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Biden suggests extra tax on energy giants if they don’t reduce gas prices

The White House plans to float a populist policy after months of internal debate on the matter

President Biden boards Air Force One at Delaware Air National Guard Base in New Castle, Del., on Monday morning. (Manuel Balce Ceneta/AP)
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President Biden lambasted oil companies for raking in record profits on Monday, saying they could face higher taxes on excess profits if they don’t pass on profits to consumers by lowering gas prices.

The remarks come days after the world’s largest oil companies reported another quarter of blockbuster earnings, with ExxonMobil posting a record profit of $19.7 billion. Chevron posted an $11.2 billion profit, its second highest on record. The earnings have drawn the ire of Biden and other Democrats, who charge they are coming at the expense of consumers struggling to afford high prices at the pump.

But Biden stopped short of explicitly calling for a “windfall tax” on excess oil company profits as other countries have implemented as Russia’s invasion of Ukraine has driven up energy prices.

“Oil companies’ record profits today are not because they’re doing something innovative,” Biden said, calling them a “windfall of war.”

The populist response, delivered from the Roosevelt Room, comes a week before midterm elections in which high energy prices and inflation have been driving issues. The president has escalated his criticisms of oil and gas firms as the White House tries to publicly cajole them into keeping prices as low as possible for American drivers.

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The White House has been frustrated by what aides see as energy companies’ use of record profits to reward shareholders rather than produce more product and bring down prices at the pump, people familiar with the issue said. A “windfall profits tax” would fall on the profits of energy companies that are in excess of their typical annual profits. The people spoke on the condition of anonymity to reflect matters not yet made public.

Democrats have stepped up their attacks on oil companies as many drivers blame the firms for the high cost of gasoline and diesel.

Biden’s remarks on Monday are unlikely to lead to the passage of a new law but mark the culmination of months of internal debates within the administration over the proper response to high gas prices and reflect a hardening of presidential rhetoric against the energy giants. Gas prices stand at roughly $3.76 per gallon, according to AAA — up from roughly $3.40 around this time last year but down significantly from around $5 at one point this summer.

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The president’s liberal allies have for months urged him to embrace the measure, but the White House had been reluctant to formally back it. The United Kingdom, Spain, Italy, Romania and Bulgaria are among the European countries that have imposed windfall profits taxes on energy firms over high fuel prices, according to Faiz Shakir, a former adviser to Sen. Bernie Sanders (I-Vt.) who has pushed the idea with White House officials.

“For all their ranting and raving on inflation, I haven’t seen any Republicans express the slightest willingness to take on oil companies over their profit-maximizing price gouging. Let’s have this debate,” Shakir said. “Democrats should pledge to address this in a special lame-duck session of Congress.”

A report by the Tax Foundation shows that an additional 10 European nations are moving forward with plans for a windfall tax on oil and gas company profits. But it also finds that many of the existing windfall taxes have failed to deliver the projected revenue, have penalized corporate energy customers in unintended ways and threaten to raise the cost of fuel.

While the tax is popular with liberals in Congress, many moderate Democrats are reluctant to champion these kinds of levies on oil companies, which the United States experimented with during the Nixon and Carter eras. Analysts found that the taxes ultimately contributed to the energy shortages of the time.

Republicans slammed the idea as a political stunt motivated by the upcoming midterm elections unlikely to expand production or move prices. They have accused Biden of resisting or blocking domestic energy companies’ plans for expanded drilling, arguing that resistance has driven up consumers’ prices.

“This is electoral posturing and blame-shifting,” said Donald Schneider, who served as a top GOP aide on the House Ways and Means Committee. “The public is not going to buy it, and I don’t think moderate members of Congress are going to vote for it either.”

This is not the first time Biden has proposed tweaking the tax code to bring drivers relief. His call earlier this year for a federal gas tax holiday got little traction in Congress.

ExxonMobil’s profits last quarter represented more than double its revenue during the same period last year.

“There has been discussion in the U.S. about our industry returning some of our profits directly to the American people,” ExxonMobil CEO Darren Woods said on the company’s earnings call Friday. He then argued “that’s exactly what we are doing” by paying dividends to shareholders, while warning windfall taxes are hurting customers in Europe and would have the same fallout in the United States.

The White House seized on the comments. “They’re using these record profits to pay out their wealthy shareholders instead of investing in production and lowering costs for Americans,” Biden wrote on Twitter. “It’s unacceptable. It’s time for these companies to bring down prices at the pump.”

Biden’s mention of the windfall profits tax was first reported by the Associated Press.