A Chevron gas station on Tuesday, March 8, in Tustin, Calif. The average price of a gallon of self-serve regular gasoline in Los Angeles County rose 8.9 cents Tuesday, its 30th record in 32 days.(Gary Coronado / Los Angeles Times)
Even before Vladimir Putin’s invasion of Ukraine shocked energy markets and sent oil prices to over $100 a barrel, Exxon was banking obscene profits. On February 1, the Texas-based fossil fuel giant announced profits of almost $9 billion for the fourth quarter of 2021—its biggest take in seven years. Exxon didn’t have to party alone; Chevron, Shell, and BP were announcing surpluses of only slightly less startling proportions.
“Combined, the four companies raked in $24.4 billion in quarter four of 2021, bringing their total profits for last year to over $75.5 billion. Chevron, Shell, BP, and Exxon used these bloated profits to shower billions onto their shareholders—including their wealthy executives whose salaries are heavily padded with stocks,” reported the watchdog group Accountability.US. “In 2021, the four companies bought back over $6.6 billion in stocks while hiking up their dividends. And the oil giants are planning for an ‘even better’ 2022 for shareholders, with plans already in place to buyback over $22 billion in stock thanks to high oil prices.”
In fact, 2022 could be dramatically better for Exxon and the other major oil companies.
Now that the United States is refusing to buy Russian oil, prospects for profiteering by energy conglomerates have expanded exponentially. Prices at the pump are shooting up to a national average of $4.17 a gallon, the highest charge in the nation’s history.
President Joe Biden acknowledged the problem when he announced the US embargo against Russian oil Tuesday. “Russia’s aggression is costing us all, and it’s no time for profiteering or price gouging,” he said. “This is a time when we have to do our part and make sure we’re not taking—we’re not taking advantage.”
Unfortunately, “taking advantage” is what oil companies do. The public-interest environmental law group Earthjustice observed this week, “While Ukrainians fight for their lives, the oil industry has pounced on an opportunity to profit economically and politically.” How so? With further spikes in gas prices and a predatory lobbying strategy that seeks to leverage the crisis for all it is worth.
“The oil and gas industry and their allies in Congress have pushed a false narrative that the fault of rising gas prices lies with the White House and are shamelessly preying on the fears of working families concerned about prices at the pump to extract big regulatory policy wins to enhance their future profits,” said Drew Caputo, Earthjustice’s vice president of litigation for lands, wildlife, and oceans. “Big Oil’s latest demand—immediately open more public lands for drilling—is both illegal and will do nothing to lower gas prices for everyday Americans.”
The answer to oil industry lobbyists should be a firm “no.”
But it shouldn’t stop there, said Senator Bernie Sanders. “We can no longer allow big oil companies, huge corporations, and the billionaire class to use the murderous Russian invasion of Ukraine and the ongoing pandemic as an excuse to price gouge consumers,” the Vermont independent declared two days after the invasion began. “It is time to enact a windfall profits tax and reasonable price controls.”
That’s not a radical idea. President Franklin Roosevelt’s administration used such a tax to prevent profiteering during World War II. It was more aggressive than what lawmakers are proposing today: top tax rates that could go as high as 90 percent on the excess profits of corporations and 95 percent for wealthy individuals.
In conversations with The Nation late last month, Representative Ro Khanna (D-Calif.) took the idea a step further, suggesting that money raised from a windfall profits tax should be used “to provide relief for working families” struggling to heat their homes and get to work—families who never got the benefits they were promised in the Democrats’ Build Back Better agenda. Khanna suggested modeling the US approach on one being proposed by British Labour Party leader Keir Starmer, with whom he recently met.
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Sanders and Khanna are often well ahead of the curve when it comes to policy matters, especially on issues of corporate accountability. But their ideas are gaining traction as gas prices soar, and Investor’s Business Daily gleefully notes, “Skyrocketing oil prices might sting at the pump. But if you own S&P 500 energy stocks—you’re about to be on the receiving end of a profit gusher this year.”
Rhode Island Senator Sheldon Whitehouse, a key Democratic member of the Senate Finance Committee, announced this week that he is exploring options for an immediate intervention to assure that Exxon and other oil companies do not “profit by billions off Ukraine’s misfortune and Putin’s cruelty, and plow that money back into climate denial and political dark money, extending their vicious cycle of profit and corruption.”
Whitehouse’s office told Bloomberg that the senator is working, along with Massachusetts Democrat Elizabeth Warren and several other Democrats, on a plan that would require energy companies that produce or import more than 300,000 barrels of oil a day “to pay a per-barrel tax equal to 50% of the difference between the current price of a barrel and the average price from the years 2015 to 2019, a period in which energy companies were recording large profits.”
Revenues from the windfall-profits tax would go to working-class individuals and families in the form of payments ranging from $240 to $360 a year, according to Whitehouse’s office.
To prevent multinational energy conglomerates from jacking up prices and shifting expenses to consumers, the Whitehouse plan would exempt small companies from the new tax, giving them the flexibility to charge prices lower than the oil giants’. Another option would be to impose the price controls that Sanders suggests.
Whatever the precise approach, action needs to be taken.
“The fossil fuel industry should not be allowed to take advantage of a crisis by artificially hiking prices and collecting a massive windfall,” said Whitehouse after Biden announced the Russian oil embargo. A windfall-profits tax can help to address the immediate crisis, argued the senator.
Ultimately, however, “it is clear we have to get off the fossil fuel merry-go-round controlled by a corrupt cartel,” Whitehouse added. “There can be no ‘energy independence’ as long as we power our economy with commodities whose prices are determined by global events beyond our control.”
John NicholsTwitterJohn Nichols is a national affairs correspondent for The Nation. He has written, cowritten, or edited over a dozen books on topics ranging from histories of American socialism and the Democratic Party to analyses of US and global media systems. His latest, cowritten with Senator Bernie Sanders, is the New York Times bestseller It's OK to Be Angry About Capitalism.