There’s a straightforward way for the White House and Congress to put sanctions on Russian oil and gas while protecting American families from high prices at the pump: make Big Oil pay.
There’s growing bipartisan momentum in Washington right now for an embargo and sanctions on Russian oil and gas as a way of weakening Putin in the midst of his violent invasion of Ukraine. The move makes strategic sense: fossil fuels make up 60 percentof Russia’s exports and account for 40 percent of its federal budget. In a very literal sense, oil and gas fuel Putin’s war machine.
But there’s another reason why the GOP is pushing an embargo and sanctions. They want to blame President Biden for high gas prices and use them to push for more fossil fuel production here in the US. In other words, Republican lawmakers are happy for all of us to pay high energy prices as long as it scores them some political points.
The strategy is especially cynical because the GOP’s “solution” of more drilling won’t do anything to reduce prices at the pump or the cost of home heating bills. US oil and gas production is near record levels and the industry already has access to tens of millions of acres of public land on which to drill, much of it still unused. And the long-dead Keystone XL pipeline? That was an export pipeline designed to transport Canadian tar sands to foreign markets. Most studies found that if it had been built, Keystone XL would have increased gas prices in the midwest and done nothing to lower them nationwide.
Even though the Republicans have no solutions of their own, the Biden administration is correct in understanding that if prices spike, it could come with a political cost — hence their hesitancy to commit to an embargo or sanctions. “We don’t have a strategic interest in reducing global supply of energy ... that would raise prices at the gas pump for Americans,” spokesperson Karine Jean-Pierre said at a recent White House news briefing.
Republicans think they’ve boxed Democrats into a corner. But there’s a clear way out that would help consumers, reduce our dependence on fossil fuels, benefit our climate, and hold oil corporations accountable for their past collaboration with Putin: a Big Oil windfall profits tax.
The idea behind a windfall profits tax is simple. When a corporation makes huge profits because of circumstances outside of their control, a.k.a a windfall, the government can claim some percentage of those profits through an additional tax. A windfall tax makes especially good sense when those profits have come at the public’s expense.
The rationale for a windfall profits tax on Big Oil is especially clear. Oil companies are currently earning their highest profits in nearly decade, not because of any innovation of their own, but because of the faster than expected economic recovery from Covid and the war in Ukraine, a crisis they helped create by working with Putin to expand Russian oil and gas production and lobbying against regulations that could have reduced our dependence on fossil fuels. Add in the damage these companies are causing to the climate and the massive subsidies they already receive from the federal government and the case becomes even stronger. It’s no surprise that calls for a tax in the UK and Europe have been gaining momentum over the past few weeks.
Big Oil will argue that any additional taxes will hurt production, but that would assume they’re using their extra profits to expand production, or perhaps even invest in clean energy as part of their much publicized net zero policies. Neither is the case. Instead, many are engaged in massive stock buybacks that are designed to benefit their CEOs and wealthy shareholders.
Rather than reward Big Oil billionaires, we should use these ill-begotten gains to offset costs for consumers and invest in strategies that will reduce our dependence on oil and gas. The revenue from a windfall profits tax could be distributed to every American, much like the Covid stimulus checks; it could be invested in programs like the Low Income Home Energy Assistance Program (LIHEAP), which helps families offset the costs of everything from utility bills to protecting their homes from extreme weather; or it could be used to offset the costs of new tax breaks for heat pumps, electric vehicles, and other clean energy solutions. It’s a clear way to get money out of the bank accounts of Big Oil billionaires and into the pockets of hard-working Americans.
A Big Oil windfall profits tax isn’t the only way to rapidly reduce our dependence on oil and gas and help protect consumers from future price hikes. Passing the climate provisions in the Build Back Better Act or using the Defense Production Act to manufacture heat pumps and EV charging stations would be other smart steps in the right direction. It’s also not the only way we should make Big Oil pay for the damage they’ve done to our climate – passing legislation like the End Polluter Welfare Act and Polluters Pay Climate Fund Act, as well as holding oil corporations accountable in the courts, is important too. But combined with sanctions on Russian oil, a windfall profits tax is a straightforward way that Congress and the White House can act today to punish Putin while offsetting any costs to American families.
All of us should be willing to play our part to help support the people of Ukraine and free the world from our dependence on oil and gas. But we shouldn’t be stuck with the bill while Big Oil runs off with the billions. It’s time for the companies who helped get us into this mess to pay their fair share. A windfall profits tax is a good place to start.