Oil industry advocates are blasting Democratic proposals to hike taxes on major oil companies, arguing that they would punish shareholders without lowering fuel prices.
Pro-oil advocates say congressional Democrats’ recent legislative push would punish investors in oil and gas companies without providing relief at the pump. Instead, they argue the higher tax burden would discourage domestic production, weaken long-term investment and make energy more expensive for American consumers.
“Windfall profits taxes don’t lower prices for consumers. We’ve seen this policy before—it deterred investment and reduced production,”American Petroleum Institute (API) spokesperson Andrea Woods told the Daily Caller News Foundation. “This is a cyclical industry, and targeting earnings in stronger periods undermines the long-term investment needed to keep energy reliable and affordable over time.”
Democratic Rhode Island Sen. Sheldon Whitehouse, unveiled the “Big Oil Windfall Profits Tax Act” in March. The legislation seeks to drastically hike the federal excise tax on stock buybacks by large oil and gas companies from 1% to 25%, with its proponents claiming the industry should not use profits from surging oil prices during the Iran war to reward shareholders.
Whitehouse did not immediately respond to the DCNF’s request for comment.
“The United States already has a ‘windfall profits tax’ in the form of its corporate income tax, which applies to company profits calculated as revenues minus costs. As a result, when high oil prices drive up oil companies’ profits, those companies automatically pay more in taxes because the tax is proportional to profit levels,” Alex Stevens, manager of policy and communications of the American Energy Alliance told DCNF.
“As we saw in past experiences with oil-specific ‘windfall’ taxes in the 1980s, layering a new tax on top of existing ones will discourage new domestic production. That outcome is in line with Senator Whitehouse’s longstanding focus on punishing domestic oil producers at every turn, but will ultimately undermine the long-term goal of protecting consumers, ensuring market competition, and lowering prices,” he added.
Stevens concluded that these poor oil prices are a need for increase of supply — and that lawmakers should reexamine policies that increase pricing and disincentivize production.
“The rate of tax imposed by this section on any barrel of taxable crude oil for any calendar quarter is the product of 50 percent, and the excess (if any) of the average price of a barrel of Brent crude oil over the covered calendar quarter, over the average price of a barrel of Brent crude oil over the period beginning on January 1, 2025, and ending on December 31, 2025,” Whitehouse’s bill reads.
The Rhode Island Democrat is not the only member of his party seeking to hit oil companies with massive taxes following the outbreak of the conflict in Iran.
“Everything about Trump’s war in Iran is a disaster, and there’s no way we can allow big oil and gas companies to turn the extraordinary financial pain many drivers are feeling into another big payday for their wealthy shareholders,” Democratic Oregon Sen. Ron Wyden said via a May press release touting his Taxing Buybacks from Big Oil Windfalls Act.
The Center for Strategic and International Studies (CSIS), also agrees that hurting exports could “backfire.”
“The political temptation to slash U.S. oil exports amid high fuel prices is understandable, but likely to backfire in practice,” Clayton Seigle, Senior Associate (non-resident) of CSIS wrote on June 5.
“Whether imposed on crude oil, refined products, or both, export controls would not bring sustained fuel price relief. Instead, they could unleash a set of structural and geopolitical problems that could make the underlying energy affordability situation worse,” Segile added.
(DCNF)