Biden warns of windfall tax for ‘war profiteering’ oil companies

The president’s announcement comes shortly after Exxon and other oil giants reported billions in profits for the third quarter.

By Rhonda Fanning & Tiara AllenNovember 1, 2022 4:54 pm,

If you ask most folks in the know what’s the energy capital of the U.S., many will tell you Texas, as it’s known as the home of several major oil extractors, refiners and petrochemical-related companies.

As the Dallas Fed notes, if Texas were a country, its current oil production would rank fourth globally behind the U.S., Russia and Saudi Arabia and ahead of Mexico and Canada – to say nothing of its fast-growing renewable industry. Texas ranks No. 1 for wind power in the U.S., and wildcatters have moved into areas like solar energy to stake their claims. Though gas and oil aren’t the main economic drivers in Texas, as they once were before transformations in the economy back in the 80s, oil and gas still account for almost 10% of the state’s gross domestic product.

But with Russia’s war against Ukraine putting the squeeze on supply and gasoline prices pinching consumers on the home front, President Joe Biden is threatening to seek a windfall profits tax on major oil and gas companies unless they ramp up production to curb the price of gasoline at the pump. The timing of this announcement is important, as the Houston Chronicle notes: Coming ahead of the midterm elections, gasoline prices and wider inflation across the economy is a driving issue for the GOP.

James Osborn, who covers the intersection of energy and politics for the Chronicle’s D.C. bureau, joined the Texas Standard to share more. Listen to the interview above or read the transcript below.

This transcript has been edited lightly for clarity:

Texas Standard: A windfall profits tax. The president is accusing big oil companies of war profiteering. What’s the president specifically alluding to?

James Osborn: It’s a series of earnings reports that came out last week about billions of dollars – Exxon set a record, its all-time record, at over $19 billion for three months’ profit. You know, this is a message the president’s been very vocal on for quite some time now. He’s raised concerns repeatedly over the last 12 months about this issue of how much money the oil companies are making versus how much more Americans are paying at the pump.

I have to ask, since everyone seems to be talking about it at this juncture: How much of this announcement is politics, and what do you make of the timing?

Yeah, clearly, I mean, we’re just a week out from midterms, so politics is front and center on this. The Republicans are expected to win the House, and it’s a toss-up on the Senate, and every little bit probably helps at this point. And the fact of the matter is that inflation … [and] the massive increase in prices that Americans have seen over the last 10 months is probably the No. 1 issue in this election. If you look at the polls, that’s what Americans are most worried about. So this is an opportunity for the president to come and stake his claim as the voice of the American people, not of big business, and stand up to a bunch of oil companies that have never been very popular politically.

‘Voice of the people.’ But, you know, a lot of jobs are tied into the oil and gas sectors, especially here in Texas, and many here may read the president’s announcement as a threat to their livelihoods. Could this backfire on Democrats in Texas, or is it possible the president’s camp might have written off making midterm gains in Texas?

I think so. I think this is really aimed at voters in Pennsylvania, Nevada – those [are] toss-up states right now. Pennsylvania does have a big natural gas industry, but at the same time, it’s a big, diverse state, and natural gas is geographically a sort of smaller portion of the state. So, yeah, your point is right: Were this windfall tax ever to go in place, it would probably lead to some job losses, the degree of which will be argued over between Biden and the oil companies. But he’s willing to lay his chips with the average American consumer not working in the energy industry who he thinks – and if you look at the polls, he’s right – are just fed up with what’s happened over the last 10 months, not just with gasoline prices, but with food prices, everything; the cost of living for everything has gone up so much.

Only a few weeks back, California Gov. Gavin Newsom made a similar declaration that he would be seeking a windfall profits tax on oil companies. And I wonder, did he tee that up for President Biden, or is it possible maybe the president is thinking about 2024 and the possibility of being outflanked on the left by Newsom or other Democrats?

Sure, anything’s possible. This is the way the Democrats – and the Republicans as well – have been heading. I mean, we’ve been moving more and more away from free market economic policies. I think it really got started under President Trump [with] efforts to protect American industry, American workers, especially against Chinese manufacturers. And that’s continuing on with the Biden administration. I think politicians in America – and for that matter, Europe – are asking some questions about how what gains were made over the last few decades, as sort of both parties have really embraced free market principles.

This now is, I think, another sign of that, of the president willing to certainly try anyway to put some market controls in place. Now the chances of this getting through Congress, even with the current makeup, let alone if Republicans take control of the Senate, is virtually nil. But I think he’s sending a message to the oil companies and to the American people that the American government’s relationship with corporations is changing.

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