Congressional Democrats want to bring down sky-high gas prices by raising taxes on major oil-and-gas companies, a proposal that dumbfounded critics said would trigger even higher prices at the pump.
The Big Oil Windfall Profits Act introduced Friday by Sen. Sheldon Whitehouse, Rhode Island Democrat, and Rep. Ro Khanna, California Democrat, would place a tax on each barrel of oil equal to 50% of the difference between current prices and the pre-pandemic 2015-19 average.
“This is a bill to reduce gas prices and hold Big Oil accountable,” said Mr. Khanna in a statement. “As Russia’s invasion of Ukraine sends gas prices soaring, fossil fuel companies are raking in record profits. These companies have made billions and used the profits to enrich their own shareholders while average Americans are hurting at the pump.”
He said the bill, which would apply only to companies that produce or import at least 300,000 barrels per day, would “provide an incentive to cap gas prices and put money back in the pockets of consumers.”
Among those blasting the proposal was Brian Brenberg, associate professor of business and economics at The King’s College in New York City, who called the proposal “absolutely foolish.”
“We’ve heard a lot of bad ideas in recent years. This might be the worst,” Mr. Brenberg said on “Fox & Friends.” “We’ve got an oil and gas crisis, and these guys want to put basically a price control in, okay? This tax, it’s a price control. Where have you seen stuff like that? It’s called Venezuela.”
Such a tax would result in fuel shortages and “send energy markets into a tailspin,” he said.
Democrats said the legislation would raise an estimated $45 billion per year at the current price of $120 per barrel of oil. The revenue would be redistributed to single-filers earning less than $75,000, who would receive about $240 annually, and joint filers with income under $150,000, who would receive about $360.
On the other hand, gas buyers with incomes exceeding the income threshold would be stuck with even higher prices at the pump and no rebate, said critics.
“If this proposal becomes law it will absolutely raise the record cost of gas even more,” said Larry Behrens, Western states director of the pro-energy group Power The Future. “Increased taxes mean increased costs to consumers, and it’s a pathetic situation when elected leaders can’t understand that simple fact.”
The American Exploration and Production Council [AXPC] said Saturday that a “new tax on energy will raise prices for consumers at a time of historic inflation.”
“With gas prices at all-time high, a new energy tax like the one proposed by Whitehouse-Khanna could not come at a worse time for every American family,” said the council. “This proposal would both directly raise the cost of crude oil (which is refined into gasoline and jet fuel) and reduce energy production (which hurts our economy and our national security).”
The U.S. average cost of gasoline hit $4.32 per gallon on Thursday, the highest ever recorded, rising about 84 cents since Russia invaded Ukraine in late February, according to American Automobile Association figures.
Mr. Whitehouse argued that the legislation would “curb profiteering by oil companies and provide Americans relief at the gas pump.”
“We’ve seen this script before, and we cannot allow the fossil fuel industry to once again collect a massive windfall by taking advantage of an international crisis,” said Mr. Whitehouse in a statement. “I propose sending Big Oil’s big windfall back to the hardworking people who paid for it at the gas pump.”
The bill’s Senate cosponsors include Bernie Sanders, Vermont Independent, and Democratic Sens. Jeff Merkley of Oregon; Elizabeth Warren of Massachusetts; Richard Blumenthal of Connecticut; Sherrod Brown of Ohio; Jack Reed of Rhode Island; Cory Booker of New Jersey; Michael Bennet of Colorado, and Bob Casey of Pennsylvania.
“We can no longer allow big oil companies, huge corporations and the billionaire class to use Putin’s murderous invasion of Ukraine and the ongoing pandemic as an excuse to price gouge consumers. It is time to enact a windfall profits tax,” said Mr. Sanders.
While Democrats have accused oil producers of price gouging, industry officials argue that oil-and-gas prices are determined not by companies but by the global marketplace, which is influenced by factors such as growing post-pandemic demand, production, net imports and storage inventory.
“Targeting the oil and natural gas industry – at moments in time when prices are high due to global market forces outside our control and extreme supply/demand disruptions – further discourages long-term investment in oil and natural gas,” said AXPC.
The council compared the proposal to the “windfall profits tax signed into law by President Jimmy Carter in 1980, which put a 70 percent excise tax on crude oil exceeding $12.81/barrel.”
“Not only did the tax bring in just 20 percent of the promised revenues, but it reduced domestic production by up to 6 percent and made us more dependent on foreign oil imports by up to 16 percent. It also had the unforeseen consequence of raising prices,” said the AXPC statement.
Americans for Tax Reform federal affairs manager Mike Palicz called the idea “a gimmick designed to distract voters from the Biden’s Administration’s refusal to increase domestic oil and gas production amid record high gas prices.”
President Biden has been accused by Republicans and industry figures of exacerbating the crisis by canceling the Keystone XL pipeline and discouraging domestic oil-and-gas production on federal lands and waters.
“The pain at the pump that Americans are feeling is a direct result of the left’s hostility toward domestic energy production,” said Daniel Turner, Power The Future founder and executive director. “Make no mistake, the Biden Administration is responsible for the skyrocketing price of oil and it’s pathetic these members of Congress now want our families to shell out even more money because of it.”