Source: United States Senator for Rhode Island Sheldon Whitehouse
03.25.22
Big Oil Windfall Profits Tax would protect consumers from giant oil companies taking advantage of world events to jack up prices
Washington, D.C. – Economists and environmental groups are expressing support for the Big Oil Windfall Profits Tax Act, legislation introduced by U.S. Senator Sheldon Whitehouse (D-RI) earlier this month to curb profiteering by oil companies and provide Americans guaranteed relief from soaring prices at the gas pump.
New reports have emerged that Big Oil companies are planning on using windfall profits to pay large dividends to shareholders and buy back billions of dollars of their own shares, juicing already generous executive compensation. This underscores the need for a legislative solution to crack down on industry profiteering and put money back in Americans’ pockets.
“Our bill has earned the support of economists and a broad cross-section of the Democratic caucus because it is an effective solution for getting Americans some relief from rising gas prices,” said Whitehouse. “Meanwhile, Big Oil companies are bragging to investors that they are flush with extra cash for shareholders and stock buybacks. We need to send some of those wild windfall profits back to the working people who paid for them at the pump.”
Under the Big Oil Windfall Profits Tax, large oil companies that produce or import at least 300,000 barrels of oil per day (or did so in 2019) will owe a per-barrel tax equal to 50 percent of the difference between the current price of a barrel of oil and the pre-pandemic average price per barrel between 2015 and 2019, a period when big oil companies were already earning large profits. The quarterly tax will apply to both domestically produced and imported barrels of oil to ensure a level playing field. Smaller companies accounting for roughly 70 percent of the domestic production will be exempt, so oil giants like Exxon Mobil and Chevron cannot simply gouge consumers further without the threat of losing market share.
Revenue raised from the windfall profits of big oil companies will be returned to consumers in the form of a quarterly rebate, which would phase out for single filers who earn more than $75,000 in annual income and joint filers who earn more than $150,000. At $120 per barrel of oil, the levy would raise approximately $45 billion per year. At that price, single filers would receive approximately $240 each year and joint filers would receive roughly $360 each year.
The legislation is cosponsored by Senators Jeff Merkley (D-OR), Elizabeth Warren (D-MA), Bernie Sanders (I-VT), Richard Blumenthal (D-CT), Tammy Baldwin (D-WI), Sherrod Brown (D-OH), Jack Reed (D-RI), Ed Markey (D-MA), Cory Booker (D-NJ), Michael Bennet (D-CO), Bob Casey (D-PA), Raphael Warnock (D-GA), Debbie Stabenow (D-MI), and Alex Padilla (D-CA). Congressman Ro Khanna (D-CA-17) introduced the legislation in the U.S. House of Representatives.
According to a recent poll by Hart research, eighty percent of voters favor a windfall profits tax on oil companies.
What the Endorsers Are Saying
“A windfall profits tax on Big Oil is exactly what’s needed to help average working people through this fuel crisis. It’s good policy, and it’s the right thing to do.” – Economist and former Labor Secretary Robert Reich
“In the midst of this economic and political crisis, oil and gas companies are taking advantage of world events, increasing their prices enormously despite no meaningful increase in their costs of production, raking in record profits at the expense of ordinary Americans. A windfall tax whose proceeds are used to help consumers is an economically sound way to deliver relief. With the benefits of price gouging thereby reduced, some companies might even be discouraged from price gouging.” – Joseph Stiglitz, Chief Economist and Senior Fellow at the Roosevelt Institute
“As the world witnesses Russia’s horrific war and atrocities against Ukraine, Big Oil has seized this crisis as an opportunity for price gouging and profiteering. The oil and gas industry is reaping massive profits while consumers everywhere are feeling pain at the pump. The windfall profits tax will require fossil fuel companies to share their gains with families who are paying the price for a global crisis they didn’t create. That’s basic fairness.” – Bobby McEnaney, Director of the dirty energy project for Natural Resources Defense Council
“For too long, the oil and gas industry has been able to use the cover of inflation and international conflict to jack up prices for American consumers. We applaud Senator Whitehouse for his leadership in ensuring that vulnerable communities don’t pay the price for fossil fuel industry greed.” – Sierra Club Deputy Legislative Director Mahyar Sorour
“After Russia’s invasion of Ukraine, polluting industries wasted no time in exploiting a humanitarian crisis to increase their profits even while American families paid the price at the pump. We applaud Senator Whitehouse’s legislation that would hold the oil and gas industry accountable for driving up prices and provide direct, much needed relief to families across this country who have been hit the hardest.” – Earthjustice Legislative Representative Sara Cawley
“This legislation will stop Big Oil’s war profiteering and deliver much-needed relief to consumers. While families are feeling pain at the pump, oil executives are making record profits because of the devastating war in Ukraine. Big Oil doesn’t deserve a single penny extra by profiting during a time of war and crisis they helped create – instead, these windfall profits for a handful of executives should be used to help the consumers, especially low-income families, who are paying all the costs. We are glad to see Congress putting families first – now it’s time for Congress to pass this legislation that would help make Big Oil pay for a crisis they helped create at home and abroad.” – Jamie Henn, Director of Fossil Free Media
“We applaud Senator Whitehouse and Representative Khanna for their leadership in putting a stop to Big Oil’s profiteering at the expense of ordinary Americans. As the US’ biggest fossil fuel companies report near-record profits and seek to exploit the war in Ukraine for political and economic gain, America is getting a wake-up call to end its reliance on volatile and destructive fossil fuels.” – Zorka Milin, Senior Advisor at Global Witness
What the Oil Companies are Saying
“As a result of our restored financial strength, we increased the annual dividend for the 39th consecutive year and announced a $10 billion share repurchase program that started last month. Overall, a strong list of accomplishments.” – Darren Woods, President and CEO of ExxonMobil, February 1, 2022
“Our cash flow-driven return of capital framework uniquely prioritizes our shareholders as the first call on cash flow generation, not the drill bit. And our recent actions underscore both our commitment to prioritizing our shareholders and the power of our portfolio in a constructive price environment. The outcomes speak for themselves. During the fourth quarter, we returned over 70% of our cash from operations or more than $800 million to our equity investors, significantly exceeding our minimum 40% commitment. […] Further, we continue to believe buybacks remain an excellent use of capital.” – Lee Tillman, President and CEO of Marathon Oil, February 17, 2022
“At $100 oil, $150/b oil, we’re not going to change our growth rate. We think it is important to return cash back to the shareholders.” – Pioneer Natural Resources CEO Scott Sheffield, February 17, 2022