Memo: Big Oil Windfall Profits Tax Will Deliver Relief to Struggling Americans
To: Interested Parties
From: STOP - Stop the Oil Profiteering
Date: October 31, 2022
Subject: Big Oil Windfall Profits Tax Will Deliver Relief to Struggling Americans
President Biden is set to deliver remarks at 4:30pm ET this afternoon about “Oil Companies Record Setting Profits.” According to reports in the Associated Press and elsewhere, the President is likely to throw his weight behind the idea of a windfall profits tax on oil and gas companies, something that Stop The Oil Profiteering has been leading the campaign for over the last year.
A Big Oil Windfall Profits tax is a much wiser course of action than President Biden’s other plan, which is to urge oil and gas companies to increase production. The US is already producing near record amounts of oil and gas, but prices at the pump remain high because Big Oil is profiteering from global disruptions caused by the war in Ukraine. As we transition to clean and affordable energy for all, a windfall profits tax can provide immediate relief to people who are struggling right now to pay for expensive fossil fuels.
Here are some key facts to know about the Big Oil Windfall Profits Tax:
The policy is overwhelmingly popular. According to polling by the Hart Research Group and League of Conservation Voters, 80% of Americans – including 73% of Republicans – support the idea of a windfall profits tax on oil and gas companies. 45% of voters strongly support the policy compared to only 7% who strongly oppose it.
A windfall profits tax could raise billions of dollars to help American families. The exact amount of revenue raised by a windfall profits tax on oil and gas companies depends on who qualifies, how high the tax is, and how it is applied. Some proposals have suggested applying the tax above a certain cost per barrel, others have suggested the tax be applied as a percentage of excess profits over a base year. No matter the exact approach, considering the massive 2022 profits of oil and gas companies, a windfall profits tax would likely raise tens of billions of dollars. That money could then be sent directly to working Americans to offset high energy costs and/or invested in programs like the Low Income Home Energy Assistance Program.
Big Oil will try and defend their profits with help from their allies in Congress. Industry groups and Republicans are already trying to argue that taxing their profits will raise prices for American families and businesses, but such claims don’t hold up to scrutiny. In fact, oil and gas companies have made it repeatedly clear that they have been throttling production and keeping prices high to please wealthy shareholders, not because of any government regulations or taxes. Rather, a windfall tax could incentivize companies in the right direction, to bring down prices, since their excess profits would now be penalized. There is also no evidence that sending a few hundred dollars in the form of a relief check to working Americans would increase inflation. Economists have been consistent in blaming the war in Ukraine, the same source of Big Oil's profits, as the reason for increased energy prices. It would be naive in the extreme to believe that Big Oil would lower prices on their own. If anything, a more aggressive stance from the Biden Administration to the industry could help push them to prioritize the needs of the American people instead of their wealthy shareholders.
The key principles for a windfall tax are: high rate, no loopholes, proceeds to the people. No matter the exact design of windfall profits tax legislation, a few principles need to be at the core.
First, the tax should be set at the highest possible levels for all major oil and gas producers. All of these corporations have earned these excess profits due to a wartime windfall and the money should be used to help the American people, not enrich CEOs and wealthy shareholders.
Second, no loopholes. Shell was able to dodge a windfall profits tax in the UK by writing off their investments in drilling in the North Sea. We’re already producing record amounts of oil and gas in the United States and shouldn’t be incentivizing additional production beyond what’s required to stabilize supply while we rapidly transition to clean energy.
Third, the proceeds should go to the people. The revenue from a windfall profits tax should be distributed back to the American people to help families struggling with high fossil fuel costs. Tens of millions of Americans are already falling behind on utility payments as winter approaches and they need support now. This money could be in the form of a direct check, like the American Rescue Plan, or invested through programs like LIHEAP, but it must reach the individuals who need it most, rather than be swallowed up in the overall government budget.
Big Oil has raked in excessive profits and should pay their fair share. Big Oil companies have now made nearly $300 billion in excess profits in 2022. ExxonMobil just announced its highest quarter in history, earning over $20 billion from July to September. Valero just posted a quarter three profit 500% higher than the previous year. These profits fit the definition of a windfall: they are directly tied to the industry’s profiteering from the war in Ukraine, a war Big Oil helped fuel by working with Putin for years to expand Russian oil and gas production. The industry has clearly shown they do not need these wartime winnings to maintain supply: instead they’re using them for some $155 billion in buybacks and dividends.
There is widespread support in Congress. 82 members of Congress have endorsed some version of windfall profits tax legislation. Legislation was first introduced in March by Senator Sheldon Whitehouse and Representative Ro Khanna. Another piece of legislation was then introduced in the House, by Representative Peter DeFazio. This August, Senator Ron Wyden introduced a third bill in the Senate with the support of Leader Schumer. Senator Bernie Sanders has also introduced legislation that would apply a windfall profits tax to the 30 largest corporations in the country, including some oil and gas giants.
The policy has widespread support from climate and progressive groups. Over 120 organizations have signed onto a letter calling for the windfall profits tax. Supporters range from large environmental groups, like the League of Conservation Voters, to think-tanks, like the Center of American Progress, to progressive organizations, like Public Citizen.
A windfall profits tax has already been passed by many European countries. Greece, Italy, Spain, the United Kingdom, and others have implemented a windfall tax. The policy in the UK was implemented by the Conservative government as a way to combat high energy prices. The European Parliament has also supported the measure.
The UN Secretary General has called for a windfall profits tax. This September, in his address to the United Nations general assembly, Secretary General Guterres called for windfall profits tax, saying “polluters must pay” and that it was “high time to put fossil fuel producers, investors and enablers on notice.”
The United States has passed a windfall profits tax in the past. Administrations from both sides of the aisle have supported windfall profits taxes in the past, whether to combat war-time profiteering or to specifically address high fossil fuel prices. The policies have been supported and maintained by both Democrats and Republicans.
This isn’t the first time President Biden has supported a windfall profits tax. As a Senator, Joe Biden supported a windfall profits tax on Big Oil companies. When President Reagan attempted to repeal the tax in 1981, Senator Biden said, “Of all the individuals and businesses in America, oil interests should be the last concern of the Senate.”
Stop The Oil Profiteering (STOP) will continue to lead the campaign for a Big Oil Windfall Profits Tax in the United States. The STOP campaign launched in February 2021, just after Russia illegally invaded Ukraine and oil and gas prices skyrocketed. In March, STOP supported the introduction of the first piece of windfall profits tax legislation by Senator Whitehouse and Representative Khanna, promoting the bill and hosting a major press conference at the Capitol. STOP has gone on to run ads supporting the windfall tax in Washington, D.C., organize sign-on letters, host rallies, write articles, and run online campaigns to support the proposal. Over the coming weeks, STOP will continue to push for Congress to pass a windfall profits tax as soon as possible.
A Big Oil Windfall Profits Tax is a powerful way to hold Big Oil accountable for their wartime profiteering and deliver immediate relief to Americans who are struggling with high fossil fuel costs. The STOP campaign welcomes President Biden’s support for the proposal and urges Congress to act as soon as possible to pass a windfall profits tax that is set at a high level, has no loopholes, and delivers the proceeds directly to the American people.
