US President Joe Biden has accused oil companies of “profiting” from the situation caused by the Russian invasion of Ukraine. He threatened to impose a profit tax if they did not increase production.
The third quarter reporting season is underway in the US, and oil companies have reported gigantic profits. Thus, Exxon Mobil on Friday reported a record profit of $20 billion, Chevron’s was $11.2 billion – slightly less than its record earnings in the second quarter.
Meanwhile, in a week the midterm elections to Congress will take place in the United States, and the issue of the high cost of gasoline has become one of the most pressing issues in the election campaign. Republicans are expected to gain an advantage over Democrats and a majority in both houses of Congress.
Biden stated:
The president has repeatedly called on oil companies to use high profits to increase investment in production. But stock market participants, especially shareholders of shale producers trying to reduce the debt burden accumulated in previous years, insist on maintaining financial discipline and paying shareholders.
After the start of the war in Ukraine, the price of Brent oil soared in March to $140 per barrel, the American grade WTI – to $130. Since the beginning of July, the price of Brent has fluctuated in the range of $85-110, and WTI – $76-105. The decision of the OPEC+ countries in early October to reduce oil production quotas by 2 million barrels per day supported quotations, which were declining in late summer and early autumn due to fears of a recession in the global economy.
The price of gasoline in the United States reached a record level in the summer, exceeding $5 per gallon. It has fallen since then, but remains about 60% higher than when Biden took office in early 2021.
Oil companies’ profits are driven by the war, a “monstrous conflict that is destroying Ukraine and hurting tens of millions of people around the world,” Biden said. The administration, along with Congress, will try to respond to the current situation, he promised: “It’s time for companies to stop profiting from the war, fulfill their responsibilities to the country, give the American people a break, and still do very well.”
But the chances of passage of the windfall tax bill were low even with a Democratic majority. The oil lobby is also against it. The American Petroleum Institute called Biden’s announcement “election rhetoric” and warned the tax could backfire. Institute CEO Mike Sommers said:
The presidential administration is trying to lower prices itself, in particular by selling record volumes of oil from strategic reserves—180 million barrels. Recently, its representatives said that, if necessary, additional volumes could be brought to the market.
At the same time, the administration recently unveiled a plan to replenish reserves by buying oil at $67–72 per barrel. This should support prices and encourage companies to increase investment in production, Biden said.