in the third quarter of the year. 

This continued a run of profits for the world’s largest oil and gas companies, which will lead more people in the United Kingdom and the United States to call for higher taxes on windfall profits.

The UK-based energy company earned $8.15 billion in underlying profit from July to September, up from $3.3 billion the previous year. In a statement released on Tuesday, BP said that “extraordinary” results from trading gas helped boost earnings.


Bigger Oil Profits

As a result, Big Oil — BP (BP), Shell, Total (TOT)Energies, ExxonMobil, and Chevron (CVX) — profited by more than $58 billion in the third quarter alone. 

The record profits come at a time when rising energy and food costs are putting more and more pressure on many European and North American households.

Shareholders profit handsomely. BP said it would use the extra cash to buy back $2.5 billion in shares, increasing the total share buybacks this year to $8.5 billion. 

This year, Shell spent $18.5 billion on share buybacks and paid out large dividends on top of that.

Oil Prices Worldwide

Worldwide Oil Prices

BP says that the recent OPEC+ supply cut and the “ongoing uncertainty linked with Russian oil exports” will keep oil prices high in the fourth quarter. 

It also thinks that gas prices will stay “high and unpredictable” because there isn’t enough gas in Europe. “The outlook is very dependent on Russian pipeline flows or other supply interruptions,” the report says.

On Tuesday, Saudi Aramco, the largest oil and gas company in the world, said that its third-quarter profit rose by 39% from the same time last year to $42.4 billion.

“While global crude oil prices were affected by prolonged economic uncertainties during this period,” CEO Amin H. Nasser said in a statement. “Our long-term view is that oil consumption will continue to expand for the rest of the decade given the world’s desire for more cheap and reliable energy.”


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