Big Oil Calls Biden’s Bluff on Windfall Tax

Big Oil Calls Biden’s Bluff on Windfall Tax

President Biden recently came out swinging and targeted oil companies with threats of increased taxes if they refused to reinvest record-high profits into increased production. As inflationary fears grow, Biden cast judgment on Big Oil, saying it has failed to invest in the American people and returns were unfair and unbelievably high as citizens succumb to high prices at the pump.

“Their profits are a windfall of war,” said Biden as he insisted oil companies were taking advantage of the War on Ukraine. “I think it’s outrageous.”

The President argued that if oil companies passed those increased profits to consumers, Americans might see relief by 50 cents per gallon when filling up their vehicles.

“If they don’t, they’re going to pay a higher tax on their excess profits and face other restrictions,” said Biden. “It’s time for these companies to stop war profiteering.”

Biden stated that if oil and gas companies failed to redirect profits, he would recommend Congress consider instituting tax penalties and additional restrictions. These bold statements were made in the wake of the recent elections, where the GOP was favored to gain control of the House of Representatives. Energy experts reasoned that no matter which party took over Congress, passing laws to tax increased profits would prove difficult.

While political beliefs continue to be debated, the suspected Red Wave on election night was not as clear-cut as hoped, and the President’s threats seemed to draw less attention than his party expected. While the arguing and speculation took place, outcomes took unexpected routes. Serving as the industry voice, the American Petroleum Institute responded to Biden’s posturing. It reasoned that the oil market is global, and producers do not possess complete control and influence over what is a free market. Despite presidential demands, large and small oil companies continued to direct cash to shareholders while being strategic in spending.

Javier Blas with Bloomberg offered insight into the current situation by reminding Americans that the administration that currently demands increased oil production is the same who pledged to reduce domestic drilling just two years prior. He further argued that Biden and his cronies convinced the oil and gas industry to refrain from including a healthy growth spurt along with other production goals.

The Financial Times echoed Blas’ take and added that the country is in the current situation because oil and gas expansion was stopped by decreasing production. The outlet added that the International Energy Agency recently predicted a peak in oil demand growth sometime between 2030 and 2040. Additionally, Biden is demanding oil companies dispense billions in funds on what will become useless assets in the years to come.

The Financial Times also indicated that the banks wanted cash directed to shareholders instead of new production investments. Shareholders have willingly accepted the returns as they will forever remember what seemed to be an endless amount of money invested in production growth as prices plummeted into the negative. Although it was for a short period, the shell shock remains.

Shareholders have waged ESG pressure, which has also influenced the direction of increased earnings. Net-zero strategies and targets incur considerable costs, and the money must originate somewhere. Steering back into the path of exploration investment would more than likely rock the boat with investors.

Biden’s chant of responsibility to the American people is one he should accept. The elected official, like the President himself, takes an oath of civic duty to act in the best interests of consumers, communities, and the country, regardless of party affiliation. When considering shareholder interests and input, it might be worth reminding the President that companies put the desires of ownership first, and in this case, it is not the White House. Oil companies owe only their shareholders, creditors, and their employees. The Biden administration has failed to allow the country to grow and prosper in multiple areas. Publicized plans to level the oil and gas industry will likely backfire amid geopolitical turmoil, rising costs, and inflationary fears. As the country pays the price for such misdirected contempt for the oil and gas industry, those companies continue to buy back shares, increase dividends, and reduce debt while refraining from significant production growth.

Author profile
Freelance Writer and Photographer

Nick Vaccaro is a freelance writer and photographer. In addition to providing technical writing services, he is an HSE consultant in the oil and gas industry with eight years of experience. Vaccaro also contributes to SHALE Oil and Gas Business Magazine, Louisiana Sportsman Magazine, and follows and photographs American Kennel Club field and herding trials. He has a BA in photojournalism from Loyola University and resides in the New Orleans area. Vaccaro can be reached at 985-966-0957 or navaccaro@outlook.com

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