Rep. Ro Khanna and Sen. Sheldon Whitehouse are pushing a bill they say will help bring relief from high gas prices to Americans – as energy industry critics argue it would do the exact opposite.
The proposal, which comes as Russia’s war on Ukraine delivers a shock to global energy prices, is called the “Big Oil Windfall Profits Tax.” According to Khanna, D-Calif., and Whitehouse, D-R.I., the bill would levy a tax on oil barrels sold by large producers “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.”
The money from that tax would be sent to consumers as a quarterly rebate, according to a description of the bill, with a cutoff for single people making $75,000 or more and families making $150,000 or more.
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“This is a bill to reduce gas prices and hold Big Oil accountable. As Russia’s invasion of Ukraine sends gas prices soaring, fossil fuel companies are raking in record profits,” Khanna said. “These companies have made billions and used the profits to enrich their own shareholders while average Americans are hurting at the pump.”
The tax would only affect to companies that extract over 300,000 barrels of oil per day, applying to oil extracted both domestically and worldwide, according to a press release from Khanna’s office. That threshold would exempt “[s]maller companies accounting for roughly 70 percent of the domestic production… so oil giants like Exxon Mobil and Chevron cannot simply gouge consumers further without the threat of losing market share,” it said.
“We’ve seen this script before, and we cannot allow the fossil fuel industry to once again collect a massive windfall by taking advantage of an international crisis,” Whitehouse said. A press release from Whitehouse and Khanna said the increase in gas prices, “is not justified by increases in the cost of domestic production, but is driven by international markets controlled by fossil fuel cartels.”
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Energy industry representatives, however, are pushing back against the proposal, arguing that it may have the exact opposite of its intended effect.
“Policies like a so-called windfall profits tax are misguided and would likely backfire by further driving up energy costs for American families and businesses,” American Exploration and Production Council CEO Anne Bradbury said.
“We believe that the solution to rising energy prices should be clear to our nation’s leaders: support domestic production of oil and natural gas and permit the pipelines and infrastructure needed to safely move energy to customers,” Bradbury added.
“The American people are looking for solutions, not finger pointing,” American Petroleum Institute senior vice president of policy, economics and regulatory affairs Frank Macchiarola said. “The price at the pump that Americans are currently paying is a function of increased demand and lagging supply combined with the geopolitical turmoil resulting from Russia’s aggression in Ukraine.”
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Macchiarola added: “Lawmakers should focus on policies that increase US supply to help mitigate the situation rather than political grandstanding that does nothing but discourage investment at a time when it’s needed the most.”
Energy industry insiders and advocates at the CERAWeek by S&P Global conference in Houston last week repeatedly said the U.S. should move toward policies that encourage energy investment, in order to increase domestic production.
Sen. Lisa Murkwoski, R-Alaska, said President Biden needs to show tangible movement in that direction otherwise U.S. energy output won’t increase anytime soon.
“The president needs to get up there, and not only say it, but then direct his secretary of the interior: Where’s that five-year plan? Direct Secretary Granholm: Get these LNG export permits out the door,” Murkowski said. “Let’s move on this. So let’s just not talk at an energy conference.”