Joe Biden Accuses Oil Companies of Profiting from Energy Crisis, Threatens to Impose Windfall Tax

The closer midterms approach, the more desperate the Biden administration becomes in nudging those pesky fuel prices downward just enough to bring voters to the polls in November. Whether it be the “Putin Price Hike” or OPEC’s reluctance to increase output, US President Joe Biden is adamant on letting Americans know it is no way his administration’s fault that they are paying 60% more at the pump, this time laying the blame on oil companies profiting from the crisis in Ukraine.

During a speech at the White House, Biden accused major oil companies of “profiteering” from the energy crisis caused by Russia’s war in Ukraine, and not using the record “windfall” profits to reinvest in domestic oil production. “At a time of war, any company receiving historic windfall profits like this has a responsibility to act beyond the narrow self-interest of its executives and shareholders,” he said. “They have the opportunity to do that, lowering prices for consumers at the pump. If they don’t they’re going to pay a higher tax on their excess profits and face other restrictions.”

Biden’s latest comments come after both Chevron and ExxonMobil reported monumental earnings, with quarterly net profits of $11.2 billion and $20 billion, respectively. “Their profits are a windfall of war— a windfall from the brutal conflict that is ravaging Ukraine and hurting tens of millions of people around the globe,” the president added. According to him, if the oil companies trickled some of those profits down to consumers instead of allocating all of the cash to shareholder payouts, gasoline prices could be 50 cents lower.

In Biden’s ideal scenario, Big Oil should use the profits to boost output, which in turn will bring down prices at the pump, and the democrats would regain some confidence among the public. If oil companies don’t make an effort to reinvest in production, they will face a windfall tax that will surely teach them a lesson! However, it is worthwhile to note that the US government has been attempting to pass a windfall tax policy since the 1980s— without any success, of course. Indeed, such tax legislation on Big Oil likely wouldn’t gain traction, particularly in the current divided Senate.

Moreover, critics of Biden’s proposal warn that such a tax policy would ultimately end up backfiring, and create even higher fuel prices in the long-run. “Once again, the president is more worried about political posturing before the midterms than he is about advancing energy policies that will actually deliver for the American people,” said American Fuel and Petrochemical Manufacturers Association head Chet Thompson, as cited by Bloomberg. “A windfall profit tax might make for good sound bites, but as policy, it’s bad for consumers. It’s likely to disincentivize fuel production and make matters worse for drivers.” 

Likewise, oil experts argue that their hands are tied when it comes to reducing gasoline prices in the short term. “Oil companies do not set prices— global commodities markets do,” American Petroleum Institute CEO Mike Sommers said. Indeed, major projects focused on boosting domestic production take years to complete, and need to create alluring long-term returns, which can only be guaranteed by a federal government that sets dependable energy policies.

Information for this briefing was found via Reuters, Bloomberg, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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