Oil industry executives and lobbyists fear Democrats could push a windfall tax on crude profits as part of a deal with President Donald Trump. A White House official called the idea of cooperating with Democrats on one baseless speculation.
The oil industry is bracing for Democrats to push for a deal with Trump that would impose a windfall tax on surging crude profits. Democrats have already proposed legislation to make companies compensate consumers for high fuel prices, according to Bloomberg.
Industry fears a tax inside a broader deal
Oil executives and their Washington lobbyists are concerned the tax could emerge as part of a broader agreement after an election that hinged on voters' anger over high prices, according to people familiar with the matter. Trump has not called explicitly for a windfall tax, and a White House official called the idea of cooperating with Democrats on one "baseless speculation."
Still, Trump has shown a willingness to lash out at oil giants. He called on the Justice Department to investigate them for price gouging in June. In August, he criticized ExxonMobil Holdings Corp. and Chevron Corp. over their earnings after they reported second-quarter profits that totaled about $26 billion.
Bill would tax prices above the 2025 average
Rapidan Energy Group said Wednesday there is a 30% chance Democrats will pass an oil windfall tax or cut fossil-fuel tax breaks after taking control of Congress. The move could help pay for a bipartisan health care package, the firm said.
The legislation, introduced in March by Senator Sheldon Whitehouse and Representative Ro Khanna, would impose a quarterly tax on oil companies when Brent crude exceeds its 2025 average of about $68 a barrel. The proceeds would fund rebate checks for consumers. Representative Jared Huffman, a co-sponsor of the House version, said the bill will be a priority when his party takes control of Congress next year.
Analysts and industry push back
ClearView Energy Partners analyst Kevin Book downplayed the risk of a profit-tax deal, saying windfall profits taxes seem unlikely to be at the top of Trump's list given his recent celebration of industry profitability.
The US imposed a windfall tax on domestically produced oil in 1980 under President Jimmy Carter, and it remained in effect for about eight years. The American Petroleum Institute said the effort raised less money than projected and led to lower domestic oil production. Environmental groups, meanwhile, are urging Democrats to push ahead with the idea.
Source: Rigzone (Bloomberg)
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