Solution to high gas prices: tax oil companies, says US politician

Editor’s Note: Patrick Gaspard is the president and CEO of the Center for American Progress. The opinions expressed in this text are his own.

President Biden has led a successful campaign to cut Russia off from the global economy, with asset freezes, export controls and a ban on Russian oil imports. While this has had a devastating impact on the Russian economy, there’s no denying that Americans are feeling the reverberations too.

Gas prices rose by nearly $0.70 a gallon in a two-week period after the invasion. Prices at the pump have since stabilized but are still over $4 a gallon. Biden responded by announcing the release of oil from the country’s Strategic Petroleum Reserve to increase supply and lower prices.

The move, along with efforts by US allies abroad, will add more than a million barrels of oil a day to supply. Still, the president and Congress must go further in combating price increases.

One way to do this is to enact a temporary tax on the windfall profits of big oil companies and the billions of dollars the industry has been raking in.

Oil giants Shell, BP, ExxonMobil and Chevron posted more than $75 billion in profits last year. ExxonMobil alone made $8.9 billion in the last three months of 2021. This comes after sustaining Putin’s fossil fuel economy for years.

ExxonMobil subsidiary Exxon Neftegas Limited has a stake in an oil and gas project that has generated billions in payments to Russia’s federal and regional governments. BP, meanwhile, has owned a fifth of Rosneft, the Russian state oil company, since 2013, although it said it would sell its stake.

Shell has a stake in an oil and gas project controlled by Russian energy company Gazprom, while Chevron has a stake in a pipeline venture there.

These companies are in a position to profit from Russia’s attack on Ukraine. Pumping oil costs the same amount, but now they can sell it at war-driven prices. They are using the resulting windfall profits to increase shareholder payouts through buybacks and dividends.

When challenged during a congressional hearing last week, oil CEOs made it clear they will not hold back.

That’s why Congress must implement a temporary windfall tax that, according to a new report by the Center for American Progress (CAP), could bring in tens of billions of dollars to help defray fuel costs for families. . The tax would increase or decrease as prices fluctuated, until prices returned to pre-crisis levels.

Currently, oil companies make more money when prices rise. But if the oil companies’ tax rate increased along with the price of the commodity, the windfall would be recaptured and could be returned to US consumers through a direct payment, for example.

This proposal would be a temporary response to an extraordinary international energy crisis. Congress could ensure that the windfall tax disappears once oil prices return to normal levels ($75 a barrel of oil, according to CAP analysis).

But this won’t be the last time American consumers will be hit by volatile energy costs, especially if they remain so dependent on oil. In the long term, Congress must also invest in building a clean energy economy.

It’s time to make the oil companies pay their fair share and lighten the American consumer’s burden a little. The most immediate action Congress should take is to enact a temporary windfall tax to ensure that oil companies do not absorb profits for themselves at the expense of American families.