US president Joe Biden charged oil companies were “profiteering” from Russia’s invasion of Ukraine as he threatened them with legislation to impose a windfall tax unless they increase output.
His comments come days after the oil and gas producers, including ExxonMobil and Chevron, reported enormous profits, and about a week before crucial midterm elections in which the price of petrol has put fellow Democrats on the defensive.
“At a time of war, any company receiving historic windfall profits like this has a responsibility to act beyond the narrow self-interest of its executives and shareholders,” Biden said on Monday evening.
“They have the opportunity to do that, lowering prices for consumers at the pump. If they don’t they’re going to pay a higher tax on their excess profits and face other restrictions.”
Exxon, the biggest US oil company, reported record quarterly net profit of almost $20bn on Friday. Rival Chevron earned $11.2bn, just shy of record earnings the previous quarter.
“Their profits are a windfall of war — a windfall from the brutal conflict that is ravaging Ukraine and hurting tens of millions of people around the globe,” Biden said.
The president said his administration would work with Congress to formulate potential policy responses. “It’s time for these companies to stop war profiteering, meet their responsibilities in this country, give the American people a break and still do very well.”
Biden has repeatedly called on producers to use their profits to invest in boosting output. But Wall Street has pressed oil companies to return cash to shareholders instead.
US petrol prices hit record levels of more than $5 a gallon this summer. They have since fallen, but remain more than 60 per cent higher than when Biden took office amid robust oil consumption and constraints on global supplies.
High prices at the pump have become a political liability for Democrats ahead of next week’s midterm elections, where the president’s party risks losing control of both chambers of Congress.
Any legislation to impose new taxes on the oil industry faces slim odds, especially in the closely divided Senate. Democratic lawmakers previously floated the idea of a windfall tax on oil companies’ profits, an idea that received a cool reception from the oil industry.
The American Petroleum Institute lobby group described the president’s remarks as “campaign rhetoric” and said any tax increases could backfire.
“Oil companies do not set prices — global commodities markets do,” said Mike Sommers, chief executive of the American Petroleum Institute. “Increasing taxes on American energy discourages investment in new production, which is the exact opposite of what is needed.”
Exxon chief executive Darren Woods said on Friday: “There has been discussion in the US about our industry returning some of our profits directly to the American people. In fact, that’s exactly what we’re doing in the form of our quarterly dividend.”
The administration has taken steps to bring down fuel prices, including record releases from the US Strategic Petroleum Reserve. Biden has said a plan to refill the reserve at a price of $67-$72 a barrel would place a floor under prices and should give oil companies the confidence to drill more.