Congressional Democrats are proposing a new tax on large oil companies designed to “curb profiteering” by redirecting profits associated with higher crude oil prices to back drivers.
The Big Oil Windfall Profits Tax Act, introduced by Sen. Sheldon Whitehouse of Rhode Island and co-sponsored by 11 other Democratic senators on Thursday, would collect a portion of the profits companies are currently yielding with oil at its highest premium in more than a decade and return it to consumers as quarterly rebates.
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“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 in a statement.
Oil companies that produce or import at least 300,000 barrels of oil per day will owe a per-barrel tax equal to 50% of the difference between the current price of a barrel of oil and the pre-pandemic average price per barrel between 2015 and 2019, according to a bill summary released by his office.
Those funds will then be rebated to tax filers, depending on their income. Assuming a $120-per-barrel price of oil, the tax would raise some $45 billion per year, and eligible single filers would receive approximately $240 on a yearly basis, while joint filers would receive roughly $360 per year.
Rep. Ro Khanna, chairman of the Oversight and Reform Committee’s Environment Subcommittee and a fierce critic of the oil and gas industry, is leading a companion effort in the House. Khanna said the measure was a means of “holding Big Oil accountable.”
“These companies have made billions and used the profits to enrich their own shareholders while average Americans are hurting at the pump,” he said.
The move coincides with recent, repeated messaging from President Joe Biden urging oil companies not to hike their prices up unethically further to improve profits now that the Russia-Ukraine war is compounding already high crude oil prices.
“It’s no excuse to exercise excessive price increases or padding profits or any kind of effort to exploit this situation,” Biden said during his speech on Tuesday announcing a ban on Russian fuel commodity imports.
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Oil industry players have denied acting unethically and maintain that the price of their products is driven by the price of oil, which is set by the global market.
“I think they need to stop the rhetoric that, you know, this industry is seeking to capitalize on a tragic moment in U.S. history and world history,” Mike Sommers, president and CEO of the American Petroleum Institute, told the Wall Street Journal.
Markets have cooled since crude oil spiked to more than $130 per barrel earlier this week. Prices most recently closed at about $109 and $106 a barrel on the global and U.S. benchmarks, respectively.
