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Higher oil and natural gas prices in recent months have been fueling inflation, but they also mean more profits for oil companies since the beginning of the war with Iran in late February. Some U.S. lawmakers have a plan for that. Here's NPR's Julia Simon.
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JULIA SIMON, BYLINE: I'm here at the gas station right now. And if you, like many Americans, fill up your car with gas, you know very well that the price has jumped up in recent months.
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SIMON: But what hasn't jumped up so much is the price of actually drilling for the oil and making this gas.
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SIMON: So where does this leave us? Gasoline doesn't cost that much more to make, but because global oil prices have risen, at one point to over $120 per barrel, many oil companies are making more money, and that's led to excess profits, or windfall profits. This Democratic senator wants the U.S. to tax them.
SHELDON WHITEHOUSE: Sheldon Whitehouse, senator from the state of Rhode Island.
SIMON: Here's how Whitehouse says it would work. You look at the average price of a barrel of oil before the war. You compare that to the price spikes today, and then you look at the excess profits.
WHITEHOUSE: And then you split the difference. We're actually somewhat generous about letting them keep half of the excess profits, but we want at least half of it to go back.
SIMON: Whitehouse says the federal government would send the money to lower-income Americans through tax rebates. This windfall tax proposal isn't new. Whitehouse introduced a bill proposing a windfall tax in 2022 after Russia's invasion of Ukraine. He introduced another version this year. Neither proposal went anywhere, but a similar tax has become law across the pond.
DOMINIC EAGLETON: That's what happened in the U.K.
SIMON: Here's Dominic Eagleton with the environmental nonprofit Global Witness. He says after Russia invaded Ukraine...
EAGLETON: The U.K. government introduced a windfall tax on the oil industry's profits, which were, you know, kind of reaching astronomical levels.
SIMON: The oil industry made more than $900 billion in profits following Russia's invasion, according to researchers at UMass Amherst. Eagleton says the U.K.'s windfall oil tax has brought in more than $12 billion through 2025, the most recent year for which they have data. The European Union also had a temporary windfall oil tax following Russia's invasion, and some European countries want one again. U.S. oil producers aren't a fan of this tax proposal.
DUSTIN MEYER: We are the world's largest oil producer, the world's largest natural gas producer.
SIMON: This is Dustin Meyer, senior vice president with the American Petroleum Institute, or API, a trade organization for the U.S. oil and gas industry. He says America has become a global energy leader.
MEYER: But a big part of that secret sauce was having the sort of investment certainty to bring us to that position. Proposals like this only erode that certainty and send exactly the wrong message at exactly the wrong time.
SIMON: Chevron, ExxonMobil and Shell did not respond to requests for comment about the proposed tax. BP referred NPR to API.
Whitehouse's office says that this bill is targeted to impact only the biggest oil producers and would leave about 70% of U.S. oil production untouched. About a dozen senators have signed on to Whitehouse's bill, all of them Democrats, along with independent Bernie Sanders. Whitehouse says that it's going to be an uphill struggle. Ultimately, he wants to spotlight big oil profits and this.
WHITEHOUSE: Wind, solar and battery power - they're not raising their prices.
SIMON: The war has highlighted how these renewable energy sources have gotten cheaper.
Julia Simon, NPR News.
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