Demand Grows for Windfall Profits Tax as Goldman Sachs Predicts More Gas Pump Pain

Progressives are arguing that Wall Street's new prediction of worsening pain at the pump for U.S. consumers this summer underscores the need for Congress to pass Democratic lawmakers' overwhelmingly popular bill to impose a windfall profits tax on Big Oil.

"The public knows oil and gas billionaires are responsible for the pain at the pump."

According to analysts at Goldman Sachs, "oil prices will surge to $140 a barrel this summer, with a drop in Russian production and a gradual recovery in Chinese demand adding to the pressure on already low supplies," Insider reported Tuesday.

"But they said consumers will feel as though oil has hit $160 a barrel," the news outlet continued, "because a lack of capacity at refineries means gasoline and fuel prices are rising more than would normally be expected, adding to costs across the economy."

Oil prices have already increased by roughly 50% this year as a result of Russia's invasion of Ukraine and mismatches in supply and demand. As of Tuesday, Brent crude, the international benchmark, and WTI crude, the U.S. benchmark, traded at approximately $119 and $118 a barrel, respectively, while the nationwide average price for a gallon of gas hit $4.92.

Since consumer demand returned following a brief pandemic-driven decline in 2020, investors have pressured oil giants to suppress production to push prices higher. Last year, as average gas prices in the U.S. steadily climbed--reaching about $3.40 per gallon in December 2021, up from $2.10 a year before--25 of the world's biggest fossil fuel corporations enjoyed a record $205 billion in profits.

Oil and gas companies have hiked prices even further in 2022--especially after President Joe Biden's early March announcement of a U.S. ban on imports of Russian fossil fuels. Accusations of war profiteering have grown since petroleum executives in April bragged about their "best quarter ever."

A report published last month by the watchdog group Accountable.US found that "in the first three months of the year, 21 oil and gas companies made over $41 billion in profits, more than doubling profits from just a year ago. This is, on average, $1.2 billion more per company than the same time last year thanks to--as the companies themselves say--high oil prices and the crisis in Ukraine."

Chevron and ExxonMobil respectively raked in $6.3 billion and $5.5 billion in the first quarter of this year, meaning that they quadrupled and doubled their profits compared with the previous year even as the U.S. economy contracted.

"We need a windfall profits tax on Big Oil," Robert Reich, a professor of public policy at the University of California, Berkeley, tweeted Tuesday.

Petroleum executives have faced increased scrutiny from Democratic members of Congress and New York's attorney general in recent weeks, but Jamie Henn, a spokesperson for the Stop the Oil Profiteering (STOP) campaign, has long argued that "the clearest and most popular way to get direct relief to the public and to check Big Oil's rampant war profiteering is with a windfall profit tax."

In March, congressional Democrats led by Rep. Ro Khanna (Calif.) and Sen. Sheldon Whitehouse (R.I.) introduced the bicameral Big Oil Windfall Profits Tax in an effort to crack down on what progressive lawmakers have condemned as "shameless" price gouging by fossil fuel corporations.

According to survey data released just days after the legislation was unveiled, a whopping 80% of U.S. voters--including 73% of Republicans--support the measure, which would hit large fossil fuel companies with a per-barrel tax equal to 50% of the difference between the current price of a barrel of oil and the average price per barrel between 2015 and 2019. An estimated $45 billion in annual revenue would be redistributed to U.S. households in the form of quarterly rebates.

"There is vast, bipartisan support for this policy," Henn said in late April, "because the public knows oil and gas billionaires are responsible for the pain at the pump."

Despite being brought to Capitol Hill to testify before Congress about their role in jacking up gas prices, U.S. fossil fuel executives--projected to reap up to $126 billion in extra profits this year--have not been shy about how they are capitalizing on the war in Ukraine.

After rewarding themselves and other shareholders with billions of dollars worth of stock buybacks and dividend bumps last year, industry leaders are on track to do more of the same in 2022.

To put an end to such behavior, dozens of progressive advocacy groups have been urging Senate Majority Leader Chuck Schumer (D-N.Y.) and House Speaker Nancy Pelosi (D-Calif.) to support the Big Oil Windfall Profits Tax, which Sen. Elizabeth Warren (D-Mass.) has said can help Democrats avert "big losses" in November's pivotal midterms.

The STOP campaign, for its part, tweeted Monday that a windfall tax on Big Oil's skyrocketing profits provides a "straightforward" solution to high gas prices.

Khanna highlighted recent reporting that the Biden White House is "engaging in conversations with" congressional lawmakers about the design of a potential windfall profits tax.

"This tax would help rein in Big Oil's profiteering and put money directly in the pockets of consumers," Khanna said Monday on social media.

Last month, Britain's Conservative government announced that the U.K. will impose a 25% windfall tax on oil and gas profits, which is expected to raise $19 billion to support low-income households struggling with a significant spike in the cost of living.

"If Britain's Conservatives can do it," Reich said Monday, "so can Biden."

However, Khanna and Whitehouse's proposal faces long odds in the Senate, where the anti-democratic filibuster rule requires 60 votes to advance debate on most legislation. Not only is the support of at least 10 Republicans unlikely to materialize, but questions remain about whether corporate Democratic Sen. Joe Manchin (W.Va.) would back the bill.

"The president is asking for Congress and others for potential ideas," Commerce Secretary Gina Raimondo said Tuesday. "But the reality is that there isn't very much more to be done... The president has already taken very bold moves."

Henn, meanwhile, has argued that Biden's moves to release millions of barrels of oil from the nation's strategic reserves and suspend seasonal regulations on ethanol blending won't halt "Big Oil's coordinated campaign to gouge Americans."