Bill Would Close Tax Loopholes for Oil Companies After Record Earnings

The net income of oil and gas producers doubled between 2021 and 2022 while gas prices also reached record highs.

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he Mobil logo and gas prices are displayed at a Mobil gas station on October 28, 2022 in Los Angeles, California. Exxon Mobil Corp. posted a quarterly profit of nearly $20 billion, the highest quarterly profit in company history amid a surge in oil prices during the quarter.
he Mobil logo and gas prices are displayed at a Mobil gas station on October 28, 2022 in Los Angeles, California. Exxon Mobil Corp. posted a quarterly profit of nearly $20 billion, the highest quarterly profit in company history amid a surge in oil prices during the quarter.
Image: Mario Tama/Getty Images (Getty Images)

Seven Democratic senators led by Rep. Bob Menendez of New Jersey introduced legislation that would close several large loopholes oil and gas companies use to skip out on paying their fair share in taxes. The “Close Big Oil Tax Loopholes Act” comes after a year of record-breaking profits for oil companies and inflation-spurring gas prices for drivers.

This isn’t the first time Democrats have tried to get Big Oil to pay more taxes. Some form of this legislation has been floating around since 2010. But after a spring and early summer of gas topping out at over $5 a gallon in some states, there seems to be at least some popular will to hold gas companies accountable for epic windfalls at Americans expense, Bloomberg reports:

The bills signal that some Democrats, emboldened by their success at the midterm elections, are unlikely to ease off on their attacks on oil producers just because elections are over.

“The American people shouldn’t have to subsidize Big Oil CEOs and shareholders while families are hit with high prices at the pump,” Menendez said. The tax loopole bill puts “American taxpayers ahead of the corporate oil industry who for far too long have been enjoying economic windfalls on the backs of hardworking Americans.”

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The bill is likely to be DOA in the Senate as the GOP broadly opposes such legislation and at least some cross-aisle support would be needed to send Close Big Oil Tax Loopholes Act to Biden’s desk, in addition to approval in the House.

Still, Congress has had its eye on gas prices for a while now. In April, Congress questioned oil execs over why prices were so high. The companies, as well as the White House, blamed the war in Ukraine for the price hikes. By October, however, President Biden was having none of that excuse. In a statement on a possible windfall tax, from the Associated Press:

“My team will work with Congress to look at these these options that are available to us and others,” Biden said. “It’s time for these companies to stop war profiteering, meet their responsibilities in this country and give the American people a break and still do very well.”

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Over the last two quarters, ExxonMobil, Chevron, Shell, BP, ConocoPhillips, and TotalEnergy earned over $100 billion in profits—more than they earned all of last year, and more than two-and-a-half times what they earned in the same quarters of 2021.

“Oil companies. record profits today are not because of doing something new or innovative,” Biden said. “Their profits are a windfall of war, a windfall for the brutal conflict that’s ravaging Ukraine and hurting tens of millions of people around the globe.”

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Despite not using these incredible profits to develop more production and announcing $50 billion in buybacks through 2024, oil company execs insist that increased production is the plan, eventually, probably. From Bloomberg:

Chevron Chief Executive Officer Mike Wirth spoke out against a prior threat from Biden for a windfall profits tax. Such measures go against the administration’s stated goal of more, not less oil production, he said at at the Economic Club of New York earlier this month.

“Most things you want more of, you don’t add taxes to,” he noted. Earlier this year, Wirth said “mixed signals” coming out of the administration, especially regarding climate change, were in part to blame for companies being conservative with their future investment plans.

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This new legislation isn’t the only attempt to get a piece of Big Oil’s rather sizable profits. Biden said back in October that Democrats would work on a new windfall tax, mainly due to oil companies using their profits on stock buybacks and dividend increases instead of investing in increasing production, the New York Times reports. Menendez is also heading up another bill with fellow Democrat Jack Reed of Rhode Island that would tax gas companies for sitting on federal land leases without drilling. It’s not just the feds who want to hold oil companies accountable; just this week California, where gas prices remain extremely high, Governor Gavin Newsom announced legislation to penalize price-gouging at the pump.

“California’s price gouging penalty is simple – either Big Oil reins in the profits and prices, or they’ll pay a penalty,” said Governor Newsom. “Big Oil has been lying and gouging Californians to line their own pockets long enough. I look forward to the work ahead with our partners in the Legislature to get this done.”